Audit Notes: News Corp.’s board, Romney’s taxes, NBC’s Olympics

The paper reports prosecutors are examining whether to charge Murdoch's directors

The Guardian’s Nick Davis, with David Leigh, has another stunner on the hacking scandal. They report that Britain’s Crown Prosecution Service, which last week charged eight News Corp. journalists and executives with crimes, is considering criminal charges against the company’s board of directors.

Directors within Rupert Murdoch’s News Corporation could face corporate charges and prosecution for neglect of their duties, in plans that are being examined by the Crown Prosecution Service.

Company lawyers, fearing a dramatic escalation of the hacking scandal by criminalising the boards on which Murdoch family members sit, are understood to have protested to the authorities…

One problem for News International, however, is the wording of section 79 of the Regulation of Investigatory Powers Act, the hacking legislation under which eight senior News of the World journalists and executives have already been charged. It provides for the corporate prosecution of a company which commits such an offence, and also of any director whose neglect or connivance led to the crime.

A prosecution of board directors seems far-fetched from what we know, but with this story nothing would be surprising.

— Columbia’s Michael Graetz, a Bush I tax official, has one of the best takes I’ve seen on why Mitt Romney won’t release more of his tax returns. Romney’s stance is inviting speculation, however outlandish, about what he’s hiding.

Given the extraordinary size of his I.R.A., we have to presume that Mr. Romney valued the assets he put in his retirement account at far less than he would have sold them for. Otherwise it is quite a trick to turn contributions that are limited to $30,000 to $50,000 a year into the $20 million to $101 million he now has there. But we cannot be certain; his meager disclosure of tax records and financial information does not indicate what kind of assets were put into the I.R.A.

Mr. Romney’s Cayman Islands and Bermuda corporations also probably allowed him to avoid limitations on deductions for investment expenditures that would otherwise apply. So we don’t need any more tax returns to know that Mr. Romney is an Olympic-level athlete at the tax avoidance game. Rich people don’t send their money to Bermuda or the Cayman Islands for the weather.

Graetz calls for Romney to release at least more years of income tax returns plus gift tax forms from the mid-90s when he set up his trust fund babies for life:

Based on his aggressive tax planning, revealed in the 2010 returns he has released and his approval of a notably dicey tax avoidance strategy in 1994 when he headed the audit committee of the board of Marriott International, my bet is that — if Mr. Romney filed a gift tax return for these transfers at all — he put a low or even zero value on the gifts, certainly a small fraction of the price at which he would have sold the transferred assets to an unrelated party. Otherwise, he should be happy to release his gift tax returns. According to a partner at Mr. Romney’s trustee’s law firm, valuing carried interests, such as Mr. Romney’s interests in the private equity company Bain Capital, at zero for gift tax purposes was common advice given to clients like Mr. Romney in the 1990s and early 2000s.

The Atlantic’s Derek Thompson has a good rebuttal to all the hubbub about NBC’s tape-delayed coverage of the Olympics. It basically boils down to his subhed: “NBC’s business model isn’t worth blowing up to placate the cable-cutting 2 percent.”

The easiest way to understand why NBC wants to force you to watch the Olympics in prime time is to stop thinking about what audiences want and start thinking about advertisers want. NBC paid about $1.2 billion for the rights to broadcast these games. To make back most of that money, NBC needs to sell extremely expensive commercials. The most valuable commercials aren’t sold online to be viewed on browser tabs on 12-inch display screens. They’re sold on prime time TV. So NBC has a clear interest in funneling our Olympic attention into the prime-time TV slot.
The strategy is working, in its own way. Even with the awkward five-hour delay — too small to swap day for night a la Beijing, but late enough that England is asleep by the time New England finishes dinner — these Olympics are smashing all-time viewing records…

The most outspoken voices clamoring for wild innovation are often the younger, more affluent, more urban, and more tech-savvy (often media) people griping on Twitter, who don’t want to pay for cable, but also want to watch the Olympics and “Game of Thrones” whenever they feel like it. This is all fine and well — if journalists weren’t talented at raising awareness, they wouldn’t be very good at their job — but the impetus to blow up the old TV/cable business model isn’t as strong as we’d like it to be. Between 80 and 90 percent of households have a cable subscription, and the level has been pretty steady for the last ten years. The estimated number of households who qualify as “cable-cutters” is as low as 2 percent.

It’s yet another reason to remember that the people you follow on Twitter are not representative of the broad swath of Americans.

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Ryan Chittum is a former Wall Street Journal reporter, and deputy editor of The Audit, CJR's business section. If you see notable business journalism, give him a heads-up at Follow him on Twitter at @ryanchittum. Tags: , , , ,