The
Secret Battle for the Future of the Murdoch Empire
Rupert
Murdoch, the patriarch, has moved to change the family’s irrevocable trust to
preserve his media businesses as a conservative force. Several of his children
are fighting back.
Jim
RutenbergJonathan Mahler
By Jim
Rutenberg and Jonathan Mahler
July 24,
2024
https://www.nytimes.com/2024/07/24/business/media/rupert-murdoch-succession-fox.html
Rupert
Murdoch is locked in a secret legal battle against three of his children over
the future of the family’s media empire, as he moves to preserve it as a
conservative political force after his death, according to a sealed court
document obtained by The New York Times.
Mr. Murdoch,
93, set the drama in motion late last year, when he made a surprise move to
change the terms of the Murdochs’ irrevocable family trust to ensure that his
eldest son and chosen successor, Lachlan, would remain in charge of his vast
collection of television networks and newspapers.
The trust
currently hands control of the family business to the four oldest children when
Mr. Murdoch dies. But he is arguing in court that only by empowering Lachlan to
run the company without interference from his more politically moderate
siblings can he preserve its conservative editorial bent, and thus protect its
commercial value for all his heirs.
Those three
siblings — James, Elisabeth and Prudence — were caught completely off-guard by
their father’s effort to rewrite what was supposed to be an inviolable trust
and have united to stop him. Lachlan has joined on Mr. Murdoch’s side.
Remarkably, the ensuing battle has been playing out entirely out of public
view.
Last month,
the Nevada probate commissioner found that Mr. Murdoch could amend the trust if
he is able to show he is acting in good faith and for the sole benefit of his
heirs, according to a copy of his 48-page decision.
A trial to
determine whether Mr. Murdoch is in fact acting in good faith is expected to
start in September. Hanging in the balance will be the future of one of the
most politically influential media companies in the English-speaking world.
Representatives
for the two sides declined to comment. Both have hired high-powered litigators.
The three Murdoch siblings are represented by Gary A. Bornstein, the co-head of
litigation at Cravath, Swaine & Moore. Mr. Murdoch is represented by Adam Streisand,
a trial lawyer at Sheppard Mullin who has been involved in estate disputes
concerning Michael Jackson and Britney Spears.
Few media
stories have been watched as closely as the succession battle over the Murdoch
empire, both because of the irresistibly Shakespearean nature of the drama, and
because of the empire’s outsize political influence. Mr. Murdoch’s decision in
2018 to formally designate Lachlan as his heir put to rest years of speculation
over his wishes for the company.
What it did
not do, though, was ensure that Mr. Murdoch’s wishes would survive him: The
existing trust gives all four of his oldest children an equal voice in the
company’s future.
The Murdoch
family has been divided before. James and Elisabeth at one point competed with
each other and Lachlan to eventually take over the company, and at various
times they have clashed with one another and their father. James, who once
helped run the company with Lachlan, left it in 2019 and now oversees an
investment fund. Elisabeth runs a successful movie studio, Sister, and has for
years sought to position herself as the “Switzerland” of the family,
maintaining good relations with all. Prudence, Murdoch’s oldest child and the
only one from his first marriage, has been the least involved in the family
business and has remained the most private of the children.
But given
Mr. Murdoch’s advanced age, this battle has all of the makings of a final fight
for control of his sprawling media conglomerates, which own Fox News, The Wall
Street Journal, The New York Post and major newspapers and television outlets
in Australia and Britain. It has already driven a new wedge into the famously
fractured family.
Politics,
and power, are at the root of the struggle. Since Mr. Murdoch designed the
trust nearly 25 years ago, the family’s political views have diverged sharply.
During Donald J. Trump’s rise, Mr. Murdoch and Lachlan became more closely
aligned, pushing the company’s most influential outlet, Fox News, further to
the right, making the other three children increasingly uncomfortable.
