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September 13, 2011 01:00 AM

Shareholders broaden lawsuit against News Corp.

Timothy Inklebarger
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    Shareholders suing News Corp. over the U.K. phone hacking scandal brought new charges against the company on Tuesday, claiming that wrongdoing at two of its U.S. subsidiaries, News America Marketing and NDS Group, resulted in hundreds of millions of dollars in losses and the erosion of the company’s market value.

    Co-lead plaintiffs in the original suit filed in the Delaware Chancery Court against News Corp. include the $310 million New Orleans City Employees Retirement System and the Central Laborers’ Pension Fund.

    The new charges highlight trouble in the late 1990s, when News America Marketing, an in-store marketing company, paid out $300 million in damages and $650 million in settlements to competitors. Among the charges were that News America Marketing hacked into a competitor’s computer system on at least 11 separate occasions and issued false press releases impugning a rival company.

    Also, according to the updated charges, smart card company NDS was accused by competitor EchoStar of illegally extracting software code from competitor’s cards and posting the code online.

    The plaintiffs also accuse the News Corp. board of breaching its fiduciary duty when it approved a $5 billion share buyback in July to buttress the company’s stock price, which had slid as a result of the News of the World phone hacking scandal.

    Jay Eisenhofer, partner of plaintiff attorney Grant & Eisenhofer, said in a telephone interview that the new charges show that “there was similar misconduct (to the News of the World scandal) at other subsidiaries of News Corp. starting back 15 years ago,” adding that the misconduct resulted in $1 billion in losses.

    “The board was aware of the conditions (but did not act),” Mr. Eisenhofer said.

    News Corp. spokeswoman Teri Everett could not be reached for comment by deadline.

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