1st May 1999
By PILITA CLARK and IAN VERRENDER PENELOPE DEBELLE
Deep inside News Cor-poration, some of the vast Murdoch company's less abject executives have a nickname for Rupert Murdoch and his family. "They call them the Ewings," says a former senior News employee. That's the Ewings of Dallas, the lavish TV soap series about the fabulously wealthy but endlessly feuding Texan oil family that once held millions in its thrall around the world.
As nicknames go, this one has its problems. None of the Ewing men was ever a global mogul like Rupert Murdoch. And while three of Mur-doch's four children are thrusting their way up through the family business, none yet looks like the dissolute villain of Dallas, J.R. Ewing, or the Human Oil Slick as he is fondly remembered.
But the past year has seen the Murdoch family take on some dis-tinctly soapish features: divorce, sibling rivalry, a mounting succession obsession, and, perhaps most sur-prisingly, Murdoch's decision to take a vastly younger, but corporately adept, lover and move into a chic Manhattan hotel with her.
While each development has been interesting in its own way, the fact that any one of them could spell enormous changes, if not disaster, for the world's most ubiquitous media company is clearly the most intrig-uing part of the story.
The most pressing question facing the company today is that of the divorce of the 68-year-old Rupert Murdoch and 54-year-old Anna Murdoch.
Within weeks of the shock announcement of an "amicable separation'' in April last year, a select band of Murdoch's confidants was given an inkling of the terms of the split. Anna was prepared to accept about $US100 million and several lavish houses in America and the UK as a property settlement in the divorce.
While a fortune in anyone else's language, it was a minuscule portion of the $10 billion of assets accum-ulated during the couple's three decades of marriage. Under the law in California, where Anna filed the proceedings on 21 July, she would be entitled to half the assets.
However, under that early ten-tative agreement, in addition to the hard assets, Anna insisted on a guarantee about the future of their three offspring, Elisabeth, Lachlan and James, within News Corporation - a condition Murdoch would hardly contest.
Murdoch's advisers urged him to accept Anna's terms quickly, to limit any potential damage to the company from a prolonged and mes-sy divorce. But when Murdoch's es-tranged wife learnt about his relat-ionship with 32-year-old Wendi Deng several months later, any hope of an early settlement evaporated. The pair now appear to be bunkering down for a long war of attrition. Anna Murdoch wants Rupert Murdoch to pay.
The official word from both sides is that meaningful talks are continuing and that neither would do anything to harm the company or the future of their children. But privately, insiders confide that negotiations are difficult.
Speak to any of the lawyers involved on either side and they will tell you that there will be no easy solution - and that any resolution between the pair will "not be ach-ieved in the short term''.
While there has been no outright declaration of war within the Mur-doch clan, those on the periphery joke that it would be easier to hammer out a truce between the warring factions in the old Yugoslavia.
To any outsider, Murdoch's wealth has transcended the normal meaning of the word; far beyond the simple calculation of the number of dollars at his command. There is the power that comes with the sheer weight of money. And as a media baron, his aura of influence has extended well beyond that of any of his super-rich peers.
But what hasn't been known is that, for decades, Murdoch has owned next to nothing.
The fabulous wealth accumulated during a lifetime of ruthless determination and daring risk has been salted away in an intricate network of trusts and private companies in which, technically and legally, he has no involvement.
With the best legal and accounting advice money can buy, Murdoch has stored his wealth in an impenetrable vault that can be accessed only by his children and several charities. And it can be accessed only after his death.
A handful of his most trusted advisers stand guard over the fortune while further down the chain, his mother, Dame Elisabeth, and several other family members are involved.
But his estranged wife, Anna, plays no role in the chain. While she was a director of the listed News Corporation until last year, both she and Murdoch removed themselves from the complex private structure that controls the family riches more than a decade ago.
It was established specifically to avoid death duties, to ensure no government anywhere in the world could plunder the family jewels.
There are no doubts the structure is watertight. The untimely death of his father burnt an indelible imprint into the 21-year-old Rupert Murdoch's mind as Australian death taxes decimated Sir Keith's modest media empire, leaving him with nothing but a loss-making Adelaide newspaper.
