By Claire West
Whale Rock Legal, the City-based niche law practice, has commented on the announcement that News Corp is being sued by a group of shareholders who allege that the media company failed to take early action over the phone-hacking scandal.
The lawsuit, which has been filed by Amalgamated Bank and a group of pension funds, says News Corp’s board, headed by Rupert and James Murdoch, failed to “exercise proper oversight and take sufficient action” when news of the hacking first emerged at subsidiary News International nearly six years ago.
This failure, the suit claims, has led to a “piling on of questionable deals, a waste of corporate resources, a starring role in a blockbuster scandal and a gigantic public relations disaster”.
The scandal has so far resulted in the closure of the News of the World, which was accused of hacking into the mobile phones of people including murdered schoolgirl Milly Dowler and victims of the 7/7 terrorist attacks in London, as well as the resignation today of News International CEO Rebekah Brooks, who edited the paper at the time the hacking is said to have taken place. Rupert Murdoch also dropped his controversial bid to buy out BSkyB this week in the face of increased pressure from MPs.
News Corp shares in the US have fallen by almost 11 per cent in the past week.
Nigel Kushner, CEO of Whale Rock Legal, said: "We may see more civil claims brought by shareholders against directors to make them personally liable for neglecting their fiduciary duties.
“In the UK, there now exists the real prospect that if a plc is successfully prosecuted under the new Bribery Act and its share price suffers as a consequence, the directors may face significant personal claims from its shareholders for their losses sustained."