Mike Mangan’s extraordinary account of
life as the most bearish News Corp analyst is shocking in its detail,
but not all that surprising when you consider the aggressive “whatever
it takes” culture that Rupert Murdoch has fostered over 52 years.

Given
that Murdoch’s journalists are expected to universally praise the Sun
King and promote his interests, it’s not surprising to hear the
strong-arm tactics used by Rupert against analysts. But the detail from
Mangan on these intimidatory schemes is quite amazing.

It also
raises some serious questions about the so-called Chinese walls that
are meant to exist between the research and investment banking
divisions. Did Deutsche Bank sack Mangan in the hope of winning some
investment banking business from News Corp? Surely ASIC and the US
Securities & Exchange Commission should take an interest in these
claims.

After the Enron and Worldcom collapses, the US
introduced sweeping reforms on analyst independence and even locked up
a couple of prominent investment bankers. The Australian response was
far more muted in terms of analyst conflicts with investment banking
engagement on takeover deals meaning analysts can’t issue research
reports.

We also made some welcome reforms on selective
briefings and continuous disclosure but there is still nothing stopping
the house broker from talking up a stock and given the billions that
News Corp has paid out in investment banking fees over the years, the
temptation would be strong indeed.

Earlier this month, a Boston couple was awarded $US2.41 million after suing
Citibank and its former big-talking telco analyst Jack Grubman after
claiming they relied on his conflicted Worldcom recommendations. Maybe
some unhappy News Corp investors could start suing this group of
analysts listed on the News Corp website.

Isn’t
it amusing that News Corp don’t provided very helpful contact details
for executives, but are happy to publish the direct lines of their
favourite analysts.

Peter Fray

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Editor-in-chief of Crikey

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