MURDOCH’S

PIRATES

MURDOCH’S

PIRATES

Before the phone hacking,
there was Rupert’s pay-TV skullduggery

Neil Chenoweth

First published in Australia in 2012

Copyright © Neil Chenoweth 2012

All rights reserved. No part of this book may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopying, recording or by any information storage and retrieval system, without prior permission in writing from the publisher. The Australian Copyright Act 1968 (the Act) allows a maximum of one chapter or 10 per cent of this book, whichever is the greater, to be photocopied by any educational institution for its educational purposes provided that the educational institution (or body that administers it) has given a remuneration notice to Copyright Agency Limited (CAL) under the Act.

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ISBN 978 1 74331 180 6

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Contents

List of Organisations and Characters

Preface

Prelude

Part 1    The Hunters

Part 2    The Hackers

Part 3    Hunting Parties

Part 4    EchoStar Wars

Part 5    A Death in Berlin

Part 6    The Long Pursuit

Part 7    End Game

Timeline

Acknowledgements

HORATIO: . . . He never gave commandment for their death. But since, so jump upon this bloody question, you from the Polack wars, and you from England, are here arrived, give order that these bodies high on a stage be placed to the view; and let me speak to the yet unknowing world how these things came about: so shall you hear of carnal, bloody and unnatural acts, of accidental judgements, casual slaughters, of deaths put on by cunning and forced cause, and, in this upshot, purposes mistook fallen on the inventors’ heads: all this can I truly deliver.

Tom Stoppard, Rosencrantz and Guildenstern Are Dead

It’s not terrorism, it’s not suicide bombing, it’s not weapons of mass destruction. It’s just pay television.

Jan Saggiori, 2010

List of Organisations and Characters

Conditional access systems

Irdeto

Mindport, South Africa–Netherlands

Nagra

Kudelski Corporation, Switzerland

NDS

News Corporation, Israel–United Kingdom

SECA

Canal+ Technologies, France

News Corporation subsidiaries and associates

BSkyB

British Sky Broadcasting, 39 per cent owned by News, NDS encryption

Foxtel

Australian pay TV business, 25 per cent owned by News, NDS and Irdeto encrpytion

Star TV

Asian pay TV News subsidiary, NDS encryption

Stream SpA

Italian pay TV arm later merged with Telepiu to form Sky Italia, initially Irdeto encryption, later NDS

News Corporation pay TV rivals

Astro

Malaysian satellite broadcaster, SECA encryption

Austar

Australian regional satellite broadcaster, Irdeto encryption

Canal+

French pay TV group with operations throughout Europe, SECA encryption

DirecTV

US satellite broadcaster, NDS encryption

EchoStar

US satellite broadcaster (now Dish Network), Nagra encryption

OnDigital

UK terrestrial broadcaster, renamed ITV Digital, SECA encryption

Optus Vision

Australian cable business, Irdeto encryption

Premiere

German pay TV business, Irdeto encryption

Sogecable

Spanish pay TV business, SECA encryption

Telepiu

Canal+ subsidiary in Italy, SECA encryption

News Corporation

Chase Carey

Currently News Corp Chief Operating Officer, NDS director, was News executive overseeing NDS in late 1990s

David DeVoe

News Chief Financial Officer, NDS director

Genie Gavenchak

Senior News lawyer reporting to Siskind

James Murdoch

NDS director, had oversight of online gamer Kesmai

Lachlan Murdoch

NDS director, had oversight of HarperCollins

Arthur Siskind

News legal counsel, part of Office of Chairman, NDS director

NDS

Ray Adams

UK chief NDS Operational Security, former commander Metropolitan Police, head of SO11 intelligence unit

Michael Clinger

CEO of NDS 1990–92

Avigail Gutman

NDS Operational Security, Israel and Asia

Reuven Hasak

Former deputy head of Shin Beit, head of NDS Operational Security

Bruce Hundertmark

News International director who set up NDS in 1988

John Norris

US chief NDS Operational Security, former US Army intelligence

Abe Peled

CEO of NDS since July 1995

Yossi Tsuria

Chief Technology Officer for NDS Israel

NDS rivals

François Carayol

Head of Canal+ Technologies

Charlie Ergen

Head of EchoStar, Dish Network

J.J. Gee

Head of security for EchoStar from 2001, former FBI agent

Alan Guggenheim

Head of Nagra US and NagraStar

Gilles Kaehlin

Canal+ security chief, former French intelligence officer, Renseignements Généraux

Roger Kinsbourg

Head of Eurotica Rendez-Vous channel

Andre Kudelski

Head of Kudelski Corporation

Pierre Lescure

Head of Canal+

Larry Rissler

Head of security for DirecTV, former FBI agent

European hackers

Rolf Deubel (Madmax)

German hacker

Plamen Donev (Pluto)

