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|Includes: News Corporation (NWS)

Because News Corporation has systematically been bribing police for information in the UK, the US Department of Justice has a slam dunk case to prosecute it under the Foreign Corrupt Practices Act, the Guardian reported this morning. This could allow the Federal Government to impose massive financial penalties, or even liquidate News Corp.

The Department of Justice has ramped up its pursuit of companies and individuals under the act and has extracted big penalties. It’s now one of the highest law enforcement priorities in the US and nearly $2 billion was forfeited by US firms in 2009 and 2010.

Its recent probe of Avon cosmetics has demonstrated its reliance on companies to self examine and then volunteer the results. Companies have an incentive to settle, if they are not to lose everything. In 2010 the Department of Justice required one privately-held company that violated the FCPA, to end operations and be dissolved.

The prospect of News International’s acquisition of British Sky Broadcasting being approved has added several dollars to News Corp’s share price. Since the phone hacking scandal broke, its shares have only fallen back to $17, from $18. News Corp’s shareholders would be well advised to dump their stock next week, as there appears to be a lot more potential downside than investors realize. As Philip Stephens points out in the Financial Times, the British prime minister, David Cameron must now find a way to block Murdoch from securing full ownership of BSkyB. Otherwise, “the prime minister might just as well sign his own letter of resignation.”

However, the BSkyB deal might be the least of News Corporation’s worries. Renault‘s announcement that it is suspending advertising in all of News International’s newspapers, suggests that the damage to its brands extends much further than The News of the World.