News Limited Review of Editorial Expenses

Sydney – November 14, 2011 – A comprehensive, three-month review of editorial expenses at News Limited's major newspapers has found no evidence of illegitimate telephone surveillance or payments to public officials.

The review, commissioned by News Limited chairman and chief executive officer John Hartigan, in the immediate aftermath of the UK telephone hacking scandal was conducted by a team of 26 auditors and collected data on nearly 700,000 transactions over a five year period.

The review's findings provide the strongest possible support for News Limited's assertion that its editorial staff have not commissioned the kind of illegitimate surveillance or payments that have come to light in the UK.

The review examined editorial expenses at News Limited's major metropolitan newspapers which account for more than 70 per cent of the company's expenses in this area.

The newspapers reviewed were The Australian and Weekend Australian, The Daily Telegraph, The Sunday Telegraph, The Herald Sun, The Sunday Herald Sun, The Courier-Mail and The Sunday Mail in Queensland, The Advertiser and The Sunday Mail in South Australia and The Sunday Times in Western Australia.

The review applied scrutiny to all cash transactions over $100 and all transactions over $10,000; identified the use of private investigation companies and interviewed senior staff and third party suppliers.

The level of scrutiny applied to individual transactions selected for examination included the retrieval of all relevant documents and interviews with relevant staff and formal questioning of people commissioned to supply services.

To add further oversight to the process, retired Victorian Supreme Court Judges, Frank Vincent AO and the Bernard Teague AO, were engaged to independently assess the review's methodology and comment on the appropriateness of News Limited's response to its findings.

The judges sought their own independent advice from editorial and audit experts and they were personally briefed on numerous occasions during the review process.

Their public comment today is included with this release.

In addition, oversight of the review was also put in place by News Corporation's independent directors.

The News Corporation board's governance committee asked Australian-based independent director Peter Barnes to have oversight of the process and he reviewed the work as it was conducted, met with the independent assessors Justices Frank Vincent and Bernard Teague, and advised News Limited management on measures to put in place in response to the review.

Despite the review finding no evidence of illegitimate surveillance or payments News Limited will nevertheless make changes to further safeguard the standards it upholds.

The company will adopt a single code of conduct across all its editorial operations and further strengthen the approval process for any use of private investigators.

A further process will be put in place to ensure all editorial staff renew their knowledge of the code of conduct each year.

News Limited chairman and chief executive officer John Hartigan said today the review confirmed his rock-solid faith in the conduct and standards upheld by the company's journalists.

"I said at the start of this process I had no reason to suspect any wrongdoing. An incredibly diligent piece of work has confirmed that. Nevertheless we will use this opportunity to put in place measures to further reinforce our standards."

Explanation of Review Process

News Limited group editorial director Campbell Reid today released details of conduct of the review of the company's editorial expenses.

The review which took a team of 26 audit staff more than 3,000 hours of work over three months to complete examined expenses at the 10 News Limited metropolitan newspapers as they account for more than 70 per cent of the company's editorial expenditure.

The review looked at all editorial payments over the past five years by The Australian, Weekend Australian, The Daily Telegraph, The Sunday Telegraph, the Herald Sun, Sunday Herald Sun, The Courier-Mail and The Sunday Mail in Queensland, The Advertiser and The Sunday Mail in South Australia and The Sunday Times in Western Australia for the period between July 1, 2006, and June
30, 2011

Data was collected on 684,451 transactions for expenditure totalling $335 million. Of this total number more than 28,000 transactions were risk assessed individually and of these 2,321 were selected for examination.

The auditing team was guided by auditing standards to judgementally risk assess the transactions for further examination, as well as choosing a total random sample.

The initial risk assessment review covered all cash transactions over $100, all transactions above $10,000 and all transactions that were selected if they returned a match against a search involving more than 100 key-words that might indicate a potential breach of conduct.

Actual examination of the 2,321 selected transactions was undertaken across the country at each of the newspaper divisions over the three month period and often involved retrieval from archive accounting records to substantiate the nature of the expenditure.

Where transactions needed further explanation, News Limited staff and relevant third parties were interviewed to establish that no illegitimate conduct had occurred.

Because all regular cash payments were reviewed the process meant items as small as milk for tea rooms through to large payments for editorial columnists or third party service providers like major news wires and picture agencies were examined and the nature of the expense validated and documented by the audit teams.

The key word searches were based on dozens of different combinations of words that could be associated with surveillance or phone hacking.

Use of private investigation companies was identified through interviews with staff and by searching for transactions matching company names and individuals identified through business directories.

As the review progressed any new names or companies that came to light were added to the process.

When transactions that required further explanation were identified, computer archives and physical records in archive storerooms were located and examined. The examination of each transaction that was reviewed in detail was not closed off
until all relevant records had been found allowing a determination and documentation of the nature of the expense to be completed.

In the small number of cases where private investigators were used staff were interviewed and, where required, the companies were asked to provide written assurances that their work practices were neither illegal nor illegitimate.

"The review also investigated claims by two people, who came forward after the UK
revelations, to say they suspected News Limited staff had hacked their phones.

In these cases the staff involved in each of the stories were extensively interviewed and no evidence was found to support the claims.

In each of these cases our staff applied normal practices of professional journalism.

Role of Independent Assessors

When News Limited announced the review in July, two retired Victorian Supreme Court judges were nominated by the chairman of The Australian Press Council, Julian Disney, to act as independent assessors of the process.

The judges, Frank Vincent AO and Bernie Teague AO, were briefed by News Limited throughout the course of the review process and they also consulted independent editorial experts and other auditors for advice.

The judges will release their independent assessment of the News Limited review today.

News Limited has briefed Professor Disney on the detail of the review process and invites his comments.

News Limited's Response

News Limited will adopt a single, new editorial code of conduct based on The Herald and Weekly Times code of conduct which was updated in August.

When the new code is complete it will replace all existing codes and editors will hold briefings for editorial staff to introduce it.

Staff will be required to confirm in writing annually that they have read and understand the requirements of the code.

Work is already under way to put in place an electronic process to refresh the editorial staffs' knowledge of the code.

The new code will also be displayed prominently in each newsroom, on masthead websites and internal intranet sites and will link to the standards of The Australian Press Council.

The new code will include specific procedures governing use of private investigators. The code will state that:

Unless there are exceptional circumstances journalists will carry out their own inquiries and investigations.
The use of private investigators must be confined to work which checks, verifies or establishes facts in support of the fundamental requirement for accuracy in our journalism.
Private investigators will not be contracted to provide services without the approval of the editor, the divisional head and the group editorial director.
Private investigators conducting work on behalf of the company will be required to comply with our editorial code of conduct and provide a written assurance that they will not engage in illegitimate surveillance.
    

Contact:

Released by News Limited Corporate Affairs
For further details contact:
Greg Baxter
Ph: 02 9288 3242
Mob : 0419 461 368
Email : baxterg@newsltd.com.au