You are hereMSNBC: US looks into alleged hacking by News Corp.'s ad arm

MSNBC: US looks into alleged hacking by News Corp.'s ad arm

In 2009 lawsuit, rival accused firm of illegally accessing computers, tarnishing its reputation

-By Michael Isikoff

July 21, 2011- Justice Department prosecutors are reviewing allegations that News Corp.’s advertising arm repeatedly hacked into the computers of a competitor in the United States as part of an effort to steal the rival firm’s business, according to a lawyer for the company.

Bill Isaacson, the lawyer for Floorgraphics, a New Jersey-based advertising firm, told NBC News he was contacted this week by two federal prosecutors and an FBI agent based in New York seeking information about claims that the firm’s computers were hacked by News America Marketing, the advertising division of Rupert Murdoch’s News Corp., seven years ago.

The allegations were first reported to the FBI in 2004 and prompted investigations at the time by the bureau, the Secret Service and the New Jersey Division of Criminal Justice, according to documents obtained by NBC News and congressional correspondence.

While never prosecuted, the claims became a key part of a civil lawsuit that Floorgraphics filed against News America. The case was resolved six days into a 2009 trial, when News America agreed to buy Floorgraphics' assets for $29.5 million as part of an out-of-court settlement.

The renewed interested in the incident appears to be part of a broader Justice Department probe into News Corp. ordered last week by Attorney General Eric Holder in the wake of disclosures of rampant phone hacking by reporters at the News of the World, the now-shuttered News Corp. newspaper in London. The claim made by Floorgraphics involves alleged computer crimes, not phone hacking, and is the only such allegation that has surfaced against News Corp. in the United States.

Seeking a 'jurisdictional hook'
“They were clearly looking at phone hacking” allegations that have been made against News Corp. in Great Britain and they wanted to see if they could find a “jurisdictional hook” for similar conduct inside the U.S, Isaacson said of his conversation with the federal prosecutor and FBI agent.

Ellen Davis, a spokeswoman for the U.S. Attorney’s Office in New York, declined comment.

Asked about the renewed interest from federal prosecutors and whether the company has been contacted about the matter, Suzanne Halpin, a spokeswoman for News America, declined to comment. She said that the firm “takes violations of our company’s business standards very seriously. News America Marketing and Floorgraphics fully resolved the civil proceeding between the two companies in 2009. The New Jersey Division of Criminal Justice filed no charges in this matter.”

The inquiry into Floorgraphics could pose a problem for another of Murdoch’s top newspaper executives: Paul Carlucci, the publisher of the New York Post. Carlucci also has been the longtime chairman and chief executive of News America and has been accused in three lawsuits of creating a cut-throat competitive culture at the company, including showing his employees a scene from the movie “The Untouchables” in which the mobster Al Capone crushes a rival’s head with a baseball bat.

Carlucci has denied the incident. Asked if Carlucci had any knowledge of the hacking of Floorgraphics’ computers, company spokeswoman Halpin said via email: “Certainly not. No one at News America Marketing had any knowledge of the alleged incident until the claim was made that it had happened.”

Legal experts say it could prove difficult for prosecutors to make a case against News Corp. based on the Floorgraphics allegations alone, since the standard five-year statute of limitations for most federal computer crimes has long since expired.

But legal sources say that the interest in the case appeared to be part of an effort to determine if there is a more extensive pattern of criminal conduct at News Corp. — a line of inquiry that New Jersey’s Democratic Sen. Frank Lautenberg asked be pursued in a letter this week to Holder and FBI Director Robert Mueller.

“As the Department of Justice and FBI examine the recent hacking allegations involving News Corp. and its subsidiaries more closely, I wanted to make sure that you were fully aware of the case of Floorgraphics and News America, as it may be relevant to your current investigation,” Lautenberg wrote.