The question now is: will Anna Murdoch be able to succeed against a seemingly impregnable structure designed to thwart the best efforts of the world's most powerful governments?
``If Rupert Murdoch has no interest in any of the assets, then ... he can't give away assets he doesn't own,'' explains a News Corp insider. ``And whatever Anna may want, no court will allow her to take it away from third parties.''
THE FACT that the divorce is happening at all is a surprise, given the upbeat way the couple's separation was announced last April by Liz Smith, the gossip columnist in Murdoch's tabloid daily the York Post.
Smith assured the world that despite 31 years of marriage and three children, the Murdochs would have an ``amicable separation'', so amicable that Anna would stay on the News Corp board, which she joined as a director in 1990.
But that was before the world, and presumably Anna, knew about Deng, the statuesque Chinese-born executive with Murdoch's Star TV network in Hong Kong. Deng was promoted to the job of Star's vice-president for distribution and marketing in China last September, a month before the world learnt she and Murdoch were an item and, what's more, had moved in together in a suite in SoHo's hopelessly fashionable Mercer Hotel, locale of choice for the likes of Uma Thurman and Leonardo di Caprio.
Murdoch's spokesman in New York, Howard Rubenstein, has gone to great lengths recently to insist that Murdoch was not dating Deng while he was still with Anna.
Whatever the timing of their liaison, by July last year Anna had filed for divorce in California, one of the US's ``community property'' states, which means that marital assets are divided equally in divorce cases.
And the divorce petition, in which Anna sought ``spousal support'', saw News Corp's shares dive by more than 10per cent in a week, wiping $5billion off the company's market value. Murdoch's control of the company is held through a 25per cent shareholding, currently worth close to US$12 billion and the divorce announcement sparked speculation that he might have to sell off part of his stake to pay off Anna, thereby diluting his grip on the corporation.
Arthur Siskind, News's general counsel, was wheeled out to insist this was not so. ``The Murdoch family interests in News Corporation have been structured for many years in such a way that the personal matters between Mr and Mrs Murdoch will not affect the ownership, control or management of News Corporation,'' he said in a July statement. ``Any statement to the contrary is completely inaccurate speculation.''
RUPERT MURDOCH also tried to head off such speculation. ``All the shares are in unbreakable trusts for the children and grandchildren,'' he told the Los Angeles Times in an interview published in January. ``And my wife would do nothing to hurt the children.''
But would she do anything to hurt Rupert? As the months went by, and the fiction of Liz Smith's promised ``amicable separation'' became ever more apparent, this question hovered over the company. By October, Murdoch announced in his 1998 annual report that far from staying on the News Corp board, Anna had left it altogether.
One focus of the divorce is reported to be the trust that holds the 25per cent family News Corp stake. So far, there is only the word of Rupert Murdoch and his employee, Arthur Siskind, that the trust is immune from ex-wifely tampering. But how safe is a family trust these days?
That depends, according to Rowan Wall, director of Deloitte Financial Services and a specialist in giving planning advice to ``high net-worth individuals''. ``Many of my clients personally design their trust to protect themselves from marital break-ups,'' says Wall.
``Over time, the courts have been allowing the family law court to move more and more into taking family trusts into consideration and therefore the family trusts have been redesigned to make them more impregnable.'' So would a global mogul like Murdoch have done such a redesign?
``I think the more wealthy you are, the more advisers you seem to have and the more time and effort is put into protecting that wealth,'' says Wall. ``You move into a wealth protection stage of your life and not the wealth generation stage.'' Wall Street analysts are watching News Corp stock closely, but say they are not greatly concerned about the effect any settlement may have on the company.
None of six leading News Corp analysts contacted by The Age would speak on the record about their views on the Murdoch break-up. Such territory is outside the unwritten rules of market research, they say. And Rupert Murdoch is a dangerous man to upset by publicly displaying his dirty laundry.
Only one analyst would speak off the record, saying that the possibility of an extended legal battle in the divorce proceedings was ``some cause for concern''.