Bulgarian hacker, ex-military

Boris Floricic (Tron)

German hacker

Lee Gibling

Founder of Thoic.com (The House of Ill Compute)

Oliver Kömmerling (Alex, Cyberdine)

German master hacker hired by NDS

Markus Kuhn (Castor)

Founder of TVcrypt List, now lecturer, University of Cambridge

Vesselin Nedeltchev (Vesco)

Bulgarian hacker, ex-military

Jan Saggiori (Hannibal)

Swiss hacker

Chris Tarnovsky (Mike George, biggun, Von)

US serviceman in Germany, NDS agent in US

Canadian pirates

Dave Dawson

Ron Ereiser

Allen Menard

Operator of DR7.com website, Edmonton, Canada

Marty Mullen

Preface

This story starts a long way back.

Before the telephone hacking furore exploded in Britain. Before News Corporation had to pay out $650 million over some unpleasantness about business practices at its News America Marketing business. It was in March 2002, the same month that Surrey schoolgirl Milly Dowler went missing and her telephone messages were hacked by News of the World, that Rupert Murdoch’s empire faced its first global scandal.

The story of that scandal made spectacular headlines around the world . . . if only briefly. Allegations about pay TV piracy tabled in a court case in California went to the heart of corporate governance and accountability at News Corporation’s highest levels. The case raised extraordinary claims against a major media company, which is perhaps why they would be so readily dismissed. The wave of damages claims that rolled out in its wake made this case exponentially larger than any of the scandals that would follow. But just weeks after the first claim was made, it was settled. Non-disclosure orders went into place, evidence files were sealed. The case disappeared from public gaze.

The timing was horribly inconvenient for me. When news of the Californian court case broke I was wrestling with a book project that had taken on a life of its own, which was frankly a little unnerving. I was writing a business biography of Rupert Murdoch, but the narrative kept being hijacked by the bizarre goings on in one small part of his empire. I had discovered a technology arm of News Corporation called NDS Group, based in Israel and Britain, which was the most outlandish company I had ever come across. NDS’s history had expanded from a brief cameo to fill several chapters. I was ready to sign off on the manuscript when the Californian court case exploded everything I had previously known about NDS. I did what I could to cover the new developments in a postscript to the book. But I knew I had merely scratched the surface of this strange substratum of the Murdoch empire.

Five years later the story came back to me, as I learned that rather than ending back in 2002, the saga had continued to bubble along below the radar. A number of hackers, lawyers and senior media executives told me different parts of a remarkable story— one that many of them had at first struggled to accept.

And here was the problem. The story was everything a journalist could hope for. Five of the biggest pay TV companies in the world had each filed legal actions claiming that a News Corporation subsidiary had conducted a dirty tricks campaign to sabotage their products. Said to be the work of a specialist unit within NDS called Operational Security, its operatives were former spies, senior policemen and US Army Intelligence and Secret Service officers, along with a network of pirates and hackers. Taken together, the claims painted a picture of a global policy of industrial espionage by a major wing of Rupert Murdoch’s empire.

It was too sensational to be credible. The suggestion that one of the world’s biggest media companies would be dabbling in something like this was beyond bizarre. How would you begin to prove something like this? The allegations had been raised in 2002 and dropped. NDS executive chairman Abe Peled could rightly say that none of the actions against NDS had succeeded. But had all five of the pay TV broadcasters that sued NDS been motivated by a malicious attempt to cripple a superior competitor, as Peled claimed? Who was in the right here? What was going on? Any investigation required extensive substantiation—and not from a single source.

The first step was to look at the lengthy legal pleadings against NDS by French media group Canal+ in 2002 and US statellite broadcaster DirecTV in 2000 and 2002. US broadcaster EchoStar’s 2008 trial brought key players in the saga into the public gaze with thousands more pages of exhibits and filings as well as a 3000-page transcript in which some of the key NDS executives and engineers appeared in the witness box for the first time.

The documents and transcripts had to be analysed in direct interviews with many of the people in the story. Surprisingly, my book Rupert Murdoch opened doors for me. In California, hacker Chris Tarnovsky told me an NDS staffer had asked for his autograph after reading it. My friend François Pilet at Le Matin Dimanche in Geneva spotted the book in an online photograph of German hacker Oliver Kömmerling’s boat in Monaco—reading my earnest work had propelled one of Oliver’s friends into deep slumber.

My interviews opened new leads and provided other document troves, including the hard drives of former Scotland Yard commander Ray Adams and also Lee Gibling, who ran NDS’s pirate website The House of Ill Compute. That meant going back to primary sources, and much more travel, to Europe repeatedly, and to North America. It took more than four years before I was in a position to tell the story.

