Police payment emails growing worry for Murdoch execs

By Mark Hosenball

WASHINGTON (Reuters) - Executives at Rupert Murdoch's UK-based News International are concerned that emails discussing questionable payments made to police by the News of the World may prove more problematic than those that discuss phone hacking, sources familiar with investigations into the shuttered tabloid's reporting practices said.

There are growing concerns inside the company that evidence of questionable payments to police -- or other British public officials -- could fuel investigations by U.S. authorities into possible breaches of the Foreign Corrupt Practices Act (FCPA), an American law that prohibits corrupt payments to foreign government officials. News International is owned by New York-based News Corp <NWSA.O>.

"We're more frightened by the (U.S. Justice Department) than we are of Scotland Yard," a source close to News Corp who was briefed about the content of the emails told Reuters. "All Scotland Yard can go after is News International but the Justice Department can go after all of News Corporation."

Thousands of News of the World emails were assembled in 2007 when News International executives and lawyers at an outside firm were preparing responses to a litigation threat lodged by Clive Goodman, a former reporter for the News of the World, who was jailed for hacking into voicemail messages of aides to Britain's Royal family.

The emails sat ignored for years in the archives of London law firm Harbottle & Lewis. News International retrieved them earlier this year and showed them to Ken MacDonald, a former Director of Public Prosecutions for England and Wales and a member of the House of Lords. MacDonald recently told Parliament that after he read the messages in May, it had taken him "about three minutes, maybe five minutes" to determine that they contained evidence of possible criminality.

The company subsequently turned over the e-mails to London's Metropolitan police, who shortly after receiving them set up a team to investigate payments to police officers. The company later authorized Harbottle & Lewis to cooperate with parliamentary and police investigators.

While much has been made of emails related to the phone hacking scandal, which since July has sparked a flurry of resignations within the company and Scotland Yard, some at News International are more worried by emails referring to payments to police.

The source close to News Corp said lawyers hired by News International were soon expected to question journalists at more than one of Murdoch's British publications about possible payments to both UK police officers and other British public officials.

Last month News Corp hired Mark Mendelsohn, who served as the deputy chief of the Fraud Section in the Criminal Division of the United States Department of Justice (DOJ). Mendelsohn is internationally acknowledged and respected as the architect and key enforcement official of the DOJ's Foreign Corrupt Practices Act enforcement program.

Reuters is a competitor of Dow Jones Newswires, the financial news agency that News International's New York-based parent company News Corp acquired along with the Wall Street Journal in 2007.

GREEN BOOK

The source close to News Corp said the email traffic indicates Goodman and the then-editor of the News of the World, Andy Coulson, agreed that an unnamed police contact should receive a "four-figure sum" for leaking a confidential file known as the "green book" containing information about the movements, locations and phone numbers of members of the royal family.

The source said the dossier held by Harbottle & Lewis also included financial records showing the precise amount mentioned in the e-mail traffic was paid out in cash. The payment was made on or about the same day of the alleged e-mail exchange, to a recipient who used a pseudonym.

The source, and a second source briefed on the matter, said the evidence available to News International now indicates that neither the paper nor its outside lawyers sought to review the archived evidence relating to police corruption, or to further examine its content, between the time the material was sent to storage in 2008 and its retrieval earlier this year.

A spokeswoman for News International said she could not discuss the emails or how the company handled them due to a continuing investigation by British police.

Harbottle & Lewis says it has been asked by police to not make public the emails' contents "to preserve the integrity of their criminal investigation."

Thursday, parliamentary officials were expected to ask News International to authorize Burton Copeland, a second outside law firm retained by the publisher, to help the company look into questionable practices, the source close to News Corp told Reuters.

"LARGE NUMBER OF EMAILS"

In February, 2007, not long after Goodman pleaded guilty to phone hacking charges, Les Hinton, then News International's executive chairman, wrote to Goodman to fire him, according to documents made public Tuesday by a parliamentary committee.

A month later, Goodman sent a letter to News International's human resources director appealing his sacking. In it, Goodman claimed his activities were carried out with "full knowledge" of other executives at the paper. Goodman noted that even after he was jailed, the News of the World "continued to employ me for a substantial part of my custodial sentence."

As a result of Goodman's claims, the company launched both an internal review of relevant evidence -- by News International's human resources and legal affairs directors -- and a further review by Harbottle & Lewis.

In a submission to parliament, Jon Chapman, News International legal director in 2007, said he and personnel chief Daniel Cloke went through a "large number of emails" to try to determine whether a "limited and specified number of individuals" knew about Goodman's involvement in phone hacking. They found "no such evidence," Chapman said. He said Hinton subsequently asked that outside lawyers review the same emails looking for the same kind of evidence.

In its submission to Parliament, Harbottle & Lewis said News International asked the firm to look through five batches of News of the World emails for evidence that certain individuals knew of Goodman's involvement in phone hacking or that other journalists were involved in phone hacking.

The law firm emphasized it "was not retained to look for evidence of wider criminal activities and did not do so," and said it was only "being asked to assist News International in dealing with Mr. Goodman's internal appeal against his dismissal."

The law firm said the e-mails it collected were shipped to an outside storage company in November 2008 and were not retrieved until March 25 of this year, when the firm reached into its archives at the request of News International lawyers.

(Editing by Martin Howell, Simon Robinson and Sara Ledwith)