Del. judge approves News Corp lawsuit settlement
DOVER, Del. (AP) — A Delaware judge on Wednesday approved a $139 million cash settlement between News Corp. and shareholders in a lawsuit over the British phone hacking scandal and the media conglomerate's purchase of an entertainment company run by News Corp. founder Rupert Murdoch's daughter.
The settlement approved by Vice-Chancellor John Noble brings an end to a lawsuit in which shareholders alleged that News Corp. directors, in blind deference to Murdoch, ignored several red flags about the extent of the hacking. The shareholders alleged that the directors failed to act until the scandal exploded in 2011 after British authorities reopened an investigation into the Murdoch-owned tabloid News of the World.
The damaging financial fallout included the folding of the best-selling News of the World after 168 years and News Corp. being pressured to withdraw a $12 billion takeover bid for satellite broadcaster British Sky Broadcasting Group PLC.
The plaintiffs also alleged that News Corp. directors breached their fiduciary duties to shareholders by acquiescing to Murdoch's decision to buy Shine Group, a television production company controlled by his daughter Elisabeth, at an allegedly inflated price of more than $600 million.
Defense attorneys rejected the allegations, and the company, which is based in New York but incorporated in Delaware, settled the case without admitting any wrongdoing.
Plaintiffs' attorney Jay Eisenhofer told Noble that the settlement was one that his clients were "enthusiastic to support."
Attorneys said the cash settlement is the largest in a shareholder derivative lawsuit, in which stockholders file suit on behalf of a company against its corporate leaders.
"It's the largest cash derivative settlement that I've ever seen," Noble said.
The cash payment from News Corp. insurers, after subtracting $28 million in fees for the plaintiffs' lawyers, will benefit shareholders indirectly by going to the company.
The settlement also includes several corporate governance reforms aimed at ensuring that News Corp. has a more independent and active board of directors.
Among other things, it calls for a company compliance steering committee to report to an audit committee four times a year, to independent directors twice a year, and to the board as a whole annually. The settlement also requires News Corp. to maintain an anonymous whistleblower hotline and to adopt a policy on political activities. The corporate governance reforms also address the nomination and compensation of board directors.
"There will be significant procedural changes in how the board will have to operate," the judge noted.
Under the settlement, the corporate governance reforms must remain in place through Dec. 31, 2016.
News Corp. is close to completing a split into two separate publicly traded companies, one containing its newspaper and publishing assets, and the other containing its TV and movie properties.
Its stock rose 69 cents, or about 2 percent, to close at $32.15 Wednesday.