News films and documentaries were acquired for nominal fees and the identity of the funders not disclosed to the audience – in what has been dubbed a “£1 programme scandal”. Ofcom has uncovered nearly 50 breaches of its code by CNN, CNBC and the BBC after a four-year inquiry into the global news channels, which are beamed into hotel rooms around the world.

The media regulator discovered a series of contraventions of its impartiality guidelines and found hundreds of nominal-fee programmes  had been paid for by bodies ranging from United Nations departments to the Indonesian ministry of trade and a Cambodian casino firm.

It said the practice carried “inherent risk to independence and editorial integrity” and it has ordered an “industry-wide” meeting of news networks to address the matter.

The Ofcom probe, the biggest it has undertaken into television content, began after an investigation in 2011 by The Independent, which revealed that a London-based media company that had received millions of pounds from the Malaysian government for public relations work was making documentaries for the BBC on the subject of Malaysia.

The Independent also detailed how the company, FBC Media (UK), had close ties to the American networks CNN and CNBC. Ofcom reported that both broadcasters had broken its rules on due impartiality.

The regulator said it would now draw up new “best-practice guidelines” for broadcasters so that “viewers can continue to be confident in the independence of factual programming”.

It is also considering a public consultation on the matter with a view to changing its Broadcasting Code in this area. In a 112-page report, Ofcom said: “This was different from a normal investigation in that it covered programmes broadcast in over 200 countries, by three TV news channels.” Officials conducted “forensic analysis” of over 1,000 programmes and “hundreds of hours” of footage.

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The broadcaster most criticised in the findings was CNN International, which was found to have broken the code 26 times, including breaches of both the impartiality and sponsorship rules.

John Defterios, one of CNN’s leading business presenters, was a director and president of FBC from 2007 until 2011. Defterios conducted interviews on CNN with the Malaysian Prime Minister, Najib Razak, in 2010 and 2011 on the shows Marketplace Middle East and Quest Means Business. John Defterios, a CNN presenter, was a director of FBC Media, which took money from the Malaysian state

Given that “the government of Malaysia had been a client of FBC”, Ofcom ruled that “FBC’s relationship with the government of Malaysia and Defterios’s relationship with FBC would have called into question the due impartiality of the interviews”, Ofcom said. It identified a third breach of impartiality rules in an interview Defterios conducted with the governor of Malaysia’s central bank, also on Marketplace Middle East.

Ofcom also found CNN in breach of impartiality rules over a 2009 interview by Defterios with Gamal Mubarak, son of the then Egyptian President Hosni Mubarak. The Egyptian government’s investment authority, Gafi, was another FBC client.

The regulator also found CNN had committed more than 20 breaches of its code on sponsorship by failing properly to declare content funding by organisations ranging from the Singapore Economic Development Board to Macedonia Tourism.

In a statement, CNN said: “We welcome Ofcom’s conclusion that the way our programmes were funded did not compromise CNN International’s editorial independence.” It added that “we … accept that a very small portion of our sponsored content fell under what Ofcom categorises as current affairs, which under UK regulations may not be sponsored”.

The BBC was found to have breached Ofcom’s code on sponsorship 20 times on its World News channel, where it featured programmes underwritten by funders ranging from the Aga Khan Foundation to the International Diabetes Foundation and the UN’s Food and Agriculture Organisation. BBC World News, the broadcaster’s 24-hour global news channel, handed Ofcom details of 186 programmes supplied to it for no cost or a nominal sum (typically £1).

The regulator asked the BBC to “explain in full its practice of accepting free or nominal-cost programming and broadcasting this without sponsorship credits”. The BBC replied that this practice dated back to 1991 when World News began.

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The BBC defended itself by arguing that it invariably included a “thanks to” message to the funder in the credits for the programme. Ofcom said this was insufficient.

One programme, Architects on the Frontline, was paid for by the Aga Khan Foundation, a not-for-profit development organisation set up by one of the world’s wealthiest men, and featured the boast that the Aga Khan Award for Architecture was “widely recognised as the most prestigious in its field”. Ofcom said the fact that a programme’s “interests are humanitarian and highly laudable” did not mean it was exempt from rules on declaring sponsors.

Another BBC programme, Stealing the Past, covered the traffic in stolen antiquities and featured interviews with Irina Bokova, director general of Unesco, the UN body which funded the documentary. The Malaysian Prime Minister Najib Razak

Ofcom’s investigation into FBC’s programmes for the BBC was hampered by the fact that the company went into liquidation months after The Independent exposé. The regulator could not find evidence that FBC specifically spent money from the millions it received from the Malaysian government on programmes it made for the BBC about Malaysia “as opposed to non-television public relations and lobbying activity”.