And then it needed to be reported, under robust conditions. In late 2011, I became a consultant to the BBC’s Panorama program for an exposé on how NDS had helped to cripple a rival pay TV company to Murdoch’s BSkyB in Britain. The program went to air in March 2012, followed seventeen hours later by the release of a major part of Ray Adams’ emails by the Australian Financial Review.

The story attracted worldwide attention—the Panorama website alone had 500,000 hits in the first two days. It also triggered a spirited response from NDS, from News Corporation newspapers and from Rupert Murdoch himself, via his Twitter account. ‘Enemies many different agendas, but worst old toffs and right wingers who still want last century’s status quo with their monopolies,’ he tweeted. And again, ‘Seems every competitor and enemy piling on with lies and libels. So bad, easy to hit back hard, which preparing.’ And finally in a reference to my employer Fairfax Media, the publisher of the Financial Review, ‘Proof you can’t trust anything in Australian Fairfax papers, unless you are just another crazy.’

The response Murdoch had foreshadowed soon took shape. In the next six weeks his Australian newspapers published 33 articles attacking my Financial Review stories. Meanwhile Abe Peled took out full-page advertisements to carry an open letter to Panorama, claiming that emails had been manipulated and mischaracterised, and that the program painted a picture of NDS which was ‘incorrect, misleading and deeply damaging’. In a second open letter to the Financial Review, Peled claimed that my articles ‘accusing NDS of promoting and facilitating piracy are based on gross mischaracterisations of the evidence’. The articles consistently misrepresented NDS’s fight against piracy and its efforts to protect the investments of its clients and the content they carried, he said. Peled robustly denied any actions by NDS to promote piracy in Australia, and was particularly severe on Swiss hacker Jan Saggiori, vehemently denying any suggestion that NDS had fabricated a US court case against him.

In an article Peled wrote for a Murdoch newspaper he said legal claims against NDS had been ‘tested to destruction’. He repeatedly claimed (inaccurately) that NDS had not been given details of allegations before publication. Certainly, talking to NDS is no straightforward procedure. Along the way I had repeatedly tried to seek information and responses from NDS executives or spokesmen. On a 2010 trip to Britain I was told to put any urgent queries to the Hong Kong office. In August 2011, I asked a detailed series of questions about an Italian criminal trial where prosecutors claimed that a senior anti-piracy official was actually fostering piracy ‘in the express interests of NDS’. An NDS spokeswoman emailed me a two-sentence response that began, ‘We are surprised by the tone of your questions . . .’ In fact NDS was one of the victims of piracy, she maintained.

By March 2012 the NDS responses had increased to two paragraphs: ‘NDS were vindicated by a jury and pronounced the sole prevailing party in the [2008] trial you refer to. I appreciate that you have been to extensive lengths to review the documentation from the trial, but the verdict stands that NDS were not found guilty of any accusations of piracy—nor has the company ever been found to have participated in unlawful activity, whether in relation to the EchoStar case or otherwise, and any insinuation it has done so is inaccurate.’

Two days later NDS sent me a copy of the letter it had sent to UK newspapers to inform them that the Panorama program, which would go to air ten days later, focused on issues that had been ‘conclusively disproven’, and to warn that ‘NDS will take all necessary action to hold responsible anyone who chooses to repeat these baseless and damaging allegations’. Later, NDS sent me copies of Peled’s open letters but made no further reply to my series of long queries.

News Corporation’s head office had taken over directing NDS responses. In June 2012, a spokesman wrote me a charming letter thanking me for my questions, but noting that as he was ‘transitioning into a new role’ he was ‘looping in’ a senior colleague. ‘Going forward, she will best be able to address your concerns or determine who at News Corporation can better assist you. Have a good weekend.’

When a week passed with no response, I wrote directly to the senior colleague, adding some more queries to the original list. The response was prompt: ‘Neil, what is your question, exactly?’ There was nothing further. Former Scotland Yard commander Ray Adams was less inhibited. He sent me an email with the subject line, ‘IDIOT!’ and roundly denied any suggestion he had framed Jan Saggiori.

But this account was never about the stilted releases that constitute corporate communications. The heart of this story was a group of young men who took up hacking for the fun, for adventure, for comradeship . . . and found themselves wandering into a dark part of the forest. It’s about what happens when an international corporation hires its own spy force, and the way that that changes a corporate culture. And whatever you believe NDS did or didn’t do, it’s about how that culture collided with these young men’s lives, and what it left them. There would be a few winners, but many losers. The question one must inevitably ask in talking to them today is—how did it come to this?

Prelude

Toronto, 24 October 1997

Toronto is a mean town when you’re looking for a bolthole. The operation was blown, and the agent was running. No ordered retreat, this was panicked flight, strung out on adrenaline. Far beyond the threshold of fear and desperation, it is a state when the quarry knows his pursuers are close and all he wants in life is a place to go to ground.

