Cracks in the clan

Last updated 05:00 26/01/2014
Rupert Murdoch
NEWLY SINGLE: Rupert Murdoch
Wendi Deng
DIVORCED: Wendi Deng
LACHLAN MURDOCH: Succession issues

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Amid all the headlines mystery still surrounds Rupert Murdoch's divorce from Wendi Deng - and what it means for alliances in the clan, writes Neil Chenoweth.

As the newly single Rupert Murdoch celebrated New Year's Eve on his son Lachlan's A$30 million yacht Sarissa on Sydney Harbour, he can't have helped but reflect on what his 1997 romance with Star TV executive Wendi Deng had cost him.

"What's better than family Xmas, even in [a] heat wave?" Murdoch tweeted as he landed in Sydney on December 22. But it was a divided family that met him.

Rupert was with Lachlan and eldest daughter Prudence - but siblings James and Elisabeth were half a world away from their father and from each other, while his two youngest daughters, Grace and Chloe, were with their mother, Wendi.

The shockwaves from Rupert's November divorce are still buffeting the Murdochs, as a long-running family split deepens. And, his company, unusually, is responding on the record to the reporting on the situation.

Three years ago, Murdoch's adult children were reported to be in family counselling over succession issues. The therapy sessions were discontinued after the British hacking scandal opened up new divisions within the family, which have now transformed into new lines of conflict around the divorce.

At one level, the strained feelings are no surprise; divorces rarely bring families together. But this is a family dispute like no other, one which will determine the future control of the Murdochs' US$95 billion (NZ$114b) twin media empires, News Corporation and 21st Century Fox.

Then there is the ticklish question of how the family's own US$12.4b fortune will be administered in the period after Rupert.

Unlikely alliances have surfaced as Murdoch senior appears caught between two visions of himself. He turns 83 in March. He has long since stopped dyeing his hair and he looks far older, and frailer.

Contradicting this, Murdoch insists he is as able as he has ever been, and he's been having more fun than he has had for years as he sets out to rebuild the News Corp side of the empire.

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Conflicting versions of the reasons behind the split, and sensational claims (repeatedly denied) that it was precipitated by the discovery that Deng had had an affair with former British prime minister Tony Blair, have been circulated by different sides of the family.

And then there is the mystery of the divorce hearing. Murdoch seems to have turned up at the New York State Supreme Court in Lower Manhattan on November 20 late last year without his chequebook. Since then, there has been no public sign of money changing hands.

Nevertheless, the parting seemed cut and dried when Murdoch and Deng shook hands after the 15-minute hearing. Deng's adroit media management showed how far she had come from the brash junior executive at Star TV who introduced herself to her boss when Murdoch was in Hong Kong in 1997.

The heavily accented, staccato English remains little changed, along with the almost febrile sense of drive and energy she conveys. Her directness and candour have always been part of her charm, but today the manner is softened and more assured. As they parted outside the courtroom, Wendi kissed Rupert on the cheek. And that was that.

Except that it wasn't. In fact, the hearing turned out to be only a prelude to a new bout of family infighting.

Murdoch's surprise decision last June 13 to file for divorce sent social media into overdrive. Within hours, sensational reports, fuelled by leaks from unnamed News Corp executives, had linked Deng to Blair - which Blair's spokesman promptly denied. Yet other accounts suggested the rift had been a long time coming.

Three weeks after the divorce filing in June, Murdoch quietly insisted that Blair be dropped as a speaker for a media conference in Sun Valley, Idaho. While the Sun Valley move went unreported, within Murdoch family circles it was known that Blair was persona non grata with Rupert.

But not all the family accepted that verdict. The challenge began with a party on November 2 at Burford Priory in the Cotswolds, the 22-bedroom historic country residence of Elisabeth Murdoch and her husband, Matthew Freud.

It was held to celebrate the 50th birthday of Freud, whose firm, Freud Communications, is the eighth-largest public relations outfit in Britain.

On July 2, 2011, Freud and Elisabeth had held a mammoth summer shindig at Burford, graced by everyone who was anyone in Britain's new establishment. News International chief Rebekah Brooks was there, along with James Murdoch, UK Prime Minister David Cameron and frontbenchers from both sides of Parliament. The list of guests went on and on.

The party lasted through the night until noon on Sunday, July 3. It was at 5pm on July 4 that The Guardian published an online version of its story about staff of the News of the World hacking murdered schoolgirl Milly Dowler's phone - and the party really was over.

Yet, just over two years later, last November, after all the dramas of the hacking scandal, Freud called a party and the world trooped back. Rebekah and James weren't there, but almost everyone else was, including Cameron.

And so was Tony Blair. His presence clearly signalled that Rupert was not welcome. Certainly that is how Murdoch took it. It was a way of siding with Wendi.

On November 10, Murdoch biographer Michael Wolff reported in his column for USA Today that Murdoch was frustrated at being portrayed as a sad old man who even resented Deng's signature moment when she came to his defence before a British parliamentary committee in July 2011, when a protester threw a shaving cream pie at her husband. The footage was replayed endlessly around the world, with Wendi hailed as a hero - a tigress wife.

The only person who didn't approve, wrote Wolff, was Murdoch, who complained it made him look helpless.

Wolff added an explosive rider: "His own hurt feelings have been soothed by a new romantic interest, a younger woman who has been travelling with him - his massage therapist - who, he has told friends, has made him very happy."

News Corp and 21st Century Fox vigorously denied the claim. And according to a 21st Century Fox spokeswoman responding to AFR Weekend, "Mr Murdoch is not and has not been dating anyone. The reported story saying differently is entirely false."