However, most believed that neither Rupert nor Anna would allow their personal falling out to drag down the family's stock. Each partner appears to be aware that a prolonged public blood-letting would serve only to damage their heirs financially and fill their lawyers' wallets.
Despite the storm raging through his personal life, the consummate dealmaker of the late 20th century has maintained his complete devotion to the business of running his global media empire.
Just three weeks ago, Murdoch announced one of the biggest deals of his career when he brought US cable billionaire John Malone under the News Corp wing, making Malone the second biggest News shareholder in a deal worth US$2.12billion.
Malone, the head of AT&T listed entity Liberty Group, now controls 8 per cent of News Corp. He has been a serious fan of Murdoch for more than a decade and is considered one of the world's most astute media investors. Immediately after it was announced, News Corp shares went through the roof, after comments by Malone that News was ``probably the most underpriced of any stock in the media industry''.
But the incredible growth of the Murdoch's empire has come at a cost: to his grip on the company and in his relationship with his family.
Each time he has taken a quantum growth leap - such as with BSkyB in Britain, establishing Star TV in Asia and creating a fourth US television network - Murdoch has been forced to relinquish a portion of his ownership.
A decade ago, Murdoch family interests accounted for 45per cent of News Corp. Today, its economic interest in the company is less than 25 per cent while it accounts for just under 30per cent of the voting rights.
NO ONE disputes Murdoch's grip on the company. But the dilution in his shareholding will seriously undermine the authority of his successors once they take control.
And there is no denying that his almost total devotion to affairs of business contributed over many years to the breakdown of his marriage.
But even if Anna's divorce case leaves News Corp intact for Murdoch's heirs, can it survive the children themselves? In 1988, Anna wrote a novel called Family Business in which a media empire is destroyed as four children vie for control when their father dies without naming a successor. Life in the Murdoch dynasty may indeed begin to imitate Anna's art. For more than a year, the three young Murdochs now working in various News Corp outposts have been the subject of incessant speculation about which of them will end up taking over from their father, who is now more than a year older than his father was when he died.
So far, the 27-year-old Lachlan looks like the frontrunner. The London-born American citizen was sent to Australia in 1994, where he has been chairman and chief executive of News Ltd, the Australian arm of News Corp, since July 1997.
His father declared in an interview with author Mathew Horsman for the 1997 book Sky High that Lachlan's own siblings had agreed that Lachlan was ``first among equals'' and should take over. As if to cement this, Lachlan was appointed senior executive vice-president of News Corp in February this year, a promotion that will extend his reach well out of Australia and into the company's American publishing interests.
But what of Lachlan's 30-year-old older sister, Elisabeth, who is now overseeing the introduction of digital broadcasting at BSkyB, News's UK satellite television company?
In Sky High, Murdoch seemed to cast doubt on any hopes she might have had about succeeding him. ``She has some things to work out,'' he said. ``She has to decide how many kids she is going to have, where she wants to live.''
But since then, Elisabeth has made it clear she is still interested in the top job. ``I have always and will always strive to be qualified and considered for that position,'' she told Britain's Channel 4 last year.
The youngest child, James, 26, has also been slowly working his way up through the company's new media and newspaper interests in New York, albeit to far less responsible positions than Lachlan.
And one should not forget Murdoch's elder daughter, 40-year-old Prudence MacLeod, as she herself made clear in an interview last month in which she revealed her fury - and Murdoch's contrition - when he began talking as if he only had three children to succeed him.
She also revealed she will probably ask for a job in News Corp herself one day, though not the top one. And she has definite plans for her three children, especially her oldest, eight-year-old James MacLeod, whom she says is a lot like his famous grandfather and may also want to take over the world one day.
``I want to make sure they aren't forgotten and that they have the opportunities that Elisabeth's and James' and Lachlan's children will have,'' she said. In addition, said Prudence, James Murdoch was ``very cool'' and not to be written off.
But then, says Prudence, News Corp ``is so huge you could have ten children and they would all have too much to do and they would all have huge positions and all one day be very important.''
