News Corp’s US marketing group suspected of hacking
News Corporation’s marketing arm falls under the scrutiny of the US Justice Department, over allegations that it hacked into the computers of a rival firm.
The Justice Department is reported to be looking into claims that News America Marketing, owned by News Corp, hacked into the computers of a rival firm – Floorgraphics – seven years ago.
The news will come as a further blow to Rupert Murdoch, whose son James today denied giving misleading evidence on phone hacking to MPs on Tuesday.
According to the US press, Floorgraphics has been contacted by an FBI agent and two federal prosecutors this week.
The allegations were first put to the FBI in 2004, but were revived this week by New Jersey Senator Frank Lautenberg.
In a letter to the Attorney General Eric Holder and FBI director Robert Mueller, Senator Lautenberg highlighted the case “in connection with the FBI’s review of News Corp’s conduct”.
The FBI has began an investigation into claims that the now defunct News of the World, owned by News Corp, tried to hack the phones of 9/11 victims.
‘Multi-million war chest’
Floorgraphics (FGI), a small New Jersey marketing company, alleged that News America Marketing broke into password protected computer systems to obtain confidential information.
Established in 1996 by two brothers, George and Richard Rebh, FGI pioneered in-store floor advertising for major supermarkets including Kmart and Safeway.
The brothers won Ernst & Young’s New Jersey Entrepreneurs of the Year in marketing as the company was hailed among the top 50 fastest growing private companies in America.
According to FGI’s lawsuit, in 1999 News America’s chief executive officer expressed an interesting in buying out the start-up. The brothers rebuffed the offer, after which News America’s CEO “threatened to destroy FGI”, their lawsuit claims.
The Rebhs’ lawsuit claimed they believed executives authorised a “multi-million war chest” to destroy their business, “spreading rumours” in the marketplace, threatening their clients and “breaking into” their computer system.
An internal investigation carried out by the company claimed to find 11 different occasions between 2003 and 2004 when News America allegedly breached their computer system to view confidential files.
An internal investigation carried out by the company claimed to find 11 different occasions between 2003 and 2004 when News America allegedly breached their computer system to view confidential files.
News Corp could not immediately be contacted for comment.
However, Suzanne Halpin, a spokeswoman for News America Marketing, said in a statement published by Bloomberg that the accessed website “was available to hundreds, if not thousands, of Floorgraphics retailers, representatives of consumer packaged goods companies and Floorgraphics employees”.
“There is considerable employee movement within this industry, and we believe it was someone with an authorized password who was using a News America Marketing computer,” she said. “News America Marketing condemns such conduct, which is in violation of the standards of our company.”
Settling out of court
The case was resolved when News America agreed to buy Floorgraphics’ assets and clients for $29.5m in an out-of-court settlement, six days into the trial in 2009.
Last year, News America settled with Valassis Communications, an advertising group in Michigan, for $500m after the group accused it of anti-competitive behaviour.
In February this year, News America settled a case brought against it by another rival, Insignia Systems, for $125m.
Chris Mixson, President of News America Marketing, said at the time: “We view this settlement as a prudent business decision for News America Marketing and are pleased it includes a 10-year exclusive agreement with Insignia that has the potential to be very profitable for both companies.”
