Rupert Murdoch: The secret battle for the future of the Murdoch empire

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. 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. Rupert 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. 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 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, Mr 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 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, Nevada. 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 a single 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 that 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 favourable 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 before sending any unresolved issues to a judge for trial, as he did here.

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 hand-picked 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 Bill Barr, an attorney general under Presidents George H.W. Bush and Trump, who was also a guest at Murdoch’s most recent wedding.

The court document shows that Barr is leading Mr Murdoch’s effort to rewrite the trust. It quotes Barr’s statement to the court when he introduced 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 Mr Murdoch’s divorce from his second wife, Anna Mann, mother to James, Elisabeth and Lachlan. Mr Murdoch divorced Ms Mann before marrying 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, 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 favour 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 Trump. Lachlan and his father dismissed James’ concerns, pointing to the network’s record ratings.

James left the business following Lachlan’s ascension to chair and CEO 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 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 Deng — received payouts of roughly $2 billion each from Mr Murdoch’s sale of his movie studios and other assets to the Walt Disney Co. James and Kathryn announced at the time that they would devote part of that fortune to causes such as climate change and combating “high-tech illiberalism.”

According to several of his associates, Mr Murdoch has come to resent James’ criticisms and complaints, given that the family empire, which Mr Murdoch built almost single-handedly, has made James and his siblings multimillionaires.

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 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.

This article originally appeared in The New York Times.

© 2024 The New York Times Company