America's SEC Probes Murdoch's DirecTV Accounts

26 January 2005

The United States Securities and Exchange Commission is taking a close interest in last year's accounts at America's largest satellite TV company, DirecTV, in which a controlling 34% stake was acquired thirteen months ago by the Murdoch family business, News Corporation.

According to a mandatory filing by DirecTV, the company may be compelled to restate its 2004 profits after SEC investigators took a long, hard look at several transactions which between them resulted in a $1.47 billion (€1.13bn; £782.8m) asset writedown last year.

In the third quarter of 2004, the Murdoch accounting machine posted a $1 billion loss at DirecTV, much of which was attributable to a writedown in the value of its investment in several satellites. Originally intended to provide a state of the art internet service, NewsCorp decreed that the satellites would instead be used to broadcast TV.

This apparently didn't impress the SEC, which has of late been stamping on cute accounting stratagems such as "asset impairment", a scheme for shrinking future depreciation charges via massive writedowns.

The regulator is also scrutinizing DirecTV's sale to French electronics giant Thomson of a company that makes cable-TV boxes. As part of the deal, the NewsCorp unit agreed to buy all the boxes produced by the company over a multiyear period.

Says DirecTV ceo Chase Cary, a NewsCorp veteran installed to run the company Murdoch-style: "It's not surprising, given the size and complexity of these transactions, that the SEC would want to understand the accounting. [We are] confident that we followed the appropriate processes."

Data sourced from; additional content by WARC staff