Mr. Murdoch
has called his effort to change the trust Project Harmony because he hoped that
it might head off a looming family struggle when he dies, according to a person
with knowledge of the family. But it has had the opposite effect.
After filing
his petition to amend the trust, Mr. Murdoch met separately with Elisabeth and
Prudence in London, hoping to win their support, this person said. Instead,
they were furious. Elisabeth responded to the possibility with a string of
expletives.
Days later,
on Dec. 6, Mr. Murdoch’s representatives went ahead with the motion to make the
changes at a hastily called special meeting of the trust in Reno, Nev. The
representatives for the three children sought to adjourn the meeting and block
the proposed changes but failed, according to the court decision.
The fight
has left Mr. Murdoch estranged from three of his children in his twilight
years. None of them attended his wedding to Elena Zhukova, his fifth wife, in
California last month. (Lachlan did.)
Though the
trust is irrevocable, it contains a narrow provision allowing for changes done
in good faith and with the sole purpose of benefiting all of its members. Mr.
Murdoch’s lawyers have argued that he is trying to protect James, Elisabeth and
Prudence by ensuring that they won’t be able to moderate Fox’s politics or
disrupt its operations with constant fights over leadership.
According to
the court’s decision, Mr. Murdoch was concerned that the “lack of consensus”
among his children “would impact the strategic direction at both companies
including a potential reorientation of editorial policy and content.” It states
that his intention was to “consolidate decision-making power in Lachlan’s hands
and give him permanent, exclusive control” over the company.
The document
makes it clear that Mr. Murdoch’s actions have pushed Elisabeth, Prudence and
James into a joint posture against him. The siblings share legal counsel and
are fighting to retain their voice in the company’s future, arguing that their
father is trying to disenfranchise them. They say Mr. Murdoch’s move violates
the spirit of the initial trust, enshrined in its “equal governance provision,”
and that it was not done in good faith.
This will be
one of the main issues in the trial. As the Nevada probate commissioner, Edmund
Gorman Jr., wrote in his decision: “A rational fact finder could find that the
determination that the Amendment was in the best interests of the beneficiaries
was made with ‘[d]ishonesty of belief, purpose, or motive,’ i.e., in bad
faith.”
The action
is taking place in a Reno probate court, which is devoted to dealing with
family trusts and estates. Nevada is a popular state for dynastic family trusts
because of its favorable probate laws and privacy protections. The decision
obtained by The Times contains a review of the facts by a probate commissioner
whose role is to adjudicate cases.
The trust
holds the family’s shares in Mr. Murdoch’s empire, which is now mainly divided
between two companies: Fox, which includes Fox News and the Fox broadcast
network, and News Corp, which holds his major newspapers.
All six of
Mr. Murdoch’s children have an equal share of the trust’s equity. That includes
Chloe and Grace, the two younger children he had with his third wife, Wendi
Deng. But those two have no voting rights.
As of now,
the voting rights are shared among Mr. Murdoch and his four oldest children
through their own handpicked representatives on the trust’s board. But Mr.
Murdoch has the ultimate control and cannot be outvoted. After he dies,
Lachlan, James, Elisabeth and Prudence each get a single vote. As Mr. Murdoch
put it in an interview with Charlie Rose in 2006: “If I go under a bus
tomorrow, it will be the four of them who will have to decide which of the ones
should lead them.”
The probate
commissioner’s review of the facts shows that Mr. Murdoch is moving to expand
Lachlan’s voting power to secure a majority and ensure that he cannot be
challenged. The changes would not affect anyone’s ownership stake in the
company.
To bolster
his argument that he’s making the change in order to benefit all of his heirs,
Mr. Murdoch has moved to replace two of his longtime executives as his personal
representatives on the trust with two people with more independence. One is
William P. Barr, an attorney general under Presidents George H.W. Bush and
Trump, who was also a guest at Mr. Murdoch’s most recent wedding.