Any halfway serious intelligence operation has an emergency plan. It’s Spy Stuff 101—in the world of John le Carré, a little in-house tradecraft. This means fallback options, safe houses, collateral assets to call on and a whole range of contingencies, long before you get round to explaining the really neat pension scheme. But it was well past any of that. Alex couldn’t go back to the hotel, the telephone call had made that clear. It was the first place the police would look for him after the Stop and Detain alert went out to the airports.

The order was to arrest him on probable cause. There were $25,000 in money orders and some expensive computer equipment in his hotel room, but Alex had to walk away. This too was a measure of his distressing situation, for he wasn’t the sort of man to walk away from money easily. But now he was heading across the US border to find yet another anonymous hotel room in one of the towns that stretched along the shore of Lake Ontario, all the time feeling his panic building inside. He cursed himself for using a credit card that might be traced, and fled his new lodging to find himself back on the street. The Ontario shore in late October had the chill of late fall; a towering blond German, he was trying to look inconspicuous. He managed to find another hotel, cheap and nondescript, but he was jumpy as a cat, ready to take flight again if any police car cruised past. By morning he was in his fourth hotel. It seemed only a matter of time before his luck ran out.

In London, his controller was trying to work out where the operation had gone wrong. Ray Adams had made the travel arrangements himself. In a previous life he had been a commander at Scotland Yard, running its intelligence division, SO11. Now he ran a network of seventeen agents in Europe for Rupert Murdoch. He knew how to do this stuff. He had put Alex on a business-class ticket on Lufthansa flight LH 474 out of Frankfurt at 5 p.m., 21 October, to arrive in Toronto at 7.20 that same Tuesday evening. The return flight was a week later.

The complicating factor here was that Alex wasn’t travelling alone. He was travelling with a business contact known as ‘Jellyfish’, who only knew Alex in his undercover role. Adams had booked a ticket for Alex’s wife as well. In part, it was because Adams didn’t see any real danger. It would be a little vacation for her, a treat. Agents sometimes needed something unexpected like that; their family needed to feel the love. It was just a chance to kick back, really. Think of it as a bit like Date Night, on Uncle Rupert’s dime.

At an operational level (he didn’t tell Alex this, let alone his wife) it was a nice domestic touch, to disarm the suspicions of the people Alex would be meeting. How could they think he was a spy when he brought his wife along with him? What kind of man puts his partner in danger? It was a gesture that had ‘Trust Me’ written all over it. And the meetings with the Canadian pirates had gone well. Then hours later they had ratted on him. Did it without a second thought.

‘Sure I did it,’ the pirate who fingered Alex tells me a decade later when I run him down. ‘What’s to think about? He was going to help the opposition. Of course I took him out.’

So now there were three of them—Alex, the missus and Jellyfish—on the run together, hotel hopping. Alex had wiped the hard drive of his laptop repeatedly during the night. It would take a very, very good forensic technician to retrieve anything from it, which was not completely out of the question. It had come to this: a hacker on the payroll of NDS, the arm of News Corporation that provided security for its pay TV operations, was on the run from the police in two countries. The best prospect, now that he had crossed the Canadian border, was for him to hide in the vastness of the United States, then fly out through an airport with low security. If he was caught, the repercussions for NDS, for News Corporation and for Rupert Murdoch, in the glare of publicity, were potentially disastrous. The first question would be how News Corporation came to be involved in what looked like criminal piracy directed against NDS’s biggest client, DirecTV.

Senior employees of one of the biggest and most powerful media organisations in the world would spend days figuring out how to hide their man from the FBI and the Royal Canadian Mounted Police, long enough to slip him out of North America. Adams ordered Alex to disassemble his laptop into two parts, with each part posted by two different courier companies to two different addresses in Germany. But Alex still had to walk through those airport gates.

‘Alex had absolutely nothing with him,’ Adams later told his superior. ‘I even disobeyed your advice that he could walk through with his laptop. He did not even have a credit card with him. There would have been absolutely no legitimate grounds for detaining him for a second. Had anyone done so, there was a lawyer ready to get him out of trouble.’

Alex arrived home safe, and that was the end of it. Everyone walked away clean . . . except that there were enduring problems. The questions were: What part of News Corporation should have been alerted as to what was going on? What part of a modern media business involves hiding people from the police and working out the best way to smuggle them out of the country, betraying the confidence of the customers whom they were paid to protect? And how was it that none of these players were ever called to account?

The most troubling thing was that this was just the beginning, the first desperate adventure. The drama that followed would trigger four separate major court actions against NDS, in which almost every major satellite broadcaster in the world sued the News Corp arm for billions of dollars in damages from industrial espionage. And yet, in the end, NDS proved staggeringly profitable for Rupert Murdoch’s empire.

The stakes were very high and the casualties would not just be on the balance sheet. Twelve months later, Alex’s friend in Germany would be dead, and Alex himself would be considering hiring bodyguards.

