News Corp. Unit Under Fire for Ties to Hacker
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SANTA ANA, CALIF. -- A high-ranking News Corp. official testified on Tuesday that he kept two hackers on the payroll for years after one of them was accused of infiltrating the security system of rival satellite television company DISH Network Corp.
Abraham Peled, CEO of News Corp. affiliate NDS Group (NASDAQ: NNDS) -- and a member of News Corp.'s executive management committee headed by Rupert Murdoch -- said he continued to employ Christopher Tarnovsky after being told by another former hacker that Tarnovsky posted information on the Internet to let users unscramble DISH's network and receive free service.
"We made it clear that these people were turning over to the good side and are expected to fight piracy instead of engage in it and we trusted Mr. Tarnovsky and instructed him not to do so," Peled said at a corporate spying trial in federal court in Santa Ana, Calif.
"Obviously, there's a theoretical risk" in hiring hackers, he added.
The espionage case was brought by EchoStar Communications, which later split into two companies, DISH (NASDAQ: DISH) and EchoStar, with DISH being the primary plaintiff. DISH claims it lost $900 million in revenue and system-repair costs.
NDS, which provides security technology to News Corp.'s (NYSE: NWS) global satellite network, including DirecTV, has denied sanctioning piracy and said it was merely aiming to make its own system more secure.
Tarnovsky was paid by News Corp. publishing house Harper Collins and made $128,000 in 2000. At the end of the year, he received a $5,000 bonus "because he must have made a very good technical contribution," Peled testified.
An earlier trial exhibit showed that the DISH code appeared on the Internet the same month Tarnovsky received his bonus.
Peled admitted that he was told in 2001 about Tarnovsky's alleged activities. Tarnovsky was not fired until 2007 -- several months before the hacker faced a deposition in this lawsuit.
Undermining DISH made News Corp. appear superior when the two companies were engaged in a bidding war to acquire DirecTV (NASDAQ: DTV) as a client, DISH alleges. News Corp. eventually acquired a controlling interest in DirecTV.
Peled was the subject of controversy on Friday after DISH lawyers learned that he had returned to London after giving his deposition and was unavailable as a trial witness.
U.S. District Court Judge David Carter was clearly irritated as he ordered NDS lawyers to bring Peled back to California, threatening to give a negative inference to the jury if Peled did not show up on Tuesday.
Carter said he was troubled that the CEO of a publicly traded company would not appear as witness when his company was facing significant damages.
"Rupert Murdoch has been invited, but I'm not going to force him in," Carter said on Tuesday upon learning that Peled had returned.