By Lilly Vitorovich
British Sky Broadcasting Group PLC's (>> British Sky Broadcasting Group plc) 24-hour news channel in the U.K., Sky News, Thursday said that it has hacked emails of individuals suspected of criminal activity.
Pay-television operator BSkyB is 39.1%-owned by News Corp. (NWS), whose U.K. newspapers have been at the centre of a storm over their reporting methods.
John Ryley, head of Sky News, said in a statement posted on the broadcaster's web site that on two occasions it "authorised a journalist to access the email of individuals suspected of criminal activity" without their permission.
Sky News hacked the emails of John Darwin, an English prison officer who became a media celebrity after it emerged he had faked his own death in a canoe to collect an insurance payout. He was charged with fraud.
His wife, Anne Darwin, was also charged with fraud and according to Ryley, Sky News met local police and provided them with emails after hacking her husband's account, offering new information relevant to her defence.
Ryley didn't elaborate on the second case, but a Sky News spokeswoman said it involved a suspected pedophile in a child protection case "quite a few years ago." She declined to provide further details because of the sensitive nature of the case.
Ryley said the broadcaster stands by its actions, which he said were "editorially justified and in the public interest."
"We do not take such decisions lightly or frequently. They require finely balanced judgement based on individual circumstances and must always be subjected to the proper editorial controls," he added.
News Corp. owns Dow Jones & Co., publisher of this newswire and The Wall Street Journal.
The disclosure comes two days after James Murdoch quit as chairman of BSkyB following pressure from politicians and some shareholders over his handling of the phone-hacking affair at News Corp.'s U.K. newspaper division, News International. Murdoch will maintain a seat on the BSkyB board and remain deputy chief operating officer of News Corp.
The phone-hacking saga has brought the closure of News Corp.' 168-year-old News of the World tabloid, three criminal investigations in Britain, the resignation of some top executives and the collapse of News Corp.'s multibillion-dollar bid to take full control of BSkyB in July 2011.
U.K. communications regulator Ofcom is keeping a close eye on developments to see whether News Corp. is a "fit and proper" owner for BSkyB. Ofcom can revoke a broadcasting license if an owner doesn't meet the loosely defined classification, which takes into account criminality, the propriety of directors and other behavior. Ofcom is unlikely to act before the conclusion of the criminal investigations.
Given the Sky News admission, BSkyB is "likely to come under increased legal scrutiny and face increased legal costs", Sanford C. Bernstein analyst Claudio Aspesi said.
In the longer term, the announcement "adds to concerns over whether News Corp. will be found to be "fit and proper", making a renewed bid for BSkyB, in our view, unlikely. Greater scrutiny is also likely to distract management at an important time," he said in a research note. Sanford C. Bernstein has a underperform rating on BSkyB and 500 pence target price.
At 1540 GMT, BSkyB shares were down 22 pence, or 3.4%, at 636 pence, valuing the company at GBP10.86 billion, in a higher London market.
-By Lilly Vitorovich, Dow Jones Newswires; 44-0-207 842 9290; [email protected]