Israeli High-tech Giant NDS Caught in U.K. Hacking Scandal

NDS, that began as an Israeli start-up and is now owned by Rupert Murdoch, allegedly leaked details that allowed viewers in Britain to access TV channels for free, leading to the collapse of the rival of NewsCorp’s Sky television.

NDS, one of Israel's most prominent high-tech success stories, has become embroiled this week in the ongoing hacking scandals that have been shaking Rupert Murdoch's News Corporation empire.

According to allegations made in a BBC Panorama investigation, NDS, which is partly owned by NewsCorp, leaked details on the internet that allowed viewers in Britain to access television channels for free. This is alleged to have lead to the financial collapse of ON Digital, the largest rival of NewsCorp's Sky television network in Britain.

News Corp Chief Executive and Chairman Rupert Murdoch

NDS was founded as a start-up by a group of researchers from the Weizmann Institute in 1988 and is a world leader in the development of encrypted smartcards and other systems for digital television networks. The company was bought by NewsCorp in 1992 and has been a key component in the corporation’s expansion of its television networks worldwide.

NewsCorp still owns 49 percent of the company, which is currently based in Britain, but has Israeli research centers in Jerusalem and Petah Tikvah and many of its senior executives are Israeli. Two weeks ago, it was announced that the American computers giant Cisco Systems is planning to buy NDS for around $5 billion.

On Tuesday, BBC's Panorama investigative program claimed that NDS used a website called Thoic to leak details enabling viewers in Britain to freely access TV channels operated by On Digital.

Lee Gibling, the programmer that set up Thoic, said that the website was basically controlled by NDS. Meanwhile, NDS admits to have used it for the purposes of combating hackers of television services.

Gibling claims that he was handed the codes by the head of NDS’ security unit in Britain, a former senior police officer. The BBC also published internal NDS documents that purport to prove that NDS did indeed transfer secret codes to Thoic. On Digital went bankrupt in 2002, according to its former executives, in a large degree due to "piracy" that allowed viewers to watch its content without paying.

The BBC allegations could not have come at a worse time for Murdoch and NewsCorp as the British broadcasting regulation body, Ofcom, is already reconsidering whether NewsCorp's highly profitable BSkyB is a "fit and proper" broadcasting license-holder.

A statement from NDS denied the claims saying that, "NDS uses industry contacts to track and catch both hackers and pirates. This is neither illegal nor unethical.

And, to ensure that all activity remains completely within legal bounds, NDS staff and their contacts operate under a clear code of conduct for operating undercover."

NDS was sued for $1 billion four years ago by American television provider Echostar over similar charges but in January this year, NDS was cleared by the U.S. Supreme Court and Echostar was made to pay $19 million in costs and legal fees.