(July 21, 2011) – The Massachusetts Laborers’ Pension and Annuity Funds (Mass. Labor) has filed a lawsuit against Rupert Murdoch and the other directors of media giant News Corporation, adding to the list of shareholders who are suing the company for failure to act in the wake of the recent phone hacking scandal.
The Burlington, MA based Mass. Labor filed the suit in the Delaware Chancery Court on July 15. In the lawsuit, Mass. Labor accused Murdoch and the directors of “failure to take any action to investigate, control, and limit the fallout from the hacking scandal” that “caused the Company to lose billions of dollars in value,” according to the suit. The suit also alleges that Murdoch engaged in nepotistic business practices that bought companies run by family members for inflated prices and that the phone hacking scandal prevented News Corp from acquiring British Sky Broadcasting Group PLC, a move which would have helped increase the value of News Corp.
Mass. Labor joins a group of other pension funds seeking damages for News Corp’s break of its fiduciary agreement. All of the suits are being filed in Delaware because News Corp is chartered there.
On July 11, aiCIO reported that the original lawsuit filed in May 2011 had been supplemented with a suit whose plaintiffs included the New Orleans Employees’ Retirement System and the Central Laborers Pension Fund. The pension funds joined a trustee for several large investment funds in the suit.
The main claim of the plaintiffs in the suit is that Murdoch and the board of News Corp failed to intervene in response to the phone hacking allegations against the company. “These revelations should not have taken years to uncover and stop,” reads the amended complaint, which was filed on July 8, and was obtained by Bloomberg. “These revelations show a culture run amuck within News Corp. and a board that provides no effective review or oversight.”
According to the complaint, “Although the scandal first came to light in 2005…it is inconceivable that Murdoch and his fellow Board members would not have been aware of the illicit news gathering practices…And yet, the Board took no real action to investigate the allegations until July 7, 2011, when Murdoch selected two of his co-directors to deal with the imbroglio.”
The impetus for the amendments to the lawsuit was News Corp’s reported fall of $7 billion in market value since the scandal broke in early July.
<p><em>By Justin Mundt</em></p>