The Australian Financial Review has exposed a secret unit within Rupert Murdoch’s News Corporation that allegedly promoted a wave of high-tech piracy in Australia that damaged Austar, Optus and Foxtel.
A four year investigation by the AFR has revealed a global trail of corporate dirty tricks directed against competitors by a secretive group of former policemen and intelligence officers within News Corp, known as Operational Security.
The security group was initially set up in a News Corp subsidiary, News Datacom Systems (later known as NDS), to battle internal fraud and to target piracy against its own pay TV companies. But documents uncovered by the AFR reveal that NDS encouraged and facilitated piracy by hackers not only of its competitors but also of companies, such as Foxtel, for whom NDS provided pay TV smart cards.
The issue is particularly sensitive because Operational Security, which is headed by Reuven Hasak, a former deputy director of the Israeli domestic secret service, Shin Bet, operates in an area which historically has had close supervision by the Office of the Chairman, Rupert Murdoch.
AFR is publishing some of the 14,400 emails it uses as evidence of its investigation.
While News has consistently denied any role in fostering pay TV piracy, emails contradict court testimony given by Operational Security officers as well as statements by News lawyers in the past three weeks.
Operational Security is understood to have operated during the tenuous period around 1999 when a battle to control the set-top box in Australia was at its height. The key to the set-top box is the conditional access provider, better known as the smartcard. When it established Foxtel in Australia, News used its own conditional access provider, its Israel-based subsidiary NDS. But the smart card NDS provided Foxtel was similar to NDS cards that had already been pirated elsewhere.
Documents show NDS allegedly sabotaged business rivals, fabricated legal actions and obtained telephone records illegally.
AFR claims the piracy cost the Australian pay TV companies up to $50 million a year and helped cripple the finances of Austar, which Foxtel is now in the process of acquiring.
A spokeswoman for Communications Minister Senator Conroy said, “These are serious allegations, and any allegations of criminal activity should be referred to the Australian Federal Police for investigation.”
The scandal is already making news overseas.
News Corp has categorically denied any involvement in promoting piracy and points to a string of court actions by competitors making similar claims, from which it has emerged victorious.
You can read more on the report by Neil Chenoweth at the Australian Financial Review.
UPDATE: A spokesperson for Foxtel said, “Foxtel is focused on building subscription television choice for consumers and we use many external service suppliers. NDS is one of them. Foxtel notes that there are no allegations of wrongdoing by Foxtel. Foxtel has always worked hard and spent significant amounts of money to combat piracy.
“This has included running an extensive court case against pirates and working with the Australian Federal Police, other subscription TV providers including Austar, and advocating with Government to enact effective laws to protect Australia’s creative industries and legitimate consumers.”