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 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!’ ”