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Let’s Meet the News Corp. Audit Committee

By now you’ve probably heard that Rupert and James Murdoch had a little Q&A with some Members of Parliament in London today. You may have also heard that things got a little interesting when a man opted to put a cream (origin unknown) pie in the elder Murdoch’s face only to have his wife, Wendi Deng, get a little medieval on the Three Stooges impersonator.

Before all the excitement, things were getting a little awkward, as Rupes came off as very unprepared and on at least one occasion, was slapping the table not unlike your own octogenarian grandfather wanting to know if someone could pass the goddamn mashed potatoes. At one point, the questioning turned to legal settlements and MP Therese Coffey asked the Murdochs if they knew “how much has been paid out in legal settlements.”

James Murdoch [said] he [did] not know total number but said its customary to try to reach out-of-court settlements in many cases. Rupert Murdoch points out News Corporation had a strong audit committee to review all these things.

Right! The audit committee, that’s who you want to talk to. Of course, that’s a pretty lame answer, as Dennis Howlett noted:

Who, exactly, are these capable audit committee members? Here’s the crew from the company’s most recent proxy:

Sir Roderick I. Eddington, Chairman – currently the non-executive chairman for Australia and New Zealand of J.P Morgan. Also former CEO of British Airways. Director since 1999.

Peter L. Barnes – Chairman of Ansell Limited. Director since 2004.

Andrew S.B. Knight – Chairman of J. Rothschild Capital Management Limited. Was also the Chairman of News International (James Murdoch’s current position) from 1990 to 1995. Director since 1991.

Thomas J. Perkins – Partner of Kleiner Perkins Caufield & Byers, a venture capital company. Director at News Corp since 1996.

I’m sure all these dudes (News Corp has one woman on their board – Natalie Bancroft) are all quite capable but it doesn’t strike me a terribly robust audit committee. Having said that, it’s been reported that News Corp’s independent directors have retained Debevoise & Plimpton to represent them. The audit committee is comprised entirely of independent directors (calling Mr. Knight “independent” seems like a stretch but whatevs) and maybe they could rattle off the laundry list of legal settlements but at least it appears they’re sorta on top of things now.

(UPDATE 2) News Corp. Appears to Be a Big Fan of Offshore Tax Havens

Sure, GE may have the “best tax law firm” in house but the boys and girls working for Rupes seem to have a few tricks of their own. David Cay Johnston reports:

News Corp. has 152 subsidiaries in tax havens, including 62 in the British Virgin Islands and 33 in the Caymans. Among the hundred largest U.S. companies, only Citigroup and Morgan Stanley have more tax haven subsidiaries than News Corp., a 2009 U.S. Government Accountability Office study found.

News Corp. had nearly $7 billion permanently invested offshore in 2009, money on which it does not have to pay taxes unless it brings the money back to the United States. Meanwhile, it can use that money as collateral for loans in the United States, where interest paid is a tax-deductible expense.

This and other tax planning strategies result in a 20% tax rate for the company. And not a single phone hacked!

[via Reuters]

Via NPR’s The Two Way news blog, Reuters has posted this statement:

Please be advised that the David Cay Johnston column published on Tuesday stating that Rupert Murdoch’s U.S.-based News Corp made money on income taxes is wrong and has been withdrawn. News Corp’s filings show the company changed reporting conventions in its 2007 annual report when it reversed the way it showed positive and negative numbers. A new column correcting and explaining the error in more detail will be issued shortly.

As of now, Johnston’s post remains unchanged and what I blockquoted above doesn’t seem to be in dispute but the situation appears to be fluid.

Here’s a portion from Johnston’s new column:

Readers, I apologize. The premise of my debut column for Reuters, on News Corp’s taxes, was wrong, 100 percent dead wrong.

Rupert Murdoch’s News Corp did not get a $4.8 billion tax refund for the past four years, as I reported. Instead, it paid that much in cash for corporate income taxes for the years 2007 through 2010 while earning pre-tax profits of $10.4 billion.

For the first time in my 45-year-old career I am writing a skinback. That is what journalists call a retraction of the premise of a piece, as in peeling back your skin and feeling the pain. I will do all I can to make sure everyone who has read or heard secondary reports based on my column also learns the facts and would appreciate the help of readers in that cause.

Johnston goes on to explain in detail how the error occurred. He also states that a number of the facts originally reported, including the number of News Corp. subsidiaries in tax haven (that we blockquoted above), remain.

Accounting News Roundup: ‘Won’t Somebody Think of the Small Businesses?!?’; Facebook’s New Arbitrary IPO Date; Debunking The ‘Failure’ of Bush Tax Cuts | 09.28.10

Analyzing the Small-Business Tax Hysteria [You’re the Boss/NYT]
“The rhetoric on this subject has become counterproductive. It can’t be helping consumer confidence, and it’s certainly not creating any jobs. In what used to be a running joke on ‘The Simpsons,’ whenever trouble arose, Reverend Lovejoy’s wife would shriek, ‘Won’t somebody please think of the children?!!!’ The emerging counterpart to that cry in our real-life politics seems to be, ‘Won’t somebody please think of the small businesses!’ “

AOL in Talks to Buy TechCrunch [WSJ]
“A deal would mark a high-profile marriage between the Internet giant and one of Silicon Valley’s most high-profile blogs, which has often been discussed as a possible acquisition target.

It would also be the latest in a series of alliances between content and Internet companies, which are seeking to draw more users and advertisers by pumping out inexpensive articles on popular topics like fashion, news and sports.”

Facebook IPO likely after late 2012: board member [Reuters]
“Facebook, the world’s largest online social network, is likely to go public sometime after late 2012, a board member said, satisfying investors’ appetite for a slice of one of the Internet’s biggest growth stories.

A stock market debut by a company valued in the tens of billions of dollars would be one of the most highly anticipated initial public offerings of the decade.

But Facebook board member, venture capitalist and PayPal co-founder Peter Thiel stressed on Monday that will not happen until after late 2012, and would depend on the company hitting certain revenue targets and how its business model develops.”

Auditors Aren’t Forcing Full Repurchase Risk Exposure Disclosure [Re:The Auditors]
Auditors looking the other way for their banking clients. Again.

BlackBerry Maker RIM Enters Tablet Scrum [WSJ]
“RIM Co-Chief Executive Mike Lazaridis on Monday showed the device, dubbed the PlayBook, at a conference for BlackBerry developers in San Francisco. The PlayBook has a seven-inch touch screen and high-definition cameras on the front and back sides, but the device won’t connect directly to cellular networks.

RIM said its tablet won’t go on sale until early next year in the U.S. and the second quarter elsewhere in the world, meaning it will miss the key holiday season. The timing also puts RIM behind iPad competitors from Samsung Electronics Co., Dell Inc. and others.”

IRS won’t be mailing tax forms next year [AP]
They’re saving $10 million a year, presumably on stamps and envelopes.

News Corp. SVP Kevin Halpin named Dow Jones CFO [AP]
Kevin Halpin is taking the reins from Stephen Daintith.

Correlation Proves Causation, David Cay Johnston Edition [Tax Foundation]
“I agree with Johnston that tax cuts are not the correct response to every economic situation, and I do not believe that letting the Bush tax cuts expire would cause an economic armageddon. If the federal government’s proclivity for deficit spending can’t be curbed by reducing tax revenue – the ‘starve-the-beast’ approach – then permanently extending the Bush tax cuts for any and all taxpayers is a worse policy than letting the cuts expire because the country will drive off the fiscal cliff even sooner.”