Conflicts of interest continue to emerge involving the Murdoch family in the collapse of the Ten Network. They have been everywhere from the moment Lachlan Murdoch joined the board in 2010, but the latest one raises questions about the role of Siobhan McKenna, who is not only Lachlan Murdoch’s key adviser in his private empire but also a senior executive of News Corp Australia who oversees its broadcasting interests.

As the AFR revealed this morning, Lachlan Murdoch and Bruce Gordon bullied Ten into administration by threatening to personally sue the directors if they drew down on the $200 million CBA facility they personally guarantee, along with James Packer.

The absurdity of the threat (and its hollowness) is exposed when you consider that Lachlan Murdoch was threatening to sue Ten director and Foxtel chief executive Peter Tonagh, who used to sit on the Ten board with McKenna but now reports to her.

Tonagh is in an impossible position, given that his job is also to protect Telstra’s 50% stake in Foxtel, which is worth less, courtesy of the Ten fiasco?

And are we really to believe that Bruce Gordon was threatening to sue Ten director and WIN Corporation chief executive Andrew Lancaster, who is Gordon’s right-hand man and trusted enough to run WIN and oversee Gordon’s interests?

McKenna’s role is highlighted in the exchange of letters confirming the coming-together of Lachlan and Bruce Gordon in an attempt to seize control of Ten through the administration process.

The letter from Birketu (the Bruce Gordon company) was addressed to Siobhan McKenna as a director of “Ilyria Television Nominees Pty Ltd”, and the letter was accepted and countersigned by McKenna. (McKenna has, in the past, been described as the managing partner of Ilyria).

But while McKenna was acting as a director of Ilyria Television Nominees in receiving the letter from Birketu, she is also News Corp Australia’s director of broadcast who sits on the board of Foxtel, Fox Sports and Sky News, which is talking to Ten about supplying the network’s news.

McKenna was also a director of Ten from 2012 to until March 15 this year when she resigned without warning or explanation and went to work with News Corp Australia as “group director — broadcasting”. This role gave her oversight of all of News Corp’s broadcast assets: Foxtel, Fox Sports, Sky News (and presumably Ten, given that Foxtel owns 13.8%). That made her the News Corp executive overseeing Foxtel boss, Peter Tonagh, who is a director of Ten.

Rather than sprinting into administration, did the Ten board obtain legal advice about the threat to sue from Murdoch and Gordon? If not, why not?

 

The majority of News Corp’s assets and profits come from Australia, yet it has a New York-based co-chairman in Lachlan Murdoch, who is breaking all sorts of corporate governance protocols. Where are the independent News Corp directors in all of this? For the record, there are only two: Masroor Siddiqui and Ana Paula Pessoa, both of whom live offshore.

Murdoch’s main job is to be the New York-based co-executive chairman of 21st Century Fox. He was paid US$23.7 million by public shareholders to do this in 2015-16, so any dealings Ten has with this business could be a related-party transaction, but neither party discloses it.

Ten’s supply contract with 21st Century Fox is costing it hundreds of millions of dollars over the term of the arrangement and is now regarded as “onerous” and a key contributor to the collapse. Why didn’t Murdoch fix this during all his years on the Ten board?

The deal was being renegotiated in an attempt to save Ten last week, but the AFR’s Chanticleer columnist today reveals how a key Fox executive played too hard to get late last week and over the weekend as Ten tried to get Fox to finalise the arrangement. Oh dear.

Besides Fox, Ten’s biggest program supplier is Endemol Shine (50% owned by 21st Century Fox), which produces The Biggest Loser, Shark Tank, MasterChef, Gogglebox Australia (for Foxtel as well), the new program Commonsense (with Foxtel), Australian Survivor (about to start), Offspring and others.

Fox Sports, (100% owned by News Corp), supplies sports coverage for rugby union, car racing (local and international), and from later this year, local soccer. Ten’s biggest asset is the Big Bash cricket in summer, which used to be on Fox Sports — but Ten snatched the rights a few years ago. Those rights end with the 2017-18 season, and talk around the TV industry is that Fox Sorts wants them back, but is willing to co-broadcast with a free to air network, just as Nine and Seven co-broadcast the NRL and AFL respectively.

That will be another conflict to manage. Let’s hope the Ten board does a better job than with the AFL rights, when they inexplicably were the incumbent that declined to bid, shortly after Lachlan Murdoch joined the board in 2010 and shut Ten’s dedicated sports channel — which was competing for sports rights with Foxtel.

Ironically, the lead independent Ten director at the time was former Ernst & Young boss Brian Long. He’s now a Commonwealth Bank director who chairs the audit and risk committee, which will no doubt be getting briefed on whether Australia’s biggest bank will need to sue three billionaires to get their $200 million Ten facility repaid in full.

Corporate Australia, don’t you love it. Such a small pond of inter-connected players.

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Peter Fray
Peter Fray
Editor-in-chief of Crikey
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