By Amy Chozick
Last week, after a British parliamentary report declared that Rupert Murdoch was “not a fit person” to lead a major corporation, several senior News Corporation executives huddled in tense discussion on the eighth floor of the company’s New York headquarters.
Some initially wanted to take off the gloves and issue an equally damning condemnation of the report’s criticism of their chairman and chief executive.
Joel I. Klein, the former New York City schools chancellor who has become Mr. Murdoch’s trusted adviser, was more restrained, arguing that the company’s statement needed a balanced tone, according to a person close to the company who spoke on the condition of anonymity. The executives eventually agreed.
The response, drafted by Mr. Klein and the company’s general counsel, Gerson A. Zweifach, dismissed the personal jabs at Mr. Murdoch as “unjustified and highly partisan,” but also acknowledged that the company’s response to wrongdoing in Britain had been “too slow and too defensive.”
The statement reflected the measure and care of a man who has spent decades in politics.
“Joel likes to fight, but he’s also incredibly politically astute,” said a person close to Mr. Klein.
Mr. Klein’s political instincts may have helped News Corporation, but his involvement has delayed his own ambitions within the company. He was hired by Mr. Murdoch to lead his company’s aggressive push into the education market. But just over six months into his tenure, the news broke that the company’s News of the World tabloid in Britain had hacked into the phone of a murdered 13-year-old, Milly Dowler, and suddenly, Mr. Klein became Mr. Murdoch’s legal compass in the ensuing British firestorm.
Mr. Klein, who declined to comment for this article, has slowly returned his attention to parts of his education portfolio, but prospects for success may have been damaged by the investigation. In 2010, News Corporation paid $360 million for a 90 percent stake in Wireless Generation, a company based in Brooklyn that specializes in education software, data systems and assessment tools to help teachers analyze student performance and customize lessons.
Last year, New York State rejected a $27 million contract with Wireless Generation, citing “the significant ongoing investigations and continuing revelations with respect to News Corporation.”
More recently, there has been criticism of Mr. Klein’s seemingly contradictory roles within News Corporation, both investigating wrongdoing inside the company and advising Mr. Murdoch on handling public relations and his appearances before the British Parliament.
While Mr. Klein still worked for Mayor Michael R. Bloomberg, Mr. Murdoch and Mr. Klein became close friends. They talked frequently about the state of public schools and Mr. Klein was lured to News Corporation with the promise that he could use the company’s deep coffers to put in place his vision of revolutionizing K-12 education. Mr. Murdoch has said he would be “thrilled” if education were to account for 10 percent of News Corporation’s $34 billion in annual revenue in the next five years.
“Joel has a huge amount of respect and admiration for Mr. Murdoch and what he’s accomplished in his life,” said Merryl H. Tisch, chancellor of the Board of Regents, which oversees New York State’s Education Department.
Mr. Klein’s résumé — he previously served as head of the Justice Department’s Antitrust Division, helped the Clinton White House respond to the Whitewater inquiries and prepared Ruth Bader Ginsburg for her Supreme Court nomination hearings — made him an obvious candidate to help Mr. Murdoch through the phone-hacking scandal. He agreed, with the hope that News Corporation would provide him with the resources to realize his longtime goal of getting technology into schools, according to people close to both men.
“It wasn’t just ‘Oh, by the way, let’s get into schools.’ This is something that’s very important to Murdoch, or Joel wouldn’t have done it,” said a longtime friend of Mr. Klein’s, Barbara Walters. She said the scandal in Britain had “sidetracked” Mr. Klein.
He emerged as one of Mr. Murdoch’s most trusted advisers, along with Chase Carey, president and chief operating officer of News Corporation; and David F. DeVoe, the chief financial officer. Mr. Murdoch put Mr. Klein in charge of the internal investigation into the hacking case, reporting to Viet D. Dinh, an independent director on News Corporation’s board. But Mr. Klein also advised on handling the scandal, sitting behind Mr. Murdoch during his first testimony before a parliamentary panel in summer 2011 and spending hours in London helping Mr. Murdoch prepare for a second round of questions last month.
Shareholder groups have expressed concerns about Mr. Klein’s independence in leading the investigation. His compensation package at News Corporation was more than $4.5 million last year, according to company filings with the Securities and Exchange Commission.
“His salary was a huge bump, so he’s clearly beholden to Murdoch and should not be running an internal investigation,” said Michael Pryce-Jones, a spokesman for the CtW Investment Group, a shareholder advocacy group based in Washington that works with pension funds for large labor unions. (British investigators have said they believe the internal review led by Mr. Klein was independent.)
In December, Mr. Klein championed the hiring of Mr. Zweifach, a Washington lawyer from Williams & Connolly, as News Corporation’s new general counsel. The hiring of Mr. Zweifach, who has represented The Star tabloid in a libel lawsuit filed by the parents of JonBenet Ramsey, and The National Enquirer in an invasion of privacy lawsuit filed by Clint Eastwood, has helped Mr. Klein return his focus almost entirely to education, something friends said he had been impatient to do.
He now spends about two-thirds of his time on education and the rest on issues related to the fallout in Britain, according to people with knowledge of Mr. Klein’s schedule.
Mr. Klein’s education unit is now one of the few areas within the company that is currently growing, both through investment in Wireless Generation and potential acquisitions. The company is looking at several small education-related companies, though no deals are imminent, according to a person knowledgeable about News Corporation’s preliminary strategy.
Wireless Generation had come under fire before the dropped New York bid. The company had been a key Education Department partner on two efforts that Mr. Klein had championed as chancellor. The timing of News Corporation’s acquisition, two weeks after Mr. Klein said he would join the company, prompted accusations that he had violated the city’s conflict-of-interest rules. At the time, a News Corporation spokeswoman said the deal had been developing for several months and Mr. Klein had no involvement in it. A spokeswoman for the Education Department said Mr. Klein recused himself from all business between the city and Wireless Generation as soon as he knew News Corporation had acquired it.
Unions representing teachers remain steadfastly opposed to News Corporation’s move into education. Randi Weingarten, president of the American Federation of Teachers, who has clashed with Mr. Klein in the past, called the company’s education push in the midst of the hacking scandal “the definition of chutzpah.”
Michael Mulgrew, president of the United Federation of Teachers, which represents New York City teachers, asked, “What parent would want personal information about themselves and their children in the hands of Rupert Murdoch, given the current circumstances?”
Wireless Generation said more than 2,500 United States school districts, 200,000 teachers and three million schoolchildren currently use its products, and many of those contracts were won after the rejected New York bid.
“Joel is a big thinker,” said John White, superintendent of Louisiana’s Education Department, who was deputy chancellor in New York under Mr. Klein. “Among those of us in the field, we’re anxiously awaiting what News Corporation will offer.”
Mr. Klein has hired some of the biggest names in education. Kristen Kane, a former chief operating officer for New York City’s Department of Education; Peter Gorman, former superintendent at the Charlotte-Mecklenburg Schools in North Carolina; and Diana Rhoten, co-founder of the nonprofit Startl, which helps develop digital learning tools, have all joined News Corporation.
They’ll most likely carry out Mr. Klein’s vision without his full attention as long as News Corporation remains caught up in the hacking scandal. Mr. Klein’s office is just down the hall from Mr. Murdoch’s on News Corporation’s executive floor, and the two men occasionally have lunch together on weekends at an Italian restaurant near their homes on Manhattan’s Upper East Side.
“We’ve had our history of battles,” Ms. Weingarten said of Mr. Klein. “But he’s always had a reputation for integrity, and I can’t imagine the last several months of being mired in this scandal have been fun for him.”