British lawmaker grills News. Corp CEO at event

October 23, 2011 - 11:55 PM
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A protestor dressed as News Corp. CEO Rupert Murdock is seen with protestors in front of Fox Studios in Los Angeles on Friday, Oct 21, 2011. A few dozen people showed up to demonstrate outside Fox Studios where News Corp. is holding its annual shareholders meeting. Murdoch is facing shareholders with small stakes in his company for the first time since a phone-hacking scandal broke in July. (AP Photo/Nick Ut)

LOS ANGELES (AP) — British lawmaker Tom Watson grilled News Corp. chief Rupert Murdoch about covert surveillance techniques by company employees as News Corp. held its first shareholders meeting following a phone-hacking scandal.

More than 100 people demonstrated Friday outside the annual meeting on the lot of News Corp.'s Fox Studios.

Watson asked Murdoch whether he was aware that a person who had left prison was hired by News Corp. and hacked the computer of a former army intelligence officer.

Murdoch said he wasn't aware, and board director Viet Dinh said the company would look into the allegation.

"I promise you absolutely that we will stop at nothing to get to the bottom of this and put it right," Murdoch told Watson.

Watson evoked private investigator Glenn Mulcaire, who was jailed in 2007 for eavesdropping on the phones of royal staff, in warning of troubles ahead for the company.

"News Corp. is potentially facing a Mulcaire II," Watson said. "You haven't told any of your investors about what is to come."

Watson got up twice and spoke for a few minutes during the 90-minute meeting.

Murdoch faced shareholders with small stakes in his company for the first time since the scandal broke in July. Watson, representing shares owned by the labor group AFL-CIO, used the event to reveal new details of what he claims are covert surveillance techniques by News Corp. employees. Watson, a Labour Party member of Parliament, has spearheaded a 2 ½-year probe into phone hacking and alleged police bribery scandal at the company's British newspaper unit.

Outside Fox Studios, some demonstrators carried anti-Murdoch signs, including one that stated "Fire the Murdoch Mafia." Another read, "Rich media equals poor democracy." Some of the demonstrators were from an organization that has been staging rallies recently to demand good jobs.

The media conglomerate has been rocked by evidence that its now-shuttered British tabloid, News of the World, hired a private investigator who tapped into the cellphone voicemail of a 13-year-old who disappeared in 2002 and was later found murdered. On Friday, News Corp. said it has agreed to pay 2 million pounds ($3.2 million) to the family of that girl.

Murdoch and his son James, who is in line to succeed him, were grilled by Watson and other lawmakers in a parliamentary committee hearing in late July. The elder Murdoch said he was ashamed at what happened but declined to take personal blame. He said he was the best person "to clean this up."

Murdoch controls News Corp. through his family trust's 40 percent stake of voting shares. A key backer is Saudi Prince Alwaleed bin Talal, who controls 7 percent. The voting stock represents less than a third of the company's total $44.4 billion market value.

That dual-class share system has come under renewed fire. Critics say the company's board is dysfunctional and management has poor oversight of the company.

Several shareholders took issue with a chart Murdoch put up showing the stock's upbeat performance compared with most other media peers since the beginning of the year and since the beginning of July. They said its performance over 10 years or more lagged its peers. Murdoch said the chart was to address criticism that the company had been hurt by the hacking scandal.

Watson noted with irony that a graphic behind the board members showed Prince William and Kate Middleton, both of whom are alleged victims of hacking by News Corp. employees in Britain.

News Corp.'s stock is down about 6 percent from when the scandal broke in early July, although it has been buoyed recently by a $5 billion share buyback plan that is about a third complete. On Friday, News Corp.'s stock rose 9 cents to $16.94 in afternoon trading.

Proxy advisory firm Institutional Shareholder Services has recommended voting out all existing board members, including Murdoch and his sons James and Lachlan. Two other firms, Glass Lewis and Egan-Jones, recommend voting against the sons, among others.

Jay Eisenhofer, co-lead attorney in a shareholder lawsuit against News Corp. on charges of mishandling the affair, said on a conference call with Watson on Thursday that if even 20 percent of votes are cast against the re-election of Murdoch and his two sons, it would be a victory. That's because that would be nearly half the 53 percent of votes unaffiliated with the family, he said.

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Associated Press video journalist John Mone contributed to this report.