Roger Ailes' alleged use of Fox funds raises liability questions

What's the future for Fox News after Ailes resignation?
What's the future for Fox News after Ailes resignation?

Roger Ailes' alleged use of Fox News' funds could pose a liability for 21st Century Fox.

On Sunday, New York Magazine's Gabriel Sherman reported that Ailes used his company's budget "to hire consultants, political operatives, and private detectives" to go after his enemies, including journalists who wrote critical articles about him.

Now, legal experts tell CNNMoney that, if true, such actions could make 21st Century Fox liable to its shareholders.

"As a general rule it is an actionable breach of the fiduciary duty of loyalty for a corporate executive to use company funds for personal purposes," Lynn Stout, the Distinguished Professor of Corporate & Business Law at Cornell University, said.

Citing a senior Fox source, Sherman reported that Ailes had hired consultants "to do work that was more about advancing his own agenda than Fox's," including one who "ran negative PR campaigns against Ailes's personal and political enemies out of Fox News headquarters."

Related: Fox News voice not changing despite Ailes' departure, but questions linger

Targets of these campaigns included journalists at Gawker as well as at the local newspaper in Putnam County, New York, that Ailes and his wife own, and even Sherman himself, according to the report.

Still, other legal experts believe that 21st Century Fox won't be liable to its shareholders because of a unique (and controversial) dual-class voting structure, which gives the Murdoch family ownership about 40% of the company's votes -- despite the fact that they own less than 15% of the company.

Others say 21st Century Fox can make the case that Ailes' handling of the funds was beneficial to the company.

"It is forbidden to use corporate funds for private purposes. But corporate officials have wide discretion to determine what is in the best interest of their shareholders, and Ailes has a plausible claim that supporting republican politicians is good for Fox's bottom line," David Yosifon, an Associate Professor of Law at Santa Clara University, said.

"Shareholders rarely object to corporate political spending and almost never win when they do object," he continued. "The problem with corporate political spending is not that it threatens shareholders -- generally it helps shareholders. The problem is that it threatens everyone else."

Whatever the case, the revelation has cast further scrutiny on Ailes, a man already facing numerous sexual harassment allegations from his 20-year period at the helm of Fox News.

Meanwhile, five of the consultants AIles hired to wage these negative PR campaigns have been let go, according to Sherman's report, suggesting that more details about Ailes use of 21st Century Fox funds may yet come to light.

21st Century Fox has not yet responded to requests for comment.


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