News Corp. Hacks Company, Then Buys It
Brothers Richard and George Rebh built an innovative business called Floorgraphics—it ranked 39 on the Inc. 500 in 2002—but then the U.S. marketing arm of Rupert Murdoch’s News Corp. set out to destroy the company in multiple ways, including computer hacking, according to 2009 court complaints.
As the phone-hacking and police-bribing scandal engulfs News Corp.'s U.K. operations, the Floorgraphics case (settled for $29 million) is getting fresh attention.
Sen. Frank Lautenberg (D-NJ) asked the Department of Justice and the Federal Bureau of Investigations—currently investigating illegal activity in News Corp.'s American operations—to examine the details of the case, settled in New Jersey courts, between News America Marketing and Floorgraphics, which sold floor advertising in grocery stores (clients included Winn-Dixie and Safeway). Floorgraphics alleged that its rival hacked its computer system as many as 11 times in 2003 and 2004 to gain business.
"I wanted to make sure that you were fully aware of the case of Floorgraphics and News America, as it may be relevant to your current investigation," Lautenberg wrote to Eric Holder, U.S. attorney general, and Robert Mueller, head of the FBI, in a letter sent July 20.
The FBI is looking into an unsubstantiated claim that the U.K.'s News of the World tabloid tried to access voicemails of 9/11 victims, and the Justice Department is looking into whether alleged payments to U.K. police may violate the Foreign Corrupt Practices Act.
In 2005, Floorgraphics accused News Corp.'s U.S. marketing arm in court of hacking into its computer systems in order to acquire proprietary information, and then subsequently allegedly spread "false, misleading, and malicious information" about the company, resulting in it losing important clients. (Floorgraphics had a troubled history with News America Marketing already: In 1999, at a lunch chronicled in a 2004 Inc. article, the company received what it perceived as bald threats from then-News America CEO Paul Carlucci, who wanted to buy the then-three-year-old start-up.)
News Corp.'s response to the allegations was "rudimentary and deficient," concluded a report included in the records of the court fight. At a 2009 civil trial over the hacking allegations, Lee Abrams, a lawyer for News America Marketing, acknowledged to jurors in Trenton, New Jersey, that his client's computers were used to access Floorgraphics' secure website.
After the case was settled, News Corp. bought Floorgraphics soon after for an undisclosed price. The 2009 case itself grew out of Floorgraphics's refusal to sell itself in 1999 to News America Marketing, company co-founder George Rebh testified at the trial. After they rebuffed the News Corp. unit's offer, News America began spreading lies and otherwise attacking Floorgraphics’s business, Rebh said.
Inc. contributing editor Courtney Rubin was for five years a London-based staff writer for People magazine. Rubin, a former senior writer for Washingtonian magazine, has written for the New York Times magazine, Time, Marie Claire, and other publications. She is the author of The Weight-Loss Diaries.