PJ: Is phone hacking by Murdoch papers simply the tip of the iceberg?
The Guardian
A life unravelled … whistleblower who incurred wrath of the Murdoch empire
Relentless legal pursuit of ex-News Corp employee likened to 'Rambo tactics'
By Ed Pilkington
Five years ago Robert Emmel was enjoying the American dream. He lived in a detached house in a suburb of Atlanta, Georgia, drove a BMW, and earned $140,000 a year as an accounts director in a highly successful advertising company called News America Marketing.
Today, Emmel is described by his lawyers as destitute. Jobless and in debt, he was discharged from bankruptcy last year. He does occasional consultancy work that last month brought in $500, and this month, court documents show, will probably produce nothing. His wife's earnings raise monthly household income to about $3,000 – half their outgoings.
This is a cautionary tale about what can happen to someone who dares to become a corporate whistleblower. Or, more specifically, someone who incurs the wrath of News Corporation, the media empire owned by Rupert Murdoch, of which News America forms a part.
Emmel's lawyer, Philip Hilder, has had a ringside seat at the gradual unravelling of his client's life. A former federal prosecutor based in Houston, Texas, Hilder is well versed in whistleblower cases having represented Sherron Watkins, who helped uncover the Enron scandal. Hilder said: "News America has engaged in Rambo litigation tactics. They have a scorched earth policy, and it's taken a huge toll on him."
News Corp has devoted the efforts of up to 29 lawyers to pursuing Emmel personally, at a cost estimated at more than $2m. Emmel, by contrast, has relied on two lawyers, Hilder and Marc Garber in Atlanta, working for no pay since January 2009.
Attention has been focused on News Corporation's activities in the UK, where the News of the World phone-hacking scandal has led to the arrest of 10 people associated with the company. In the US, oversight of News Corp is gathering pace with the department of justice and the FBI looking into the company, while senators are considering launching committee hearings into News Corp practices.
One incident that US investigators are exploring is the hacking of a website run by one of News America's rivals, an instore advertising business called Floorgraphics. The firm discovered that its password-protected site had been breached from an IP address at News America's offices in Connecticut. News America has condemned the breach as a "violation of the standards of our company" but says it does not know how it happened.
Emmel was one of the main witnesses for Floorgraphics at a subsequent trial against his old company. He worked for News America for seven years from 1999 to 2006, turning whistleblower in his final year there. The company is the leading US provider of in-store advertising services, helping to bring products from firms such as Coca-Cola, Kraft and Nabisco to the attention of supermarket shoppers. Headed by Paul Carlucci, who now publishes Murdoch's tabloid the New York Post, it enjoys annual revenues of more than $1bn and has a 90% stranglehold on the market. News America also has a record of legal disputes with its commercial rivals, three of whom have launched lawsuits against it in recent years accusing the firm of using unlawful practices.
All three lawsuits – including the Floorgraphics one and cases initiated by Valassis and Insignia – were eventually settled, but not before News America agreed to pay an astounding $655m to end the disputes. Emmel acted as a whistleblower in all three cases. He gave two days of evidence in the Floorgraphics trial after which News America rapidly settled, and was also named in the Valassis and Insignia cases.
By 2006 Emmel said he was increasingly concerned about what he alleged were improper practices on the part of his employers. He alleged that News America was engaging in "criminal conduct against competitors" and using "deceptive and illegal business practices" to defraud its retailer customers out of money owed. He claimed he had "substantial oral and documentary evidence" to support his allegation that the company had defrauded its own customers, used anti-competitive techniques against rival companies, and fraudulently inflated its reported earnings unbeknown to its shareholders.
News America denies the allegations. In a statement, it said: "There have been three very public lawsuits about these matters and at no time during any of these legal proceedings was any evidence produced to support Mr Emmel's claims."
For a year before he was sacked in November 2006, Emmel began compiling documentary evidence that he suggested backed up the allegations, and posted it to public bodies and individuals including the US securities and exchange commission, two senators, two Senate committees and the New York attorney general.
It is not known what happened to Emmel's allegations within the regulatory bodies he approached. He posted one set of 55 pages of documents on 20 December 2006, shortly after he had been fired and a day before he signed a non-disclosure agreement with News America.
That set of documents went to Nicholas Podsiadly, an official in Washington then working as an investigative counsel at the Senate finance committee. At one point, court documents show, Podsiadly said the committee was considering referring the allegations to the justice department and the federal trade commission.
Podsiadly did not reply to a request for information. A spokeswoman for the finance committee said nothing would be done with any documents sent by Emmel until the litigation over them had ended.
Emmel today remains under a court-imposed injunction that forbids him from disclosing anything from these documents. "I cannot comment," he said.
News America learned of Emmel's whistleblowing activities after it had sacked him in a dispute over his timekeeping. It then unleashed its legal armoury against him. In April 2007 it filed a lawsuit accusing him of six violations relating to his disclosure of confidential information, pressing its case with more than 300 pleadings to the Georgia courts. The company said Emmel refused to return "tens of thousands of stolen documents" and added: "Initiating legal action was News America Marketing's only recourse to protect the company's private information."
Despite the tenacity with which it has pursued Emmel, News America has had very little satisfaction through the courts. In March 2009 the district court in Georgia threw out all of its claims against him, bar one – a claim of breach of contract relating to his posting of the 55 pages of documents the day before he signed a non-disclosure agreement. Even that count, however, has been overturned by the US appeal court, which ruled in Emmel's favour in June, although the court kept the non-disclosure injunction in place noting that a significant proportion of Emmel's legal fees had been paid by News America's competitors.
In 2009 the company made clear that it intended to go to trial to ask for $425,000 from Emmel to cover legal costs incurred in the breach of contract element of the lawsuit, as it was entitled to dothough the sum was way beyond his ability to pay. Emmel's lawyers say the move forced him into bankruptcy. News America then insisted on a deposition to extract financial information out of Emmel, a move that is allowable under the law but that astonished Emmel's bankruptcy lawyer, Danny Coleman, because he says there had been no suggestion from the authorities that anything about the bankruptcy was out of order. "In my view, that was an abuse of the legal system," he said. "They took the law to its extreme and they used it to harass my client and prolong his agony.
After months of work on the deposition, nothing irregular was found. Hilder said he was struck by an irony in the Emmel case. "Here is a company, News Corp, that is in the business of disseminating information to the public, and yet its subsidiary does everything in its power to silence him."
News America denies engaging in inappropriate litigation and insists that it only wants to protect commercially confidential information, adding that Emmel's lawyers were "once again attempting to distort the facts in this case". The company added it had "vigorously defended itself against Mr Emmel's charges against the company, all of which were dismissed by the court". It says the injunction does not prevent him from co-operating with any formal investigation into News America.
The idea that Emmel had been driven into destitution was "preposterous", it said, "given his legal fees – to the tune of $750,000 – were paid by two competitors to News America". Emmel's lawyers do not dispute that until 2009 he received legal fees from Floorgraphics and Insignia, but say that was consistent with his role as a whistleblower against his old company.
While legal proceedings continue, the injunction preventing Emmel from approaching corporate regulators remains in place. But the appeal court in June made one important proviso. Nothing in the injunction, it ruled, "prevents Emmel from complying with grand jury or court-issued subpoenas or from co-operating with law enforcement authorities in any formal investigations of News America".
http://www.guardian.co.uk/media/2011/aug/17/whistleblower-murdoch-empire
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