And then there is Wendi Deng. What if she has children as well? And what role would they have in News Corp? Indeed what role would the Yale-educated Deng play in a post-Rupert Murdoch company?
By all accounts Deng is an ambitious and able woman, though so far she is not seen by members of the extended Murdoch family as a threat. She seems to have disarmed at least some of those in the family who may have harbored dark thoughts about her motives for sharing a relationship with a rich and powerful man who is in his late 60s.
Inside the family, at least at this point, Deng is not regarded as having the ability or the desire to throw a spanner into the Murdoch succession. She is not married to Murdoch and Murdoch-Deng children, given that Rupert is 68, are seen as a remote chance.
The process of formally admitting Deng to the Murdoch family began three weeks ago when she was invited to a gathering in Victoria of the Murdoch clan.
The occasion, Murdoch's sister Helen Handbury's 70th birthday, was Deng's first formal family outing on Murdoch's arm. Helen Handbury, who lives with her husband Geoff Handbury on a property in western Victoria, was said to be keen to invite Deng as a show of family support.
``It went well,'' says a source close to the Murdoch family. ``Wendi is very natural, pleasant, quite talkative and very easygoing. She fitted in with all the ages. It was quite a big family gathering and this was her first introduction.''
Murdoch's mother, Dame Elisabeth, also attended the party, a significant thaw in the ice that has surrounded her reaction to the news of Murdoch's separation from Anna and his relationship with Deng. Rupert's latest and most unconventional exploit has been a challenge the Murdoch matriach, now 90, is finding difficult to absorb.
The rest of the family is also struggling with the breakdown of what had seemed such a happy, long-term union, and this colored their feelings for Deng. ``It's really just the fact that people have found it difficult to come to terms with the marriage breakdown,'' says the source. ``It's difficult, as it should be. So to the extent that her presence signalled that, it had everyone a little nervous in anticipation of meeting her.''
It is understood from someone who recently spent time in her company that Deng is at the very least considering giving up her executive role at Star to be Murdoch's full-time companion.
``There was no discussion of business going on,'' says the source. ``Rupert and Wendi just seemed to be enjoying each other's company. She was good fun to be around, and he seems particularly relaxed and in good form.''
To this observer, at least, Deng's arrival on the scene has not unduly disrupted the internal dynamics of the Murdoch family.
``I guess if she had presented as talking business strategy with Rupert like he does with Lachlan or whatever, I guess that would make those sort of feelings be raised. But it just doesn't feel like that.
``She's a pretty friendly, chatty, light presence, which is what I think Rupert sees in her. I think she is devoting herself to being a good supportive companion to Rupert.''
Marriage seems at the very least to be a long way off.
``It's early days,'' says Prudence MacLeod. ``He's not divorced yet, let's not forget.''
Instead, the difficulty the Murdoch family is having with Deng is because of the personal wrench involved in replacing the glossy perfection of Rupert and Anna's marriage with a messy divorce and a much younger girlfriend.
But acceptance is clearly coming. His eldest daughter Prudence is very close to Murdoch and was as stunned as any in the family when the separation was announced last year. But last month in London she was taking a measured view.
``Who knows what goes on in a marriage,'' she said. ``It's very sad. I think it's very sad for anyone to put that much time into a marriage then wake up and think, `Oh, maybe it's not so great any more'.
``But I also think it is important that if you are unhappy you've got to get on and if there's a chance for happiness somewhere else, you have to go for it.''
SO WHILE the Murdoch marriage is still being mourned by insiders, adjustments to accommodate Deng are being made. ``The only obstacle Wendi has to get over is still not so much how she's going to fit in but the sense that there was a long-term, wonderful marriage and everyone is mourning1 it still,'' the source says. ``That's the only thing people have to get used to, and I think meeting her helps people to process all of that.''
So while there have been reports from New York that Deng and Murdoch have been window-shopping for engagement rings, there is still no firm evidence that the two will do more than co-habit in the new SoHo apartment they have been redecorating for the past few months. But if they do marry, and if children are born, then the real life of News Corporation could end up making Dallas look dull indeed.