Excuse me, I have a bug in my safe

It’s like time travel to a golden past. What do you do when your client comes to you with some wacky claim that some part of News Corporation is bugging your conversations with him? In those fresh days of the 1990s it all seemed so fresh and new. And totally implausible. 

Pub: AUSTRALIAN FINANCIAL REVIEW Pubdate: Tuesday 11th of March 1997

 Israeli police investigate claims of bugging by News offshoot 

Neil Chenoweth and Fred Brenchley, London   

Extraordinary allegations have arisen in the British High Court that Israeli police are investigating tapes of bugged telephone conversations discovered by tax officials when they raided the Jerusalem offices of News Datacom last October.

The tapes are said to have been found in the office of Mr Abe Peled, the head of News Datacom, a subsidiary of Mr Rupert Murdoch’s News Corp oration. The tapes are alleged to contain privileged conversations between a former News Datacom executive Michael Clinger and his lawyer.

In affidavits filed with the High Court, News has denied unequivocally any connection with or knowledge by any of its staff, its legal advisers or private investigators of the tapes. News believes any tapes were planted in Mr Peled’s office.

Mr Audley Sheppard, a London partner in Clifford Chance, one of the largest law firms in the world, confirmed to the Financial Review that the firm was concerned that some form of eavesdropping may have taken place.

He said the present district attorney of Jerusalem had confirmed to him that his voice was recorded in conversations with his former client, Mr Clinger, on tapes found in Mr Peled’s office by tax officers.

Last week, the Jerusalem Post reported that police had questioned Mr Peled, under caution on suspicion of commissioning wiretapping, after he flew into Israel on Sunday, March 2.

News dismissed Israeli press reports as “typically inaccurate”, including a weekend report (denied by Israeli police) by Sunday Business in London that Mr Peled had been arrested.

Ms Eugenie Gavenchak, deputy general counsel of News America Publishing, told the Financial Review last week: “Mr Peled had scheduled appointments one month and two weeks in advance of his meetings with the Tax Authority and the National Serious Crime Unit for the purpose of assisting in their investigations and presenting News’s evidence as to the facts. He was not met at the airport, escorted anywhere or detained by any government authority.”

The allegations of phone-tapping arose in a British civil case in which News International and News Datacom are suing Mr Clinger and others over an alleged fraud of $39 million relating to News Datacom smart cards, which are used to protect pay-TV transmissions by BSkyB, Foxtel and others from piracy.

Mr Clinger, who is assisting Israeli tax authorities in their investigation of News Datacom, is wanted in the US on fraud charges relating to 1986.

On Sunday, February 2, Clifford Chance lawyers phoned Justice Evans-Lombe, the assigned duty judge of the British High Court, with an urgent application for an order restraining News Corp and its lawyers from destroying or disposing of any tape recordings, transcripts or other record of privileged telephone conversations between Mr Clinger and his lawyers.

Mr Murdoch, meanwhile, was in New York, where he had just been presented with two scrolls of Jewish scripture by the King David Society, with the announcement that in June the United Jewish Appeal would name him Humanitarian of the Year.

News lawyers attacked the bona fides of the claim, with affidavits by Mr David Mackie, head of litigation at News’ British lawyers, Allen & Overy, by Mr Peled and Ms Gavenchak that they had not received or been aware of the existence of the privileged material described by Clifford Chance.

News sought further details of which Israeli officials had made the claims described, and what the conversations said.

“It seems to me that the proper approach is to treat the plaintiffs’ answer on affidavit that there is no privileged information that has come to or is in their hands as conclusive,” Justice Lindsay found on February 10. He extended the injunction on the News companies, but reduced this to an undertaking in the case of the News lawyers that any such material if located would be presented to the court.

“If any tape recordings of any conversations do exist, it is clear to us that Mr Clinger was responsible for making them,” Ms Gavenchak told the AFR. “If any tapes were indeed found within our company’s offices, they were planted there.”

The News Datacom building in Jerusalem, in which the tapes are alleged to have been found, is a high-security installation, with guards on duty around the clock, and video records going back six months of all people entering the building.

Entry requires a key, a smart card and a code, while Mr Peled’s office is in a high-security section which requires a further smart card and code. Israeli reports say the tapes were found in a safe in Mr Peled’s office.

In an affidavit, Mr Clinger stated that on January 12, 1997, he was invited to the Jerusalem offices of Israel’s National Serious Crime Unit and listened to recordings of 15 telephone conversations involving himself on a tape marked 23A. Five of these conversations were with his lawyers at Clifford Chance, which had taken place around late September 1996.

Mr Clinger’s Israeli lawyer, Mr Michael Kirsch, who for 10 years was himself district attorney for Jerusalem, said he also had listened to the tapes and confirmed the accuracy of a rough transcript of the tapes made by Mr Clinger.

Mr Kirsch said the current district attorney of Jerusalem had confirmed that the tapes existed and that the matter was being investigated by the National Serious Crime Unit.

Mr Clinger also alleges that on Thursday, January 30, he was shown at the National Serious Crime Unit a facsimile addressed to senior News executives and advisers which contained a transcript of a conversation between himself and Mr Sheppard.

Those named strenuously deny ever having seen such a document.

“Mr Clinger has failed to produce any evidence of this purported fax, other than his own word, the trustworthiness of which needs no comment,” Ms Gavenchak said.

In mid-January, Israeli newspapers reported a series of further raids in the News Datacom investigation by Israeli police on private investigation firms, including Shaffran, a security company owned by Mr Reuven Hazak and Mr Peleg Radai, both former senior figures in Shin Bet, Israel’s domestic security agency.

Mr Radai and Mr Hazak, formerly deputy director of Shin Bet, were reported to have told police they were not connected with the tapes.

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