A narrow majority of U.K. lawmakers said today that Rupert Murdoch is unfit to lead News Corp, partly because he showed 'willful blindness' to illegal activity happening in the company.
Murdoch, 81, testified to Parliament that he didn't know phone hacking and local bribery were widespread at the now closed News of The World. His subordinates concealed it from him, he said.
If that was true, the U.K. panel said, “he turned a blind eye and exhibited willful blindness to what was going on in his companies,” according to an account in the Washington Post.
The paper said 'legislators accused Murdoch and his son James of overseeing a corporate culture that sought “to cover up rather than seek out wrongdoing.”'
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The FBI is reportedly investigating whether News Corp's payments to police in the U.K. violated the FCPA. Indications of 'willful blindness' won't help News Corp and its top execs deal with potential U.S. charges.
During Frederic Bourke's FCPA trial, prosecutors told the jury that instead of doing adequate due diligence for his investment in Viktor Kozeny's Azerbaijan privatization scheme, Bourke had 'stuck his head in the sand.'
The 'head-in-the-sand' phrase appears prominently in the FCPA's legislative history.
The Congressional Research Service said this in its report to Congress about enactment of the FCPA and its 1988 and 1998 amendments:
The "knowing" requirement . . . is intended to encompass the "conscious disregard" and "willful blindness" standards, including a conscious purpose to avoid learning the truth. The Conferees agreed that "simple negligence" or "mere foolishness" should not be the basis for liability.
However, the Conferees also agreed that the so-called "head-in-the-sand" problem-- variously described in the pertinent authorities as "conscious disregard," "willful blindness" or "deliberate ignorance"--should be covered so that management officials could not take refuge from the Act's prohibitions by their unwarranted obliviousness to any action (or inaction), language or other "signaling device" that should reasonably alert them of the "high probability" of an FCPA violation.
Bourke was sentenced to a year and a day in prison after a jury convicted him in 2009 of conspiracy to violate the FCPA. He's now free pending his appeals.
Neither News Corp nor any of its executives have been charged for FCPA violations.
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In a commentary today on CBS Money Watch, author Margaret Heffernan said 'willful blindness isn't just a character flaw; it is a structural trap that lies in wait for anyone in power.'
My book, "Willful Blindness: Why We Ignore the Obvious at our Peril" shows that willful blindness has been with us for a long time. It emerged in Victorian time as a legal concept that argues that when there is information we could have, and should have, but somehow manage not to have, we are nonetheless responsible. While most often used to prosecute cases of money laundering and drug trafficking, it was used most sensationally in the government's case against Enron CEO Jeff Skilling and Chairman Ken Lay. The phone hacking scandal is the media's Enron moment.