Rupert Murdoch Fails in Bid to Change Family Trust

A Nevada commissioner recently issued a firm ruling against Rupert Murdoch’s attempt to amend his family trust, which would have consolidated control of his media empire with his eldest son, Lachlan, and solidified Fox News’s conservative editorial stance, according to a confidential court document obtained by The New York Times.

Commissioner Edmund J. Gorman Jr. concluded in a decision filed on Saturday that Rupert and Lachlan Murdoch acted in “bad faith” by attempting to amend the irrevocable trust, which divides control of the Murdoch empire equally among Rupert’s four oldest children—Lachlan, James, Elisabeth, and Prudence—following his death.

Gorman’s ruling was highly critical. In his 96-page opinion, he described the effort to change the trust as a “well-orchestrated charade” designed to “cement Lachlan Murdoch’s executive role” in the company, regardless of the potential consequences for the business or the beneficiaries of the trust.https://wordpress.com/

A lawyer for Rupert Murdoch, Adam Streisand, expressed disappointment with the decision and indicated plans to appeal.

In a statement, James, Elisabeth, and Prudence expressed support for the commissioner’s decision, stating they hoped it would allow the family to move past the litigation and focus on rebuilding their relationships.

The dispute over the family trust is not about financial stakes—Rupert Murdoch is not seeking to reduce his children’s financial shares—but rather about the future control of his vast conservative media empire, which includes Fox News, The Wall Street Journal, The New York Post, and major media outlets in the UK and Australia.

At 93, Rupert Murdoch has long planned to pass on his media holdings to his children, following in the footsteps of his father, who similarly handed over his smaller media company to Rupert and his sisters. However, Murdoch is equally determined to preserve the right-wing editorial direction of his empire, creating a complex challenge in balancing these two goals.

Throughout his career, Murdoch has sought to intertwine his family and business interests, with Lachlan, James, and Elisabeth all once considered potential successors. By 2019, it had become clear that Rupert preferred Lachlan to lead after his death. The issue, however, lay in the family trust’s structure.

James and Elisabeth have more liberal political views than their father or brother. If Rupert failed to secure Lachlan’s leadership, he risked losing control over the ideological direction of the media empire, jeopardizing the conservative legacy he had spent decades cultivating. In seeking to centralize Lachlan’s control, Rupert argued that preserving the empire’s political leanings would benefit all beneficiaries of the trust.

The legal battle has deepened tensions within the famously fractured Murdoch family. Disputes have emerged before, such as during the phone hacking scandal in the UK in 2010-2011, when Elisabeth attempted to convince Rupert to fire James, who was managing the company’s British operations at the time.

But this particular conflict—triggered by a covert legal attempt to alter an irrevocable trust—is unprecedented in the family’s history. It has exposed decades of shifting ideologies and loyalties, making Rupert’s preference for Lachlan as successor glaringly obvious to his other children, forcing them into a courtroom in Nevada to maintain some semblance of control over the family’s business.

The legal drama reached its peak in September, with several days of secret testimony in Reno from Rupert, Lachlan, James, Elisabeth, Prudence, and various trust representatives. The proceedings revealed that Rupert’s children had begun privately discussing their father’s death and its public-relations implications as early as April 2023. One catalyst for these discussions was an episode of the HBO show Succession, which prompted Elisabeth’s representative to draft a “Succession memo” to prevent a similar real-life scenario.

While the commissioner’s ruling is important, it is not final. As a “special master,” Commissioner Gorman submits a recommended resolution to the Probate Court, but it is up to a district judge to approve or reject it. If the decision is contested, it could lead to further legal battles.

Should Rupert and Lachlan fail to achieve their desired outcome in court, they might seek other ways to consolidate Lachlan’s power, such as through a buyout of his siblings’ shares in the company.

After The Times reported on the trust dispute in July, the paper, joined by several other outlets, filed a motion to unseal the proceedings, citing the significant public interest. This case is ongoing.

Rupert Murdoch established the Murdoch Family Trust in 2006, after marrying his third wife, Wendi Deng, and having two children with her. Under the trust, Rupert retains control of his business until his death, at which point his voting shares are to be distributed equally among his four oldest children.

The trust was initially structured as a binding agreement, part of an arrangement Rupert made with his second wife, Anna, who had concerns about him granting control to the younger children he had with Wendi Deng. While the younger children received financial stakes, they were excluded from voting power. However, the trust did include a provision allowing Rupert to make changes if they were in the best interest of the beneficiaries.

This provision is what Rupert and Lachlan sought to exploit. In recent years, they had become increasingly concerned that James—who left the company and has little contact with his father and brother—was plotting to oust Lachlan and alter the company’s editorial direction. During the proceedings, Rupert and Lachlan’s lawyers pointed to a meeting held by James, Elisabeth, and Prudence in London in September 2023 as evidence of their plot, but the commissioner ruled that the evidence was insufficient.

Lachlan initiated the effort to amend the trust in mid-2023. Together with his father’s legal team, they developed a plan to centralize Lachlan’s control. They called it “Project Family Harmony,” although, as the commissioner wryly noted, the name was “perhaps too optimistic.” The plan singled out James as the “troublesome beneficiary.”

One option they considered was to separate James’s “sub-trust” from the main trust, thereby diminishing his influence. Ultimately, they decided it was better to keep his shares within the trust, but under their control.

Rupert and Lachlan also appointed new trust representatives, including former U.S. Attorney General Bill Barr, to secure the votes needed to marginalize James, Elisabeth, and Prudence. They even offered voting rights to Rupert’s children with Wendi Deng.

The plan was unveiled at a special trust meeting late last year, with Rupert stating that Lachlan was the only suitable leader for the empire. However, in order for the changes to be valid, Rupert and Lachlan had to demonstrate that the amendments were in good faith and solely for the benefit of the trust’s beneficiaries.

James, Elisabeth, and Prudence vehemently disagreed, asserting that the changes were motivated by Rupert and Lachlan’s desire to maintain Lachlan’s leadership and the company’s conservative editorial stance after Rupert’s death. They argued that their efforts to amend the trust were based on a false assumption and that they had no intention of ousting Lachlan.

Commissioner Gorman sided with James, Elisabeth, and Prudence, concluding that Rupert and Lachlan’s actions were motivated by ulterior motives to preserve the empire’s conservative direction. He ruled that their plan was conducted in bad faith, carried out secretly, and only disclosed to James, Elisabeth, and Prudence days before the vote.

Gorman sharply criticized the Murdochs’ representatives, noting that some were inadequately prepared for the case. He compared their efforts to a “poker game” where the facts eventually exposed their bluffs.

In conclusion, Gorman declared, “The effort was an attempt to stack the deck in Lachlan’s favor after Rupert Murdoch’s passing. It might have worked, but the facts are now clear, and the court rejects this plan.”