The court
document shows that Mr. Barr is leading Mr. Murdoch’s effort to rewrite the
trust. It quotes Mr. Barr’s statement when he introduced Mr. Murdoch’s move at
the special meeting of the trust on Dec. 6. Mr. Murdoch, he said, “knew the
companies and the environment better than anyone else and believed that Lachlan
was in the best position to carry on that successful strategy.”
The basic
contours of the trust date back to Murdoch’s divorce from his second wife, Anna
Murdoch Mann, mother to James, Elisabeth and Lachlan, whom Mr. Murdoch divorced
before marrying Ms. Deng in 1999.
Concerned
about the destructive potential of a dynastic succession fight, Ms. Mann
insisted that the divorce settlement give the four children equal control over
the empire, people close to the family have said. As part of their agreement,
Mr. Murdoch locked this provision in place permanently through an irrevocable
trust.
But Mr.
Murdoch came to see that provision as untenable after he placed Lachlan in
charge of Fox and News Corp in 2019. A primary source of the problem was his
younger son, James, who had been passed over in favor of Lachlan. In recent
years, people close to James and his wife Kathryn have said that after Mr.
Murdoch’s death they would consider joining with Elisabeth and Prudence to
wrest control from Lachlan and tame the companies’ wilder right wing instincts.
James and
Lachlan shared operating responsibility for the companies from 2015 to 2019, a
relationship that frayed during the Trump administration, as the two split over
Fox’s fawning treatment of Mr. Trump. Lachlan and his father dismissed James’s
concerns, pointing to the network’s record ratings. James left the business
following Lachlan’s ascension to chairman and chief executive in 2019, and
stepped down from the News Corp board in 2020, citing “disagreements over
certain editorial content published by the company’s news outlets.”
James and
his wife, Kathryn, a longtime climate change activist, remain occasional, and
cautious, public critics of the family empire. After wildfires ravaged
Australia in early 2020 they shared their “frustration with some of the News
Corp and Fox coverage” of climate change in a statement to The Daily Beast,
noting “the ongoing denial among the news outlets in Australia.” After the Jan.
6 riots at the Capitol in Washington, James indirectly criticized Fox News,
saying that unnamed “outlets that propagate lies to their audience” had
“unleashed insidious and uncontrollable forces that will be with us for years.”
In the
spring of 2019, Mr. Murdoch’s children — including the two children he had with
Ms. Deng — received payouts of roughly $2 billion each from Murdoch’s sale of
his movie studios and other assets to the Walt Disney Company. James and
Kathryn announced at the time that they would devote part of that fortune to
causes like climate change and combating “high-tech illiberalism.”
According to
several of his associates, Mr. Murdoch has come to resent James’s criticisms
and complaints, given that the family empire, which Mr. Murdoch built almost
single-handedly, has made James and his siblings multibillionaires. The court
document indicates that Mr. Murdoch’s representatives have referred to him in
their own communications as the “troublesome beneficiary.”
James had
differed with his father and brother over Fox News, arguing its play to Mr.
Trump for short-term ratings gains would undercut its parent company’s
long-term prospects, a fight he lost before parting ways with them.
Since
leaving the company, James has been managing his own portfolio of investments,
with a controlling interest in the company that runs Art Basel and major stakes
in media companies in India.
It has
always been unclear how serious James was about trying to make any move against
Lachlan, or if he would have the backing of his sisters for such an effort. The
fact that they have come together to preserve the trust suggests that he and
his sisters are now solidly aligned against Lachlan, and that they may well try
to oust him, or at least try to influence the direction of the company, after
their father’s death.
Whether they
will have the legal power to do so will soon be determined in a courtroom in
Reno.
Benjamin
Mullin contributed reporting.
Jim
Rutenberg is a writer at large for The Times and The New York Times Magazine
and writes most often about media and politics. More about Jim Rutenberg
Jonathan
Mahler, a staff writer for The New York Times Magazine, has been writing for
the magazine since 2001. More about Jonathan Mahler
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