World News | Fox’s settlement with Dominion is unlikely to cost $787.5 million

NEW YORK, April 23 (AP) — Fox Inc.’s massive $787.5 million settlement with Dominion Voting Systems over defamation claims is eye-popping, but the final cost to the media company may be much lower.

On Tuesday, Fox and Dominion settled allegations that Fox News baselessly accused the company of manipulating its voting machines against former President Donald Trump in 2020.

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It was the most high-profile media libel case in decades.

Fox has about $4 billion in cash on hand through December 2022, and MoffettNathanson analyst Robert Fishman expects the company to pay the settlement this quarter.

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How much the lawsuit will ultimately cost Fox is unclear, as it could pay some of the costs in a variety of ways, primarily through insurance and tax breaks.

Fox can deduct the Dominion settlement money from its income taxes as an expense for doing business.

Fox Chief Communications Officer Brian Nick has confirmed the deductibility of the settlement.

Large companies often deduct large settlement payments to help offset some of the costs, but because settlement amounts are often confidential, it can be difficult to determine exactly how much they benefited.

Payments deemed restitution or compensation are deductible, whereas payments to or at the direction of a government are generally not deductible.

Robert Willens, a tax professor at Columbia University Business School, estimates that Fox will be responsible for about three-quarters of the settlement amount, about $590 million, after tax write-offs.

“The point is, if the payment is made to a private party rather than as required by the government, then you can conclude with little to no concern that the payment is deductible,” he said.

A 2005 Government Accountability Office study found that of 34 settlements totaling more than $1 billion, 20 companies reported withholding some or all of the settlement payments. Big banks such as Bank of America and JPMorgan Chase also reportedly deducted some of their fee settlements related to the 2008 financial crisis.

Additionally, if Fox had insurance, insurance may pay for some of the settlement. Chad Milton, a partner at Media Risk Consultants, said a large media company like Fox might have $100 million to $500 million in insurance, including media liability coverage and other types of coverage.

“Amassing $100 million isn’t hard, but as you get higher and higher, it gets harder,” Milton said.

Typically, media companies have to pay a certain amount, possibly millions, before insurance kicks in.

However, the deductible includes attorneys’ fees, which can run into the tens of millions of dollars or more in a high-profile case like Fox-Dominion, so the deductible may be swallowed up by attorneys’ fees alone.

One problem: Even if the insurer pays most of the settlement, there may be a total annual liability limit that could mean the insurer won’t cover another large settlement bill.

Media companies and insurers don’t always agree on who should cover what, because contracts have caveats that allow insurers to avoid paying in certain circumstances.

In 2012, Disney settled a defamation lawsuit after ABC aired a segment questioning the safety of the meat producer’s product, which critics dubbed “pink slime.” But AIG, one of its insurers, ended up suing Disney so they wouldn’t have to pay part of the settlement, though AIG ultimately lost the case.

Fox also said it does not expect the settlement to affect its operations.

“Given our cash flow, strong balance sheet and the health of our business, we do not anticipate material operational impacts or changes to our business,” the company said in a statement after announcing the settlement.

MoffettNathanson’s Fishman said everything was pointing to companies being able to operate as usual.

“It’s unclear whether these lawsuits have had an impact on Fox News’ ratings and business,” he said.

Fishman said he doesn’t expect the settlement to hinder Fox’s ability to return money to shareholders, including the $1 billion accelerated share repurchase program announced in February.

Fox has a similar lawsuit with another voting machine company, Smartmatic, but no date has been set and the case may not make it to court for several years. (Associated Press)

(This is an unedited and auto-generated story from a Syndicated News feed, the content body may not have been modified or edited by LatestLY staff)