NDS hacking allegations go global

After BBC claims that NDS hacked a Rupert Murdoch UK rival, an Australian newspaper says pay-TV rivals were hacked there too.

The hacking allegations against NDS Ltd., a subsidiary of Rupert Murdoch-controlled News Corporation (Nasdaq: NWS, NWSA; ASX: NWS, NWSLV) (49%) and Permira Funds LLC (51%), have spread from the UK worldwide. "The Australian Financial Review" (AFR) states, "A secret unit within Rupert Murdochs News Corporation promoted a wave of high-tech piracy in Australia that damaged Austar, Optus, and Foxtel at a time when News was moving to take control of the Australian pay TV industry."

"AFR" adds, "Their actions devastated Newss competitors, and the resulting waves of high-tech piracy assisted News to bid for pay TV businesses at reduced prices including DirecTV in the US, Telepiu in Italy, and Austar. These targets each had other commercial weaknesses quite apart from piracy."

"AFR" released 14,400 emails held by former Metropolitan Police commander Ray Adams who was European chief for Operational Security between 1996 and 2002. The "AFR" is publishing thousands of the emails on its website.

The email archive, which News Corp has previously sought to suppress, provides a unique insight into the secret side of Rupert Murdochs sprawling global empire. It reveals an operational arm that has generated multi-billion dollar windfall profits for the company.

The emails support claims by the BBC Panorama program, aired in the UK on Monday, that News Corp sought to derail OnDigital, a UK pay TV rival to News Corps BSkyB, that collapsed with losses of more than 1 billion in 2002, after it was hit by massive piracy, which added to its other commercial woes.

While News has consistently denied any role in fostering pay TV piracy, the Adams emails contradict court testimony given by Operational Security officers as well as statements by News lawyers in the past three weeks.

"AFR's" report is based on a four-year investigation by the paper, which revealed a global trail of corporate dirty tricks directed against competitors by a secretive group of former policemen and intelligence officers within News Corp known as Operational Security. The paper says that the piracy cost the Australian pay TV companies up to $50 million a year and helped cripple the finances of Austar, which Foxtel is now in the process of acquiring.

According to the "AFR", "The issue is particularly sensitive because Operational Security, which is headed by Reuven Hasak, a former deputy director of the Israeli domestic secret service, Shin Bet, operates in an area which historically has had close supervision by the office of the chairman, Rupert Murdoch.

"The security group was initially set up in a News Corp subsidiary, News Datacom Systems (later known as NDS), to battle internal fraud and to target piracy against its own pay TV companies. But documents uncovered by the 'AFR' reveal that NDS encouraged and facilitated piracy by hackers not only of its competitors but also of companies, such as Foxtel, for whom NDS provided pay TV smart cards. The documents show NDS sabotaged business rivals, fabricated legal actions and obtained telephone records illegally."

"AFR" says, "In addition to the controversy over OnDigital and Austar, the actions of Operational Security have triggered five separate unsuccessful legal actions by pay TV companies around the world, each claiming damages of up to $1 billion.

"Covert operations in Australia were directed by the head of Operational Security for Asia Pacific, Avigail Gutman. At the time, Gutman was based in Taiwan, where her husband, Uri Gutman, was the Israeli consul, before she was promoted to be a group leader based in Jerusalem."

"AFR" editor-in-chief Michael Stutchbury says, The 'AFR' fully stands by Neil Chenoweths extraordinary report of pay TV piracy involving News Corp subsidiary NDS.

NDS manufactures smartcards for all News Corporations' pay-TV companies worldwide. NDS was founded in Israel, based on encryption technology developed at the Weizmann Institute of Science. Though sold to News Corporation in 1992, 1,500 of its employees are based in Jerusalem. Earlier this month, Cisco Systems agreed to acquire NDS for $5 billion.

NDS issued a comprehensive statement denying any role in promoting piracy or providing competitors codes for use in piracy.

Published by Globes [online], Israel business news - www.globes-online.com - on March 28, 2012

Copyright of Globes Publisher Itonut (1983) Ltd. 2012

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