Adelaide, October 1997

A little disclosure here. To write about News Corporation means spending a lot of time talking to lawyers. When I was writing Virtual Murdoch in 2001, I received legal threats from half a dozen law firms around the world. It was educational in highlighting the different national legal styles.

Australian lawyers, in my experience, have not distinguished themselves with a tremendous sense of humour—at times they can be a little snippy. American lawyers don’t bother with small threats. They have it down to a routine: they press the button and launch an intercontinental ballistic missile, perhaps in their spare moments between their coffee break and the next client meeting. When I wrote in 1999 to Squadron Ellenoff & Sheinfeld, seeking information from the New York firm that had represented News Corporation since the 1970s, their reply came from Ira Lee Sorkin. These days Ira is better known for his sterling work over the last two decades as Bernie Madoff’s lawyer. Ira duly dropped a thermonuclear device on my head, but I could tell he had more important things to do—his response was so impersonal I think it lost something along the way. But when it comes to causing pain and discomfort—in short when you want a lawyer to club your target somewhere soft and vulnerable with a large pointy stick— it’s hard to go past the British. It’s that old-world charm.

Law firms, though, are just the sideshow. For decades the man who was News Corp’s front line of defence, as chief legal counsel (now Rupert Murdoch’s personal advisor), was Arthur Siskind. Arthur and I have never really hit it off. It’s October 1997, the month that Alex has his little imbroglio in Toronto, when I speak to him face to face for the first time. I’m on the opposite side of the world from Toronto, in South Australia, and Arthur is about to throw me out of the News Corp annual meeting. Actually, it’s the morning tea for shareholders after the meeting. And he’s being pretty polite about it, which really shows he’s a model of restraint.

The annual meeting just finished has been a showcase for what the global media empire is doing: from the newspapers and fledgling pay TV operation Foxtel in Australia to Star TV, the satellite broadcaster that covered all of India and Asia from its base in Hong Kong, and BSkyB in Britain, along with the Sun, News of the World and the Times and Sunday Times. Then there are the big bets that Murdoch has recently made on cable channels in the US: Fox Sports and a maverick operation called Fox News, which Roger Ailes launched just a year before at a cost of $1 billion. Will it really work? As well, there are the Fox television network and stations, together with Twentieth Century Fox. My head is still full of the finale, a breathtaking trailer played at the end of the meeting for a film that James Cameron has directed, which is due to launch in two months time, called Titanic.

Annual meetings are a nightmare for Rupert Murdoch’s minders. Back in the United States he can handle any number of public outings without making a ripple, but in Australia he has a gift for unhappy headlines. He has just told shareholders what a bad idea the current push for tighter privacy laws was. Really, who needs them, when newspapers are so good at self-policing?

‘Privacy laws are for the protection of the people who are already privileged and not for the ordinary man or woman,’ he tells reporters at the press conference after the meeting. After the recent death of Prince Diana, he continues, ‘I think you’ll see a great deal more restraint by all the newspapers in Britain and I think you will see a stronger and better policed code of ethics.’ That restraint will mean paying less money for paparazzi photographs.

‘Princess Diana, whom we all had great respect for, generally worked with photographers to her satisfaction . . . I think newspapers paid far too much for them and there’ll be a major cost saving if we can bring this thing through.’

Before now, no one has thought to turn Diana’s death into a budget line item. Murdoch also offers a small rebuke to questions from the Sydney Morning Herald as ‘part of the consistent and nagging denigration of News Corporation that goes on in your newspaper day after day, orchestrated by “Friends of Another Organisation” . . . but I won’t go any further than that’. That was the support group for the Australian public broadcaster, Friends of the ABC, that Murdoch is being arch about. It’s important when you’re kicking your rivals to keep a light touch.

During the refreshments offered to attendees after this is when I bounce up to mend a few bridges with News Corp’s chief legal officer. Ever since the 1980s Arthur Siskind has been Rupert Murdoch’s go-to guy, when he needs someone to stomp up and down with hobnailed boots. His critics call him pugnacious: ‘He is, in a term, a tough son of a bitch—he knows what he wants and he won’t back down until he gets it,’ a US lawyer, Randy Mastro of Gibson, Dunn & Crutcher, told the American Lawyer in 1993. At some point Arthur and I have got off on the wrong foot. Maybe it’s the American–Australian cultural thing. Maybe it’s that awkwardness many lawyers have around journalists—the need to treat them like something particularly sticky and unpleasant that has attached itself to their shoe. But I think it was probably one particular article that did it. The year before this, I had described him as an unindicted co-conspirator in a New York fraud case. In hindsight I can see why he’d be a little unhappy.

