Why U.S. Prosectors Won’t Be Filing Corruption Charges Against News Corp

What if the scandal involving bribery, phone-hacking and News Corp landed in an American courtroom? It would be a great story. But despite the best efforts of some media outlets to wish the story into existence, it’s not going to happen.

For two weeks, the British newspaper The Guardian (disclosure: until a month ago, we were owned by Guardian News & Media) has been beating the drum about the Foreign Corrupt Practices Act, a 1977 law that makes it illegal for U.S.-based companies and executives to obtain business by bribing foreign officials.

Earlier this month, Reuters (NYSE: TRI) reported that U.S. officials had opened an investigation into whether the News Corp scandal involves FCPA violations. Even though the story noted there is no evidence of U.S. phone-hacking, the Guardian has raised the spectre of its rival being paraded before American justice.

Media pundit Michael Wolff, for instance, yesterday opened a piece by noting the obvious — that the FCPA is not designed for events like the UK hacking scandal. But Wolff nonetheless embarked on a speculative tour de force of how the FCPA could technically apply and how Team Murdoch is rejigging its legal strategy to fight off the Americans. He concludes by egging on the U.S. feds.

Give me a break. Attempting to prosecute part of the UK media establishment would be a bridge too far, even for a Justice Department that has acquired a reputation for over-zealous and politicized FCPA investigations.

Consider that the FCPA exists because some countries are unwilling or unable to stop corruption themselves. The UK, whose rule of law principles inform America’s own legal system, is not one of those countries.

There are also the diplomatic implications of usurping the UK’s legal powers at a time when many Brits are outraged over a one-sided extradition treaty that the country signed with U.S. after 9/11. While the Obama administration would no doubt love to put the screws to the owner of Fox (NSDQ: NWS) News, it’s hard to see how a full-blown FCPA prosection would not be perceived as a humiliating suggestion that the UK can’t handle its own affairs.

Americans too might be put off by a costly and unnecessary investigation. In a worthy overview of the law and politics of the FCPA, Reuters’ Alison Frankel nails it as follows:

As a journalist, I’m horrified that News Corp may have paid the police for tips. If I were a British taxpayer, I’d be irate that cops and Defense Ministry officials allegedly took the bribes. I’d be at the head of the line calling for a full investigation and harsh penalties for anyone who broke the law.

But as a U.S. taxpayer, I’d rather the Justice Department spent my money investigating, say, mortgage-backed securitization than whether British journalists bribed British police officials for tips on British news stories. In an age of limited resources, I’m not convinced that our government should be bending and twisting the FCPA to make a case against News Corp. however sexy and high-profile that case would be.

The situation would be very different if Wall Street Journal reporters in the U.S. used bribing and hacking to get their stories. But there isn’t a shred of evidence this happened.

As for Wolff’s claim that News Corp.’s legal strategy is being shaped by the FCPA, the company may indeed be wary of being forced to pay the Justice Department to go away (in a piece titled “Bribery Racket,” Forbes suggested FCPA officials launched prosecutions for personal gain). But for now, News Corp.’s lawyers are likely more preoccupied with the ongoing turmoil in the UK — like James Murdoch’s resignation and the Leveson Inquiry.

For now, no amount of media-induced smoke will light a FCPA fire under News Corp.