The BBC has previously broadcast an on-air apology for the scandal, which was the subject of “extensive internal investigation”, it told the regulator. “We know that FBC had a PR relationship with Malaysian clients and as such we fully accept that it was not an appropriate producer of the programmes it produced for BBC World News,” it admitted. “We acknowledge that a conflict of interest existed here, in breach of the BBC’s editorial guidelines, and that this relationship could have undermined our editorial independence.”

The BBC said last night that it had already strengthened its procedures to protect editorial integrity. “We are pleased that Ofcom welcomes the steps we continue to apply to prevent further issues and we look forward to working with Ofcom and the other broadcasters to develop best practice guidelines to help maintain compliance with the Code in this complex area.”

A BBC Trust spokesperson said: “We welcome Ofcom’s findings which follow those of the Trust four years ago, which found a number of these programmes to have been in serious breach of editorial and sponsorship guidelines. At that time the Trust required BBC World News to broadcast a series of apologies to international audiences and also required the BBC to tighten its compliance processes. As a result, no similar programmes have been commissioned since the Trust published its finding.”

Broadcasting breaches

FBC Media (UK), a London-based television production and public-relations company, received around £17m from the Malaysian government to promote the country’s interests. BBC Worldwide, which was unaware of FBC’s commercial relationship with Malaysia, commissioned eight programmes from the company which dealt with Malaysia and were screened between 2009 and 2011. The BBC has broadcast an apology for the relationship and admitted yesterday that “it could have undermined our editorial independence”. Ofcom did not find that the BBC’s editorial independence had been compromised but welcomed the BBC’s admission that FBC was “not an appropriate producer” of the content.

Eckart Sager, the vice-president and head of production at FBC, personally conducted an interview with the Malaysian Prime Minister, Najib Razak, for the weekly CNBC programme World Business in 2011, which FBC made for the network. Ofcom said that FBC “had a commercial interest in creating programming which was about Malaysia and which conveyed positive messages about Malaysia”. Mr Sager had a “personal interest” in such content, which “called into question the due impartiality of the programme”.

John Defterios was the president of FBC between 2000 and 2011 and a business presenter on CNN. In 2010 and 2011 he conducted two interviews with Mr Razak on the CNN shows Marketplace Middle East and Quest Means Business. Mr Defterios told Ofcom he was “extremely dismayed and was unaware” that a screenshot of one of the interviews had been used in an FBC marketing presentation and that he never would have “allowed this to happen”. Ofcom found that the interviews, and another that Mr Defterios conducted on Marketplace Middle East with the governor of Malaysia’s central bank, were in breach of due impartiality rules because of FBC’s relationship with Malaysia. CNN said: “CNN and John Defterios have both acknowledged that our strict conflict-of-interest policies were not fully adhered to. John is a journalist of the highest calibre and remains a highly respected member of our correspondent team.”

BBC Worldwide also made 20 breaches of sponsorship rules, by failing adequately to declare programme funders that included Unesco, which sponsored a show to use “robot” floats to measure ocean temperatures, and the Aga Khan Foundation, which paid for a programme which featured its architecture prize.

How The Independent broke the story

Four years ago, The Independent exposed how the BBC paid nominal fees of as little as £1 for programmes made by FBC Media (UK), which included foreign governments and multinational companies on its PR client list.

FBC made eight pieces for the BBC about Malaysia while failing to declare it was paid £17m by the Malaysian government for “global strategic communications”.

FBC, run by the former Financial Times journalist Alan Friedman and the CNN presenter John Defterios, was also making editorial programmes featuring FBC clients for the global business broadcaster CNBC, which suspended its FBC-made show World Business.

Other FBC clients included the regime of the former Egyptian dictator Hosni Mubarak, the governments of Greece and Kazakhstan and companies including Microsoft. Programmes were being made for free or for nominal fees as little as £1.

The Independent worked alongside investigative journalist Clare Rewcastle Brown, who publishes the Malaysian blog Sarawak Report. “I am satisfied that Ofcom has now found breaches of the broadcasting codes on several counts,” she said last night.

The story set in motion the biggest investigation Ofcom has carried out into television content and has led to an overhaul of the way broadcasters handle the grey area of funded factual programming. The regulator yesterday described the area as “crucially important” and carrying “inherent risk to independence and editorial integrity”.

The BBC quickly acknowledged it had a problem and in February 2012 broadcast an apology to its global audience for “breaches of our normal standards”.