In late 1996 I wrote to Siskind about an old case from when he was head of corporate at Squadron Ellenoff Plesent & Sheinfeld. In the 1980s his biggest client after News was a defence contractor called Wedtech Corporation. It was back in the days when Rudy Giuliani was the aggressive US Attorney for New York, before he ran for mayor. Wedtech collapsed in the late 1980s after senior executives and congressmen were convicted of fraud, bribery, extortion and racketeering. In one of those trials, Giuliani’s senior Assistant US Attorney, Howard Wilson, described Siskind as an unindicted co-conspirator in what Wilson said was a sham stock transfer to win defence contracts. But Siskind told me that it was just a legal strategy to allow the prosecutor to table an allegedly incriminating memo that Wedtech management had sent him. Siskind certainly did not know after reading the memo that they were trying to defraud the US government: ‘I don’t believe that the US Attorney’s office ever seriously considered laying any charge against me.’

A year after this, in Adelaide, I can see all this coming back to Siskind as I introduce myself. ‘I was having drinks with Rudy Giuliani that day your letter came in asking about that,’ Arthur tells me. ‘We had a little laugh together, that anyone would be bringing that old story up.’ It is soon after this exchange that Arthur begins to make pointed comments about whether I am entitled to be in the shareholders’ enclosure, hitting the tea and scones. It is always a risk letting a journalist loose on a food tray— I’ve made quite a dint in it.

The reason I had been contacting Siskind the year before was to ask about a tax investigation the Israeli government was conducting into a technology company that News Corp owned in Jerusalem called News Datacom, which I understood had something to do with smartcards. We exchanged some correspondence over several months and had a few telephone conversations. On the second occasion Siskind faxed me that he would speak to me, but only under protest, because the queries put to him were ‘indicative of your propensity to mix and match facts and untruths to benefit a sensational story . . . the facts make very little difference to you’.

It seemed promising that he remembered me, but perhaps that’s a glass-half-full kind of reading. News Corporation has a broad church in its many corporate manifestations, and yet News Datacom was like nothing I had ever come across before. Siskind attributed all of News Datacom’s tax problems to a former executive called Michael Clinger, whom News Corp was suing for fraud. I discovered Clinger had an arrest warrant for securities fraud outstanding against him in New York. Curiously, the arrest warrant had been issued while he was the chief executive of News Datacom. He had continued to run this little arm of News Corporation for a year, even though he was an international fugitive.

A London Financial Times journalist, Will Lewis, had been leading the international coverage of the Israeli tax investigation of News Datacom, despite some trenchant responses from Siskind, who was supervising News Corp’s action against Clinger. Siskind was convinced that Clinger was the main source for Lewis’s stories—so much so that Siskind told me he could quote dates and times when Clinger and Lewis had talked. Siskind’s responses to some of the questions Lewis fired off to him had become personal. It seemed so marked that I asked Siskind in an email how it was that he knew so much about Will Lewis’s family; for example, his wife’s job prospects. Had he put Lewis under surveillance? He told me that any information he had about Lewis’s personal life came from News Corp’s surveillance of Clinger.

‘Our instructions to our agents are to act within the law at all times,’ Siskind said.

Several months later, in March 1997, serious allegations arose in a London court case that private investigators hired by News Datacom had been bugging Michael Clinger’s telephone calls. Israeli police had raided News Datacom’s offices and in the safe of the current chief executive of News Datacom they had found tapes of phone calls Clinger had made to his Jerusalem and London lawyers. When I asked Siskind for a comment on all this, he was done talking with me and passed my query to his offsider, Genie Gavenchak. She roundly denied any wiretapping had taken place. She said News Corp believed that no tapes had been found in the News Datacom safe and, if they had been found, it was because Michael Clinger had put them there.

This all ended neatly enough. Ultimately, News Datacom settled the Israeli tax claim for $3 million. The High Court in London awarded the company $47 million damages against Clinger. News Datacom renamed itself NDS. Will Lewis’s story came to an end with the court case and he ended up as editor of the London Telegraph. Later still, he joined News International and became deputy chief executive under Rebekah Brooks, with no more word about phone tapping. And the good ship NDS sailed on.

In fact the NDS story was just beginning. Working out what happened next at NDS, though, would prove a long, frustrating trail. The first part would be understanding the people and events that led up to Alex’s close call in Toronto in 1997. The single feature that would link most of the players in this saga is a history of extreme violence. That’s the nature of the secret world. The question that would recur for me time and again was: Who dropped the ball? In other words, who was overseeing the dramas that played out at NDS? And who at some point should have told the NDS black-hat operations that what they were doing was a really bad idea? NDS was always tight with the Office of the Chairman at News Corporation. NDS execs reported to Rupert Murdoch’s closest people. Arthur Siskind and News Corp’s chief financial officer David DeVoe sat on the NDS board, as did James and Lachlan Murdoch and Chase Carey, who was by then co-COO of News Corp (although not all of them were on the board at the time of the events described in this book).

