Made Men

As George Carlin said: "It's a big club, and you ain't in it!"

As it turns out, a News Corporation division has twice come under significant civil and criminal investigations in the United States, but neither inquiry went anywhere. Given what has happened in Britain with the growing phone-hacking scandal, it is worth wondering why.

Both cases involve News America Marketing, an obscure but lucrative division of the News Corporation that is a big player in the business of retail marketing, including newspaper coupon inserts and in-store promotions. The company has come under scrutiny for a pattern of conduct that includes below-cost pricing, paying customers not to do business with competitors and accusations of computer hacking.

News America Marketing came to control 90 percent of the in-store advertising business, according to Fortune, aided in part by a particularly quick and favorable antitrust decision made by the Justice Department in 1997. That year, the News Corporation announced it wanted to buy Heritage Media, a big competitor, for about $754 million in stock plus $600 million in assumed debt. The News Corporation said it would sell the broadcast properties and hang onto the marketing division, which serviced 40,000 groceries and other retailers.

The deal would make News America Marketing the dominant player in the business and, for that reason, the San Francisco field office of the Justice Department recommended to Washington that the News Corporation’s takeover bid be challenged on antitrust grounds. Typically, such a request from a field office would carry great weight in Washington and, at a minimum, delay the deal for months.

But the Justice Department brass overrode San Francisco’s objections and gave its blessing in just two weeks. So who ran the antitrust division at the Justice Department at the time? Joel Klein, who this year became an executive vice president at the News Corporation, head of its education division and a close adviser to Rupert Murdoch on the phone-hacking scandal in Britain. [emphasis mine]

Sorry, my brains just exploded and I need to pick up the pieces from the floor. Give me a sec; while you wait, reacquaint yourself with our little chart:

OK, thanks. Hey, look at that: Chris Christie's on the chart, too. You don't think...

One of News America Marketing’s other competitors was Floorgraphics, a small New Jersey company that did in-store ads. George Rebh, who founded Floorgraphics along with his brother Richard, met with Paul V. Carlucci, head of News America, in 1999 at a Manhattan restaurant, and the News Corporation executive got right to the point.

“I will destroy you,” Mr. Carlucci said, according to his deposition in the Floorgraphics suit against News America, adding, “I work for a man who wants it all, and doesn’t understand anybody telling him he can’t have it all.” (Mr. Carlucci is now the publisher of the News Corporation-owned New York Post.)

Just in case the Rebh brothers did not get the point, court records indicate that beginning in October 2003, someone working out of the Connecticut headquarters of News America Marketing gained access to the Floorgraphics computer network, which included a collection of advertisements the company had created for its customers.

[...]

According to correspondence that has been forwarded to members of the New Jersey Congressional delegation, Mr. Rebh also got in touch with the F.B.I., which sent two special agents to the Floorgraphics offices in 2004. One of the agents, Susan Secco, followed up with an e-mail in which she commented on the evidence Floorgraphics had compiled.

“I believe I have all I need to conduct interviews, as there is an excellent paper trail,” she wrote.

She then got in touch with the United States attorney in New Jersey and, after an initial burst of interest, the case died a slow death. The United States attorney at the time in New Jersey was Chris Christie, now governor of New Jersey and a rising star in the Republican Party.

Oh, there go my brains again. Hang on...

To summarize: Joel Klein, back when he worked at the DOJ, let Murdoch gain an effective monopoly in in-store marketing. After screwing up the NYC schools as Chancellor under Mike Bloomberg, he took a job working for News Corp running their educational software division; he is also consigliere to the Murdochs for the phone hacking scandal.

Later, when Murdoch's company tried to corner even more of the market in the same field, Chris Christie - just like Bloomberg before him - tanked the investigation. This time, News Corp hacked into computers of their competitors, which obviously suggests a pattern of abuse.

Now, those of you who read me regularly know what comes next, but I'll still spell it out. There is another link between Joel Klein and Chris Christie: the Acting NJ Education Commissioner, Chris Cerf, who use to work for Klein before he worked for Christie. The same Chris Cerf who worked in instructional software in between gigs. The same Chris Cerf who made his bones running Edison, one of the most prolific but least successful education privatizers in the country.

And so it all comes together. And it's all for the children, of course...

ADDING: I'm going to pat myself on the rump a little and say "Told ya so." (thx jcg)