A gaggle of journalists and camera crews greeted the Murdoch family members as they arrived at Reno’s Second Judicial District Court in Nevada early Monday morning. Siblings James, Prudence and Elisabeth arrived together (though in separate gleaming black SUVs). Half an hour later, Rupert (with his new wife Elena Zhukova) and Lachlan (holding hands with his wife Sarah Murdoch) arrived in a separate convoy.
But why are they in Reno? After all, Rupert was born in Melbourne and went to Geelong Grammar. His first two children were born in Australia, and favourite son Lachlan still resides in Sydney.
The key to understanding why the Murdochs have ended up in the third-largest city in the middle of a desert state — in front of a courthouse resembling something out of a generic Australian regional town — is in the nature of the proceedings.
Why Nevada?
The Murdochs are before the courts over the future of the Murdoch Family Trust. Rupert and Lachlan are teaming up to avoid the potential takeover and redirection of the Murdoch empire via a redistribution of voting shares in the trust. Over the next week, patriarch Rupert will attempt to alter control of the family trust so that it resides solely in the hands of his eldest and most conservative son, Lachlan, despite the trust being written to ensure none of his first four children receive favoured treatment.
Nevada is considered one of the most friendly states in the United States for setting up a trust. It doesn’t impose state income tax on trusts, doesn’t require reporting of trusts to the state, and allows the creation of dynasty trusts (which can last for up to 365 years).
Critically, while many other states don’t facilitate the changing of an irrevocable trust (hence the name), Nevada does, through a process called “decanting”: the legal process of “pouring” the assets of one trust into a new trust with changed provisions. This is what Rupert is seeking to do, and which probate commissioner Edmund Gorman has ruled he’ll be allowed to do as long as he’s acting “in good faith and for the sole benefit of the heirs”.
These factors play a central role in why Murdoch chose Nevada to file his trust amendment petition.
Why can’t we know any of the details?
Nevada has strong privacy protections over trust proceedings, which have been activated in this case. All of the filings in the Murdoch case have been sealed by Gorman, despite petitions from media companies such as The New York Times and Reuters.
In fact, the drama had been playing out in secret for months and was only exposed to the public in July when The New York Times obtained a confidential court document.
In response to the petitions, the court ruled that unsealing the proceedings had security implications and would personally impact the involved parties.
“In addition to the protection of privacy interests that outweigh the public’s right to access these proceedings, the court also recognises that several of the parties and witnesses in this case … are well known to the public and the subjects of intense media and public scrutiny,” Gorman wrote in his order preventing the opening of the case.
“These parties warrant additional security measures to ensure that their own physical access to the courts is not infringed, and that malicious actors who might wish them harm cannot use their appearances in this probate court to facilitate that harm,” the order continued.
How does this stuff play out in Australia?
Trust proceedings are handled differently in Australia. Trust law expert and senior lecturer at the University of Sydney Dr Derwent Coshott said the general position in Australia is that trust proceedings would be heard in public.
“That’s what happened with the Gina Rinehart case — that’s why you had people from the ATO there and it was so widely reported,” Coshott told Crikey.
That transparency meant the public heard details such as the mining magnate allegedly referring to the family’s housekeeper (who her father married) as an “Oriental concubine” in letters to him, and allegedly trying to have her deported.
“The fact that Nevada allows these kinds of things to be held in secret is very much an exception to the general rule,” said Coshott.
What’s Rupert’s plan?
The trust, created after Rupert’s divorce from Anna Maria dePeyster in 1999, currently has eight votes. Four are controlled by Rupert himself, and the remaining four by the four children from his first two marriages: Prudence, Elisabeth, Lachlan and James. On Rupert’s death, the trust currently states that the four votes controlled by Rupert will be equally distributed to the four other vote-holders.
Rupert has been secretly trying to change the terms of the family trust in order to give Lachlan sole control of the trust. According to court documents obtained by The New York Times, Rupert argues that Lachlan should have control of the family’s investments in a number of assets including Fox News, The Wall Street Journal, the New York Post, The Australian, the Sun and the Times.
Rupert argues that Lachlan’s conservative views are essential to the business success of the media empire, according to the documents. Subsequently, Rupert argues that control of the family trust being in Lachlan’s hands is vital to achieving benefit for the rest of the trust beneficiaries.
Rupert is represented by Adam Streisand (cousin of singer Barbra), a high-powered litigation attorney who has handled estate disputes for Michael Jackson and Britney Spears. On the other side, James, Elisabeth and Prudence are represented by Gary Bornstein, who represented Epic Games during its high-profile antitrust case against Google.