In October 1997 I knew nothing of the adventure in Toronto. In hindsight it’s tempting to link it in the same time frame as the annual meeting in Adelaide, when I was getting thrown out of the morning tea, as some sort of indication that senior management’s attention was focused elsewhere. But that doesn’t really work because the annual meeting was in early October, a fortnight before Alex’s great escape. On 24 October 1997 the record shows that Rupert Murdoch was in Beijing for a meeting in the Great Hall of the People with Ding Guangen, the head of the Chinese government’s Central Propaganda Department.

Actually that was later in the day. Earlier in the morning, around the time that Alex was desperately working his way through the seedier hotels along the edge of Lake Ontario, Murdoch had taken time off for a little sightseeing and to buy some ties in Xiushui Market, or Silk Street. He had dispensed for the morning with the services of local exec Bruce Dover. Instead he was accompanied by a vivacious young Chinese executive from Star TV, acting as his interpreter for the first time, Wendi Deng.

PART 1

The Hunters

These bloody days have broken my heart.

Sir Thomas Wyatt, 1536

Hebron, 6 June 1980

Dawn was still creeping across the sky when the initial explosion came. Minutes earlier, the faint glimmer of light brushing the horizon had produced that critical moment when imams can first discern the difference between a white hair and a black hair, which is the signal for the calls to prayer to echo across the mosques of Israel’s West Bank.

There had been no warning. At 6.15 a.m. one of the first traders to arrive at the Hebron market triggered a booby trapped hand grenade that in turn set off an explosive charge that tore through the traders and others passing by. The casualty toll was seven, none fatal. The bomb had been designed to injure, to maim, to disfigure, not to kill.

Ninety minutes later, a second bomb exploded when the mayor of Ramallah, Karim Khalaf, turned the key in the ignition of his car. He lost his right leg. At 8.30, some 30 kilometres north, another explosion tore off the front of the car of the mayor of Nablus, Bassam Shakaa, seconds after he turned on the ignition. After six hours of surgery, doctors amputated both his legs. Another mayor, Ibrahim Tawil of El-Bira, had rushed to see Khalaf at the hospital in a friend’s car. Tawil’s mercy dash saved him from a similar fate. Instead, a bomb disposal expert from the Israeli Police took the force of the bomb meant for Tawil as he gingerly opened the mayor’s garage door. He lost his sight.

Across Israel a shadowy group of conspirators waited for reports of more explosions, but nothing followed. Two of the bomb teams despatched to plant their deadly charges the night before had missed their targets.

It was enough. By nine that morning it was clear that Israel had a new terror group. It was the first series of attacks by the Jewish Underground, targeting Arab leaders. It barely made a mention on the news wires.

Sydney, November 1980

God was in his heaven, all was well with the world, and Rupert Murdoch was doing two of the things he loves best. First off, he was acquiring another couple of television stations. He wasn’t really buying the stations—he had done that two years before by buying half an airline. He was now beating off the tiresome nitpickers at the Australian Broadcasting Tribunal who had been trying ever since his purchase to prise his fingers off them. He had been diverted briefly by his first attempt to buy Australia’s biggest newspaper chain, the Herald and Weekly Times Group. He hadn’t succeeded this time round, but he’d made a neat profit before making his tactical retreat, and Ansett Airlines’ television stations were worth every penny—as long as he held on to them like a limpet.

Australian television stations were supposed to be owned only by Australian citizens and these ABT people had the impertinence to question his current status and future intentions. Murdoch explained to them, hand over heart, how he was regrettably forced to spend a great deal of time overseas running his overseas newspapers—the News of the World and the Sun in London, the New York Post in America, you might have heard of them. And something small and a little grubby in San Antonio. But in his heart of hearts he always considered that his chief residence was here in Australia, here on the farm at Cavan, on the rich alluvial plain near Canberra.

It was a noble thought, well expressed, and yet the ABT was not entirely convinced, contrasting these admirable patriotic sentiments with his tax returns, which stated he lived in New York. They even mentioned something about his green card, which requires you to state your place of residence as somewhere American. You can see right there the tension of being Keith Rupert Murdoch, global media baron in the making. He’s never going to be quite where you want him—you say tomato, I say US tax residency status.

Really, though, this was just light relief. He would hold on to his television stations in the end, but the real action was in London, where he had picked up the faint signals of a newspaper owner in distress. This was the second thing that Murdoch really loved— acquiring newspapers. Getting hold of Times Newspapers could get interesting.

Pointe-à-Pitre, 30 December 1980

Alan Guggenheim had always been a fidget. It was bred deep into his marrow, the need to be tactile, to pick up and handle les trucs, ‘the gadgets’, to fiddle with the controls, to make them function just a little better. There was a perfect way everything could work and it was only a question of working out what it was. Why wouldn’t anyone want to do that? He was just . . . a gadget guy. So it was natural, as he accelerated away from his home, that his first thought was to turn on the car radio to get a little news.