The divorce hearing was held 10 days after Wolff's column was published. Despite the outwardly civil greetings, four days after the hearing, the Mail on Sunday in Britain cited unnamed News Corp sources who said that Blair and Deng had met on a number of occasions without Murdoch's knowledge and had stayed overnight at the Murdochs' ranch in Carmel in California, in October 2012 and last April.

While decorously denying any suggestion of impropriety by Deng or Blair, the Mail on Sunday said there had been a "terminal rift" between Blair and Murdoch and quoted an unnamed Murdoch friend: "If you think that Rupert made a decision to end his marriage and a long-term friendship without just cause, you are sorely mistaken."

The Mail on Sunday ran a second story a week later, again quoting News Corp sources and friends of Murdoch, revealing that in May, an email from Deng referring to arrangements for Blair's visit to Carmel inadvertently went to the wrong person and reached Murdoch.

He questioned staff at the Carmel ranch and at their Los Angeles home, Misty Mountain, where Blair is also said to have stayed overnight.

The leaking wasn't over. On December 15, the News Corp sources were back, briefing the Mail on Sunday that Freud's failure to invite his father-in-law to his birthday party in November was "a very public V-sign to Rupert", and that he had joined forces with Deng and was briefing journalists against Murdoch.

"Freud has been sending crazy 3am emails to Rupert making all sorts of accusations. Elisabeth is stuck in the middle and it has had a devastating effect on her relations with Rupert," said one News Corp source in Britain. "Rupert believes that the stuff reported in the press about him being a sad old man who has lost the plot has been put out there by Matthew [Freud]."

A source "close to Mr Murdoch", said: "Matthew and Rupert have no relationship and so none of this is a surprise." Freud himself responded: "I will be eternally grateful to Rupert Murdoch for producing Elisabeth, who is practically perfect in every way. Our views differ quite dramatically on a number of subjects professionally and I regret that this has caused my relationship with him to be sometimes conflicted.

"But we have had good times as well as bad times, we both love his daughter and his grandchildren, if not always each other. I do not believe anything else is terribly important." By giving a quote to The Mail on Sunday without attempting to correct its earlier stories about Blair and Deng, Murdoch appeared to validate them, but the Freud story put them in the context of an ongoing family dispute.

Among all the high-profile personalities, it's easy to lose sight of how much money is involved.

Admittedly that's because almost everything that is reported about Murdoch family finances is wrong. Rumour feeds on innuendo, which becomes accepted fact. There was widespread speculation when Rupert divorced his second wife, Anna, after 32 years, that under California law she was entitled to half of his fortune. When the divorce was settled on June 8, 1999, her claims were modest: she walked away with several homes and US$100 million.

In the only interview Anna ever gave, journalist David Leser, for The Australian Women's Weekly, asked if it was true that she had received A$1 billion cash as a divorce settlement. Anna - blonde, composed, statuesque - simply smiled and declined to comment.

The Independent in Britain interpreted this as a confirmation of the big payment.

Mistaken currency conversions inflated this to $US1.7b, which was reproduced in thousands of internet list. Not only that, but Wendi Deng received US$1.8b, the internet now says. If only any of this were true.

The real payout was always evident from the Murdoch share-trading records. On June 2, 1999, six days before Anna's divorce was settled, the Murdoch trusts sold 16 million A shares for US$US121.76m - an amount that covered the US$100m cash Anna received (along with a couple of houses) and other associated costs.

It was clear enough. Which is why it's so surprising that Murdoch made no similar sales in the days before his divorce from Wendi, 14 years later.

Murdoch raised $US14.7 million from cashing in some of his share rights from 21st Century Fox in August. He raised $US10 million selling his shares in November 2012, and another $US69 million selling shares last February, concluding two days before the Academy Awards, when, according to The Mail on Sunday, there were reports of marriage trouble after Deng was "snippy" with Murdoch at the Oscars. It's suggested in some circles that Murdoch engaged his divorce lawyer, Ira Garr, before May, which would suggest he was considering divorce before any revelations about Blair. It's also suggested that while Deng signed a pre-nuptial agreement before the wedding in 1999, then two further post-nuptial agreements after the birth of Grace in 2001 and Chloe in 2003, that these agreements were due to expire next year on Wendi and Rupert's 15th wedding anniversary. This is unconfirmed.

Wolff finds the May surprise version of events hard to credit. Murdoch had told his son Lachlan in the summer of 2010 that the marriage had been "a big mistake", he says. And despite the News Corp denials, Wolff stands by his claim about the massage therapist.

For Wolff, there is no compelling evidence Blair and Deng had an affair. He believes the animus was due to Blair siding with Deng.

Her daughters Grace and Chloe will inherit a third of the Murdoch fortune, a share worth US$4.1b. The downside is that it is tied up in News Corp stock held in the Murdoch family trust, which will be controlled by Prudence, Elisabeth, Lachlan and James.

"They all get treated equally financially," Murdoch told American television interviewer Charlie Rose in July 2006 when he announced the deal he had struck with his adult children to tear up his agreement with Anna over the inheritance, so as to give Grace and Chloe equal shares.

When Rose prodded Murdoch about the year-long family feud that preceded the deal, he demurred. "No, just on a question of power, would they have - would the trustees have some of these things at the moment, you know, and so - we've resolved everything very happily." By a question of power, Murdoch meant Wendi. Wolff sees the current family politics as Elisabeth and Lachlan in common cause against James, "with Pru, the peacemaker, siding with [the] majority".

In the past, Prudence has seemed closer to James. And as Wolff has pointed out, there is no mechanism for resolving any trust deadlocks.

It's in that context that Wendi Deng, as guardian, until possibly at least 2031, of her two daughters may come into her own, meaning she will remain a player in the Murdoch universe.

If there is any Murdoch family member with the Machiavellian insight to pick up on this and look to the future, it's Matthew Freud. Wendi Deng's best friend.

- Fairfax Media

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