Thursday, July 14, 2011

FBI Now Scrutinizing Possible Hacks Into 911 Victims

As momentous as the phone hacking scandal in the UK has been for the News Corp.,  its shareholders and the shareholders of BSkyB, news comes that the FBI has opened an investigation into possible similar hacks into 911 victims. If the Bureau finds any such activities then the risk is that the FCC would be drawn into scrutinizing the suitability of the company to own broadcast licenses. If Mr. Murdoch had knowledge of criminal acts related to any hacking then the broadcast licenses might be subjected to revocation. No criminality has been proved on either side of the Atlantic and we find it difficult to believe that Mr. Murdoch would have been involved. . But if criminal acts occurred in the United States and Mr. Murdoch knew of them, then revocation becomes possible and the damage to the company's asset value would be severe. Mr. Murdoch personally assumed control of the license (and became a US Citizen to do so) when the company acquired what are now the Fox TV stations. Again we do not believe he was involved--but we don't know that he was not either but this is added uncertainty to the weight on the shares already.  We still see no upside in the shares as the investigations on both sides of the Atlantic take place and resolve the comapny's management and Mr. Murdoch personally. 

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