It was the silly season after Christmas with little world news. In Britain, Rupert Murdoch was on the final approach in his quest to buy the Times and the Sunday Times. He had set up a supervisory board, which he promised would give their world-acclaimed staff complete editorial independence but, the way some journalists were describing it, the process felt like watching pirates clambering on board over the gunwales. As Alan stirred restlessly in his seat, this wasn’t exactly the lead story on the radio in Guadeloupe, that tiny island outpost of metropolitan France nestling in the Antilles and close to the West Indies.

That morning, on the quiet back road from his house in Guadeloupe, Guggenheim’s fidget would save his life. But it was about the only thing he had going for him. Everything else he was doing wrong, beginning with being on the road in the first place at seven o’clock in the morning. It’s Counterterrorism Basics. When you’ve received a credible death threat, the first thing you do is vary your movements, vary the times you go to work, change the routes you take, make sure your killers never know where you’ll be. The security consultants teach you other things, like dropping your keys on the ground to give you an excuse to look under the car for bombs. Taking the back rooms in hotels to avoid the car bomb blast from the front. But chiefly they tell you the most important element is unpredictability: security through obscurity.

For Alan, that morning, this wasn’t an option. He lived on an estate on the edge of Pointe-à-Pitre, a housing cluster with a couple of local side roads but only one way out to the main highway. He and his wife Suzanne were to be part of the official send-off party of local dignitaries at the airport to farewell the president of the republic, Valéry Giscard d’Estaing, after his Christmas in the Caribbean. They had to be there, at that time, travelling on the only road out. Alan and Suzanne were toast.

The French state at this time was sending an elaborate message. In August the military arm of the local independence movement, the Groupe de Libération Armée de la Guadeloupe (GLA), had delivered an ultimatum: all French settlers must be out of the country by 31 December or they would die. But that is not the way one addresses the Fifth Republic. In November the Élysée Palace had announced coolly that life would go on as usual, that in fact Giscard d’Estaing was intending to spend Christmas at Guadeloupe to demonstrate that it was as much a part of France as ever.

The first direct threat against Alan had come during a board meeting of the employers’ association, the Conseil Régional du Patronat de la Guadeloupe, which he ran as executive director. His secretary interrupted the meeting to deliver letters that had been addressed to each of the directors by the GLA, which repeated the 31 December deadline. Each letter had been personalised, with several lines detailing the movements of a family member of each director—a child or marriage partner—outlining how the GLA could reach them at such and such a place, at such and such a time. Two leading business figures had already been wounded in shootings in the street, and in September a soldier died when a bomb he was defusing at the airport exploded, part of a wave of bombings targeted at French businesses.

Alan was on the GLA hit list because for two years he had been working to bring local working conditions—notably wages, unemployment and superannuation benefits—in line with France. This would result in a huge improvement for working people; but it was a delicate negotiating process between employers, trade unions and the French government, and it meant he had to travel to Paris every few weeks. If Alan succeeded, the changes would make it much harder for the communist GLA to convince Guadeloupe’s population to seek independence—and embrace third-world poverty. This made Alan a particular target, as well as Suzanne, who was chancellor of the university, which was a hotbed of the independence movement.

Prefect Guy Maillard had done what he could. Alan and Suzanne had received basic anti-terrorism training. Police patrols came past their house three times a night—‘Always at the same time, because they are gendarmes,’ Alan noted. Sometimes a police car would drive ahead of Alan’s grey Renault R30 to check for ambush sites as he drove to work. Yet, even though there had been an attack on the television station on Christmas Eve and a bomb had wounded a tourist at the airport on 28 December, there had been no dreadful catastrophe. And now, with the president in town, these precautions had to be put on hold.

The prefect had been apologetic when he called Alan about dropping the police patrols: ‘By the way we don’t have enough manpower for security with the president’s visit, we need to lighten up your protection. There’s just not enough military and police. You understand we have to put the president first.’ Alan said sure.

Two days later, as Alan and Suzanne pulled out of their driveway, the whole unnerving process of the president’s visit was almost over. It was just on seven o’clock, the heat of the day already beginning to build. Alan had the windows up and the air conditioning on. He was running late and he switched on the car radio to check for news as he accelerated around the curve in the long run out to the highway.

The news bulletin was reporting the president’s imminent arrival at the airport to catch his plane as Alan approached the first cross-street in the development, 200 metres from his home. He noticed a department of social security car stopped in the street on his right. As he approached, the car turned out in front of him. Then it stopped. Alan braked, but his mind was on the broadcast as he reached forward to fiddle with the radio, struggling to hear what was being said about the president.

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