Rupert Murdoch Fails in Bid to Change Family Trust

 Nevada Commissioner John Reynolds ruled resoundingly against Mr. Murdoch, who sought to allow his son Lachlan to control fully his empire and entrench the right-wing editorial bias at Fox News.

A Nevada commissioner voted overwhelmingly against Rupert Murdoch's attempt to change his family's trust to make his eldest son Lachlan more secure in his control of his media empire and secure Fox News's right-wing editorial bent, according to a sealed court document obtained by The New York Times.

The commissioner, Edmund J. Gorman Jr., said in a ruling filed Saturday that the father and son, the head of Fox News and News Corp., acted in "bad faith" in their effort to alter the irrevocable trust, which divides control of the company equally among Mr. Murdoch's four oldest children — Lachlan, James, Elisabeth, and Prudence — after his death.

The ruling was at times scathing. At one point in his 96-page opinion, Mr. Gorman characterizes the plan to change the trust as a "carefully crafted charade" to "permanently cement Lachlan Murdoch's executive roles" inside the empire "regardless of the impacts such control would have over the companies or the beneficiaries" of the family trust.

The brothers are disappointed with the decision and intend to appeal," said Mr. Murdoch's lawyer, Adam Streisand.

James, Elisabeth, and Prudence said: "We welcome Commissioner Gorman's decision and hope that we can move beyond this litigation to focus on strengthening and rebuilding relationships among all family members."

The fight for the family trust is not about the money, though: Mr. Murdoch will not reduce any of the financial stakes of his children in the company, it is about the future dominance of the world's mightiest conservative media empire that now includes Fox News, The Wall Street Journal, New York Post, and majority newspapers and television stations within Australia and Britain.

READ MORE: Rupert Murdoch fails in bid to change family trust act

Mr. Murdoch, who is now 93, had long planned to leave these vast media companies to his children as a kind of inheritance, similar to the way that his own father had bequeathed his relatively tiny media company to Mr. Murdoch and his sisters. But he also is determined to preserve the conservative cast of his empire, and balancing these two competing wishes has become increasingly difficult for him.

Throughout his five-decade career, Mr. Murdoch had been careful to blur family and business matters, even letting Lachlan, James, and Elisabeth serve, one at a time, in succession to him. The family has made the least of the eldest daughter Prudence. So it was by 2019 more or less assumed he wanted Lachlan eventually to succeed him. The complication was the family trust itself.

James and Elisabeth are considered less conservative in their politics than their father or brother. Without locking in Lachlan's leadership of the company, Mr. Murdoch cannot be certain that Fox News will continue to be a right-wing news outlet after he is gone, imperiling the legacy of the conservative empire he had spent his life constructing. Mr. Murdoch has been saying that a plan to make his outlets politically slanted -- and take away the right to vote of three of his children -- serves in the financial interests of all of his beneficiaries as efforts go on to consolidate his control over this empire.

The battle over the trust has also fueled tensions within the once-uniquely fractious family. It is not the first time the Murdochs have split into warring factions -- arguably most dramatically over phone hacking in Britain in 2010 and 2011 when Elisabeth had argued that her father should oust James, then responsible for the company's UK business.

But this particular battle, initiated by a sneaky legal move to alter an irrevocable trust, is unique in the family's history. It has uncovered decades of shifting ideologies and loyalties but also has left Mr. Murdoch's favoritism for his eldest son glaringly and agonizingly clear to his other children. They have had to take the courts of Nevada as a last hope to cling onto some vestige of control over a family business that has come to be almost indistinguishable from the family itself.

The litigation ended with sealed, in-person testimony by Mr. Murdoch, Lachlan, James, Elisabeth, Prudence, and several of their representatives to the trust over several days in September in Reno. The proceedings revealed that the children of Mr. Murdoch secretly talked about how they would plan for the death of their father about the public-relations strategy in April 2023. What sparked the wave of discussion is that the commissioner, the patriarch died in an episode of an HBO drama called "Succession, and the whole family's business was left in chaos. This inspired Mark Devereux, Elisabeth's representative to the trust, to pen a "succession memo" aimed at helping avoid a repeat of the real-life case.

It is not the end of the story, however. The commissioner was an independent "special master" who made a recommended ruling based upon the testimony and evidence submitted. That ruling was then presented to the Probate Court for ratification or rejection. Even at that point, the disappointed litigant might appeal the result, sending the matter back into another round of detailed litigation, this time much more grueling.

If they don't succeed in court, there might be another way the siblings could bolster Lachlan's position. For example, Lachlan could buy his sibling's shares of the business.

Since The Times reported on the courtroom battle over the family trust back in July, the newspaper as well as other news services filed a motion to get the case unsealed to argue that there is intense public interest in its outcome. That case remains active.

READ MORE: Rupert Murdoch fails in bid to change family trust book

The Murdoch Family Trust was established in 2006, six years after he had married his third wife, Wendi Deng, with whom he had two children of his own, Grace and Chloe. Under the trust, he retains control of the business until his death, when his voting shares will be distributed equally between the four oldest children.

That early trust arrangement, negotiated as an afterthought in his agreement with his second wife, Anna — mother to Lachlan, Elisabeth, and James — was she feared that he might share their power and equity equally when he made over the entire multibillion-dollar Murdoch empire. His youngest children were bequeathed a financial equal share but without the ability to vote. And yet the language of the trust provided, for example, that Mr. Murdoch could amend it, so long as he acted for the best interests of his beneficiaries.