US Justice Department last year opened probe into allegations that employees at The Wall Street Journal's China bureau bribed Chinese officials - @WSJ

By DEVLIN BARRETT And EVAN PEREZ

The Justice Department last year opened an investigation into allegations that employees at The Wall Street Journal's China news bureau bribed Chinese officials for information for news articles.

A search by the Journal's parent company found no evidence to support the claim, according to government and corporate officials familiar with the case.

The U.S. government, meanwhile, is nearing the end of a broader investigation of the Journal's owner News Corp . stemming from allegations of phone hacking and bribery at U.K. tabloids, among other issues, according to people familiar with the case.

During the course of that broader probe, the Justice Department approached News Corp.'s outside counsel in early 2012 and said it had received information from a person it described as a whistleblower who claimed one or more Journal employees had provided gifts to Chinese government officials in exchange for information, according to people familiar with the case.

News Corp. and the Journal don't know the identity of the informant, company officials say, and government officials wouldn't discuss such details. It isn't clear whether the person worked inside the Journal and whether the informant provided names of alleged bribers.

According to U.S. and corporate officials, News Corp. has told the Justice Department that some company officials suspect the informant was an agent of the Chinese government, seeking to disrupt and possibly retaliate against the Journal for its reporting on China's leadership. The company officials came to that view after finding no evidence of the alleged bribery and because of the timing and nature of the accusations, company officials say. It isn't clear what, if any, evidence the company officials have for that claim, which reporters for this article couldn't independently verify.

A spokesman at the Chinese embassy in Washington didn't respond to messages seeking comment.

Government officials familiar with the probe declined to say what they made of the company's claim. A person close to the company said the alleged China matter hasn't been raised by U.S. investigators in some time, but wasn't more specific. It isn't clear if the Justice Department considers the matter resolved or still open.

Paula Keve, a spokeswoman for News Corp.'s Dow Jones unit, which publishes the Journal, said in a written statement: "After a thorough review of our operations in China conducted by outside lawyers and auditors, we have not found any evidence of impropriety at Dow Jones."

The informant's accusations about the Journal related to reporting activity in Chongqing, the power base of disgraced Chinese official Bo Xilai, and covered previous Journal reporting in China, according to government and corporate officials. To check the claims, investigators examined activity reaching back at least five years, they said.

Mr. Bo, from his seat in Chongqing, was a powerful and rising figure in China until a scandal involving the poisoning death of a British associate led to his downfall and the criminal prosecution of his wife.

In March 2012, the Journal published an article detailing the questions surrounding the British man's death, and how the scandal was fueling a power struggle within China's political leadership. Other articles followed about the wealth and corruption behind the private lives of some Chinese leaders.

The Chinese bribery allegations against the Journal arose around the time that U.S. and Dow Jones officials believed Chinese hackers were targeting Dow Jones's computer systems, according to people familiar with the matter. That is one reason company officials say they suspected the informant's actions were part of a broader attack on the paper.

Federal investigators probing the Dow Jones computer hacking concluded it was carried out by people with links to China's government, apparently to snoop on articles the paper was writing about its political leadership, according to government and company officials.

An array of Western companies has been targeted by Chinese hackers in recent years, including recently some U.S. media firms such as New York Times Co. The Obama administration has stepped up its calls on China to curtail such activity.

In a statement, Dow Jones Editor in Chief and Journal Managing Editor Gerard Baker called the newspaper's China reporting "exemplary and unrivaled" and added: "Our journalists, often working in the most difficult circumstances, will never be deterred from shining light on the darker recesses of Chinese society and politics."

If the Chinese bribery allegations were true, such behavior would be a potential violation of the U.S. Foreign Corrupt Practices Act. That law, commonly referred to as FCPA, was the principal basis for the U.S. opening its initial investigation of News Corp.'s activities in the U.K. and elsewhere. The law makes it illegal for companies with sizable American operations to offer money or gifts to foreign-government officials to gain a business advantage.

The allegations of gifts in China went beyond the typical meals or drinks shared by reporters and officials and included lavish entertainment and travel, according to people familiar with the matter.

Over the past decade, the Justice Department has more aggressively pursued companies with U.S. operations suspected of bribing foreign officials. In 2012, the Justice Department announced 13 FCPA-related settlements or court charges. A decade earlier, there were four.

In FCPA cases, unlike almost any other criminal probe, companies under investigation are required to do the bulk of the detective work themselves, typically by hiring an outside law firm. In the Journal case, after the Justice Department presented the informant's allegations, the company and outside investigators began going through its own accounts seeking evidence to corroborate the informant's claims, according to government and company officials. Finding none, the company notified the government it couldn't confirm the claims, the people said.

The investigation comprised audits and records searches.

According to officials, the informant then gave the Justice Department a similar set of allegations about a different set of company expenses in China. News Corp. looked into this second set of claims, and again found nothing, those people said.

Since 2011, the Justice Department has been overseeing a criminal investigation of News Corp. relating to revelations that its British papers hacked phones and bribed public officials to get information for articles. Almost two years later, that probe is nearing completion, government and company officials said, setting the stage for settlement negotiations between the U.S. and News Corp.

News Corp., which has hired law firm Williams & Connolly to oversee the FCPA case, is expected to make its final presentation detailing the company's global bribery investigation to the Justice Department next month, according to people familiar with the matter.

It will be then up to the Justice Department to spell out what punishment or sanctions, if any, the agency wants, and at that point negotiations will likely begin. The Justice Department doesn't publicly discuss cases that close without charges filed.

Both sides expect an agreement would include a monetary settlement of some kind, based on the alleged violations in the U.K. The government has also investigated potential misconduct in the company's former Russian outdoor billboard subsidiary, according to people familiar with the case, specifically whether it paid bribes to local officials to approve sign placements in that country.

News Corp. said Thursday: "In regards to U.K. matters, we've delivered on our commitment to uncover wrongdoing and feel confident about the work we've done to put us on the right path, including sweeping changes to our global internal controls, compliance programs and ethics requirements." The company hasn't in the past commented on the Russia allegations. The Russian company, which has been sold by News Corp., has denied wrongdoing.

Several U.S. officials said senior Justice Department lawyers are increasingly skeptical any criminal charges would be filed against individuals at the company, although the investigation continues.

An investigation by British police has already led to criminal charges against reporters and editors, alleging that people working for News of the World and another News Corp. paper, the Sun, paid bribes to public officials for information. Many of those cases are still pending.

Write to Devlin Barrett at devlin.barrett@wsj.com and Evan Perez at evan.perez@wsj.com

Source: http://online.wsj.com/article/SB10001424127887324532004578365064172055862.html

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