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Murdoch's media empire strikes back

LONDON (Reuters) - An angry Rupert Murdoch on Thursday declared war against "enemies" who have accused his pay-TV operation of sabotaging its rivals, denouncing them as "toffs and right wingers" stuck in the last century.

Separate reports by the British Broadcasting Corporation and the Australian Financial Review newspaper this week said that News Corp's pay-TV smartcard security unit, NDS, had promoted piracy attacks on rivals, including in the United States.

NDS and News Corp had already denied the claims, but on Thursday the media empire mounted a concerted fight back as a corruption scandal that has plagued its UK newspapers began to encroach on its far more lucrative pay-TV business.

"Seems every competitor and enemy piling on with lies and libels. So bad, easy to hit back hard, which preparing," News Corp Chief Executive Murdoch, 81, tweeted.

News Corp, whose global media interests stretch from movies to newspapers that can make or break political careers, has endured an onslaught of negative press since a phone-hacking scandal at its News of the World tabloid blew up last year.

At its height last July, Murdoch told British parliamentarians: "This is the humblest day of my life," after meeting the family of a murdered schoolgirl whose phone News of the World journalists had hacked.

On Thursday, it appeared that Murdoch had had enough of apologizing. "Enemies many different agendas, but worst old toffs and right wingers who still want last century's status quo with their monopolies," he tweeted.

For an avowed republican such as Murdoch, describing someone as an upper class "toff" is a damning insult - although he is now seen by many in Britain as part of the establishment, thanks to his business interests and ties to politicians.

The BBC has a long history of ideological clashes with BSkyB, which is 39 percent owned by News Corp, and both Rupert and his son James Murdoch have publicly attacked the British public service broadcaster over the years.

The Australian Financial Review is owned by Fairfax Media, the main rival to Murdoch's News Ltd newspaper group in Australia.

In a letter sent to the Australian Financial Review by NDS on Thursday, the company's executive chairman Abe Peled accused the newspaper of repeatedly mischaracterising NDS.

"You repeatedly mischaracterize communications about third party pirate devices to suggest that NDS was responsible for those devices," Peled wrote.

"You further mischaracterize NDS emails to suggest that NDS encouraged piracy of competitor systems while ignoring evidence that NDS was responsible for bringing to justice the sources of that piracy."

Peled adds that NDS is "a leader in the fight against piracy" and that the company "has assisted law enforcement agencies around the globe in bringing to justice many of the pirates your articles falsely portray as victims".

PASTYGATE

Richard Levick, a crisis public-relations guru whose clients have included the Catholic church and some Arab governments, said he had sympathy for Murdoch although he would have advised a more measured response.

"We have a saying here: Don't kick a man while he's up - it's too much work. Rupert Murdoch has been down now for three-quarters of a year so he's an easy target. People start to pile on. I sense exhaustion," he told Reuters.

"He's going to back to the old tools here, going on the attack, going for blustery headlines. It's worked for him for 40 years, so why change now? I understand the natural inclination to do that and I have some personal sympathy with him."

In the past week, Murdoch's British newspapers, which had been relatively subdued since the phone-hacking scandal broke out, have also gone back on the offensive, dominating the country's political agenda with some bold moves.

The Sunday Times mounted a old-fashioned sting operation in which reporters posing as international financiers were promised exclusive access to Prime Minister David Cameron in exchange for donations of 250,000 pounds ($400,000) a year.

The article led to the immediate resignation of a senior fundraiser from the ruling Conservative party, forced Cameron to disclose details of people who dined at his private apartment, and sparked a discussion about party funding.

Days earlier, the Sun tabloid hijacked the national debate about the country's 2012 budget by seizing on an obscure tax the government planned to impose on hot pies, seen as a staple of a working-class diet, and offering a free pie to every reader.

A week later, Cameron, his finance minister and the opposition leader were still vying with one another to be seen as the most avid pie-eater, tucking into pasties, pies and sausage rolls at every photo opportunity.

"INACCURATE CLAIMS"

The latest allegations bring the crisis closer to Murdoch's son James, who sits on the board of NDS, which News Corp and co-owner private equity firm Permira agreed to sell for $5 billion to Cisco this month.

The younger Murdoch, who is also chairman and ex-CEO of BSkyB, has been criticised for not uncovering the scale of phone-hacking at the News of the World, though he had not yet joined the UK newspaper operation when the hacking took place.

He has since moved to New York after being promoted within News Corp to deputy chief operating officer, and has severed all ties with the British newspapers. His focus is now the company's international pay-TV operations, where he made his career.

Chase Carey, News Corp's COO and James Murdoch's immediate boss, issued a statement late on Wednesday in which he condemned both the BBC Panorama documentary and other media worldwide that had reported its claims.

"The BBC's Panorama program was a gross misrepresentation of NDS's role as a high quality and leading provider of technology and services to the pay-TV industry, as are many of the other press accounts that have piled on - if not exaggerated - the BBC's inaccurate claims," he wrote.

NDS has complained that it was not asked for its side of the story before Monday's Panorama, which said NDS had leaked secret codes that allowed rampant pirating of BSkyB rival ITV Digital, which went bust in 2002.

On Thursday, NDS's Executive Chairman Abe Peled published a detailed letter to Panorama accusing the documentary of using manipulated emails to support its allegations, and demanding that the program retract the claims.

The BBC said: "We stand by the Panorama investigation. We have received NDS's correspondence and are aware of News Corp's rejection of Panorama's revelations. However, the emails shown in the program were not manipulated, as NDS claims, and nothing in the correspondence undermines the evidence presented in the program."

Also this week, the Australian Financial Review published a story claiming that NDS had allowed piracy to thrive at its client U.S. satellite broadcaster DirecTV, which Murdoch had ambitions to buy, even though it had a fix.

It reported that NDS ran a secret unit in the mid-1990s to sabotage its competitors. The stories were the result of a four-year investigation by investigative reporter Neil Chenoweth, who has written two books about Murdoch.

The AFR's Editor-in-Chief Michael Stutchbury told Reuters on Thursday: "We fully stand by our reports in the paper and by Neil Chenoweth's extraordinary investigation."

"We are not motivated in any way by any desire to damage any financial rival to the company that runs the Financial Review. We are simply following the story and publishing what we have uncovered," he said.

None of the evidence presented by Panorama and the AFR this week suggests that the Murdochs or any other News Corp executives were aware at the alleged practices at NDS.

NDS has won several court cases brought by rivals accusing it of promoting piracy, while others have been dropped - in one case because News Corp bought a subsidiary from the rival, Vivendi, which at the time was struggling with debt.

News Corp made $3.8 billion in revenues and $232 million in operating profit from satellite TV in its last fiscal year. It does not detail financial results for its newspapers but its UK titles bring in less than 3 percent of group profit.

($1 = 0.6309 British pounds)

(Additional reporting by Sakthi Prasad; Editing by Ed Davies, Will Waterman and Mark Potter)

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