News Corp’s strategy to protect Foxtel from the NBN? Chockful of Sneak

So how hard would News Corp Australia really fight to stop the Labor Government’s National Broadband Network threatening Foxtel (the pay-tv operation they own together with Foxtel)?

Well, they’d be sneaky. We know that because of the lengths they went to to kill off another threat to Foxtel, Channel Seven’s C7 sports channel. Remember C7? And they were chockful of sneak there. They could sneak for their country. I think they invented sneak.

Kerry Stokes ran a monster legal case to show News and Telstra et al got together to improperly force him out of business. But Stokes failed and was left with a $150million bill for costs. They’re perfectly law-abiding folk at News Corp. And so colourful.

I’m — I don’t know for sure. It — I know that it was inappropriate, but I don’t know whether it amounts to fraud or not.

News Corp Australia counsel Ian Philip, on lying to Telstra, December 12, 2006

Do they view us as fools, idiots, suckers or all of the above??! . . . . What can they say? They have walked out of meetings, done deals behind our back, failed to pay us money they owe us on Fox Sports, failed to tell us about new initiatives that impact on us (eg, their new broadcasting business), etc. Where will it end?

Encrypted email, Telstra’s Danita Lowes to CEO Frank Blount, November 20, 1998

News’s behaviour over Fox Sports is part of a pattern of behaviour, which has been evident particularly over the last 12 to 18 months since Ken Cowley’s departure from News.

January 1999 Telstra briefing for board pay-TV sub-committee

Ken Cowley told Frank Blount on two occasions that News were attempting to screw us and that he thought it was completely unacceptable.

January 1999 Telstra internal briefing paper

Tom Mockridge told Danita Lowes in June that News was trying to ‘screw’ us and that he would start the price at $US1 [per subscriber per month] and go from there.

January 1999 Telstra internal briefing paper

Cowley told Ziggy [Switkowski], Ted [Pretty] and Danita [Lowes] in a meeting that he thought it was criminal what News and PBL were up to and he was worried about Australia’s future in the area.

January 1999 Telstra internal briefing paper

Could you please confirm that you have [the document] and it has been destroyed. The above steps become necessary due to the fact that Channel Seven have not been advised of the special agreement with PBL which underpins the Australis joint venture.

Consultant Peter O’Connell to Optus executive Robert Simpson, cc Z Switkowski, July 16, 1996

I‘ve come to tell you that we’re going to take the AFL rights off you. We’re all going to get together to take those rights. We don’t really want to do it but News are making us.

Kerry Stokes’s version of what James Packer told him, December 2000

Management is concerned that PBL will increasingly seek to promote interests outside of Foxtel rather than Foxtel itself.  Draft paper for Telstra board July 28 1999.

 I have asked Rob Simpson to uplift [Seven exec Buddy Miler] Buddy’s signed resolution and destroy it on the basis of my growing concern that our friends at Seven will not be fully informed prior to their execution of a similar resolution

Peter O’Connell to then Optus CEO Ziggy Switkowski   July 1996

 The relationship with News has continued to deteriorate. Its actions are not those of a partner and they have failed to address Telstra’s concerns regarding Fox Sports.

Draft paper for Telstra board July 28 1999 by Paul Rizzo and Ted Pretty

News has proposed a clear and equitable way of resolving this unnecessary and damaging dispute. We beg you to reconsider it in the spirit it was offered.

Lachlan and Rupert Murdoch letter to Frank Blount, Telstra chairman David Hoare Feb 5 1999

At the risk of being repetitive it is absolutely fundamental to the business objectives of Foxtel and its shareholders that the TNC Heads and the News./Telstra guarantees underpinning it are terminated and the Vancouver deal engaged.

            Tom Mockridge to Foxtel board on tactics to starve Australis Media of funds   May 7 1998

 News has tended to view Foxtel as its “birthright”, and as such is unlikely to want to go easily.

Draft paper for Telstra board July 28 1999

My personal fave point during the trial was the realisation by News Corp Australia chief counsel Ian Philip that two affidavits he had sworn earlier were wrong and the right thing to do was to swear a new affidavit a few days ahead of his apearance in the witness box, saying the complete reverse of what he had mistakenly sworn earlier. Kerry Stokes lawyers (bless ’em) had thought they had a smoking gun, with a handwritten fax Philip sent to Telstra’s chief counsel with instructions to destroy it after reading. While it looked like Philip was conspiring with Telstra to keep Stokes from bidding for rights to football games, in reality, Philip was able to explain, he was lying to Telstra in an attempt to extract money from them. He felt he ought to correct the record. That’s certainly not how News Corp treats its business rivals. It’s how it treats its business partners. He was cross-examined by the amazing English silk Jonathon Sumption QC.

Sumption: Now, in your third witness statement, which was served last Monday, you say that there were a number of statements in this fax which were untrue or misleading; do you remember that?—Philip: Yes, I do.

Sumption: Now, you say, is this right, that you knew that they were untrue and misleading at the time that you wrote this fax?—Yes, I do.

Sumption: So they were lies?—Yes, they were.

Sumption: So now does your third statement amount to this: that you intentionally misled Telstra in order to persuade them to commit an extra $13 million to $14 million to fund a bid that you believed would go through anyway?—Yes

Sumption: And, as I understand it, your object in doing that was to save News from having to put up at least $10 million, possibly more, out of its own pocket?—Yes.

Sumption: You are a lawyer. You know what fraud is, don’t you?—Yes.

Sumption: Do you agree that if the evidence in your third statement is right you were trying to defraud Telstra?—I’m – I don’t know for sure. It – I know that it was inappropriate, but I don’t know whether it amounts to fraud or not.

Sumption: Inappropriate? Is that all it was?—No, that is not all it was. It was stupid.

Sumption: It was an attempted fraud, on your evidence, wasn’t it?—I can’t answer that question because I’m just not sure what the elements of fraud are.

Sumption: Would you agree that if your evidence is right and if Telstra were influenced by your statements when they eventually agreed to support the increased bid then you succeeded in defrauding them?—That’s possible.

It all sounds quite understandable, but Justice Sackville took a set against Philip. He found:

Mr Philip gave the impression of a man who quite willingly subordinated his sense of ethics and propriety to a single-minded determination to advance the commercial interests of his employer.

… Mr Philip was willing to go to considerable lengths to present a picture that bore little resemblance to reality… For a solicitor still holding a practising certificate to engage in deliberately dishonest conduct calls out for further inquiry by the authority responsible for professional discipline. . . If News has taken no action against Mr Philip in respect of his admitted dishonesty, it would reflect very seriously indeed on News’ standards of commercial morality.’

Sackville was also scathing of Kerry Stokes’ evidence. News Corp Australia’s CEO John Hartigan defended Philip.

News conducted its own thorough investigation of Mr Philips’ conduct. What was striking about the investigation was the overwhelming support proffered by Mr Philips’ industry peers and the wider legal fraternity, who regard him as an exemplary advocate and a man of character and integrity.

Mr Philip continues to enjoy the full support of News Corporation management.

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