News Corp. Piracy Allegations Expand to Australia, Asia

11:09 PM PST 03/27/2012 by Pip Bulbeck
Justin Sullivan/Getty Images
Rupert Murdoch

An Australian publication reports that Rupert Murdoch's company used a special unit in the mid-1990s to sabotage its competitors.

SYDNEY – Rupert Murdoch’s News Corp. is facing a fresh round of allegations about hacking and piracy within the organization that goes back to 1996.

aAccording to a new report published in Australia on Wednesday, a secret unit within News Corp.’s pay TV technology affiliate NDS engaged in activities that were designed to undermine both satellite TV rivals and allies in various markets.

The report suggesting that NDS engaged in conduct to undermine rivals from the U.S., U.K. and Europe to Asia and Australia was refuted as “fanciful” and “baseless” by News Corp.’s local arm, News Ltd.

The Australian Financial Review published the allegations about NDS, formerly News Datacom Systems, which provides set top boxes, smart cards and conditional access systems used by News Corp.’s satellite TV businesses worldwide. News Corp. and its partner Permira agreed to sell NDS to Cisco Systems for $5 billion earlier this month.

The newspaper said its allegations of piracy are backed up by 14,400 emails it obtained and published. They reportedly were in the possession of former U.K. Metropolitan Police commander Ray Adams who was European chief for the “secret” NDS unit, named Operational Security, between 1996 and 2002. Those documents, the paper said, "show NDS sabotaged business rivals, fabricated legal actions and obtained telephone records illegally."

The allegations expand on those aired by the BBC’s Panorama program in the U.K. on Monday, which detailed the alleged sabotage of OnDigital, which collapsed with losses of more than £1 billion in 2002, after it was hit by massive piracy, which added to its other commercial woes.

The report in the Australian newspaper claimed that Operational Security “promoted a wave of high-tech piracy in Australia that damaged [regional pay TV operator] Austar, [rival satellite operator] Optus and Foxtel at a time when News was moving to take control of the Australian pay TV industry."

Operational Security was originally set up by NDS security chief Reuven Hasak in 1996 to fight piracy of News Corp.'s own satellite TV systems and used the services of hackers and pirates as consultants. But it is now alleged that the unit engaged in piracy against BSkyB competitor OnDigital and sabotaged other rivals, allowing News Corp. to pick up satellite TV assets cheaply, including DirecTV in the U.S., Telepiu in Italy and Austar United Communications.

News Corp. has a 25 percent stake in and management control of Australian pay TV giant Foxtel and is currently in the process of acquiring Austar, majority owned by Liberty Global. Anti-trust regulator, the Australian Competition and Consumer Commission, is set to rule next month whether Foxtel’s acquisition of Austar would lessen competition in the market.

A statement from News Ltd., which is now headed up by former Foxtel boss Kim Williams, on Wednesday said the Australian Financial Review report was “full of factual inaccuracies, flawed references, fanciful conclusions and baseless accusations, which have been disproved in overseas courts”. It added: “For example, the notion that alleged NDS actions in Australia were done to undermine Austar so that Foxtel could bid for it 13 years later are so far-fetched as to be laughable."

The statement also added: “News Limited and Foxtel have spent considerable resources fighting piracy in Australia. It is ironic and deeply frustrating that we should be drawn into a story concerning the facilitation of piracy." And News Ltd. noted that  “the United States Department of Justice, a federal court jury and a federal appellate court have all rejected allegations that NDS was either responsible for TV piracy or for distributing codes to facilitate piracy. Moreover, the United States Court ordered NDS's accuser to pay $19 million to cover NDS's legal fees and costs.” That refers to an action brought against NDS by U.S. satellite TV provider Echostar in 2008 in which the latter was awarded nominal damages of just $1,546.

News Corp. had also issued a rebuttal related to the Panorama claims. "News Corporation is proud to have worked with NDS, whose industry-leading technology has transformed TV viewing for millions of people across the world, and to have supported them in their aggressive fight against piracy and copyright infringement," it had said in a statement. "Whilst it was not reported fully in the program, NDS has consistently denied any wrongdoing to Panorama, and we fully accept their assurances." It added that "the BBC did not pose questions to News Corporation ahead of broadcast and was unwilling to engage in any conversation on this issue, which is disappointing."

Australian Communications minister Stephen Conroy on Wednesday called the allegations “serious,” adding that "any allegations of criminal activity should be referred to the Australian Federal Police for investigation.”

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