News Corp.'s (NYSE: NWS) decision to repurchase $5 billion worth of the media conglomerate's shares, which have been tanking amid rancor over the News of the World phone-hacking scandal, is like giving a Band-Aid to someone who has just been stabbed. While the gesture would be appreciated, it is grossly insufficient, particularly if U.S. regulators launch an investigation under the Foreign Corrupt Practices Act.

The accusations
In a nutshell, the FCPA makes it illegal for U.S. companies to pay bribes overseas to win business. According to legal experts, the Securities and Exchange Commission and the U.S. Department of Justice may investigate New York-based News Corp. for possible FCPA violations.

News Corp. Chairman Rupert Murdoch and other members of senior management could face legal liability if it can be proved that they knew about illegal conduct but failed to stop it, according to Mike Koehler, an assistant professor of business law at Butler University who edits an FCPA blog. He added that just because a company faces scrutiny, that doesn't mean its executives will as well.

"The DOJ FCPA's Unit (as well as the SEC's FCPA Unit) follow the news just like the rest of us and the allegations concerning payments to London police officers to obtain information that would presumably allow News Corp. to better sell its newspapers would seem to implicate the FCPA's anti-bribery provisions and thus be of interest to the DOJ (as well as the SEC)," wrote Koehler in an email.

Possible huge fine
FCPA cases have settled for hundreds of millions of dollars, though it is not clear whether News Corp. would face such stiff fines if violations are found, according to David Simon, a partner with Foley & Lardner. He added that U.S. officials have aggressively pursued these types of cases.

It's clear that Murdoch & Co. won't be getting out of hot water anytime soon. Prime Minister David Cameron's government was ready to back a call by the opposition Labour Party that urged News Corp. to withdraw its $19 billion bid to assume control of British Sky Broadcasting Group. News Corp. beat them to the punch, however, and withdrew the bid. Since the deal is no longer on the table, it may present an opportunity for other media companies, such as John Malone's Liberty Global (Nasdaq: LBTYA), which agreed in March to acquire Germany's Kabel Baden-Wurttemberg for $4.5 billion.

Murdoch and other top executives, including his son James, have been summoned to appear before Parliament to answer questions about how News of the World allowed a culture of cutthroat competition that some say showed little regard for the rule of law or common decency to fester for years before the company pulled the plug on the publication this week.

A $7 billion loss
News Corp., the parent company of Fox News Channel and The Wall Street Journal, has lost $7 billion in market value over the last four days as the phone-hacking scandal has boiled over.

Some investors, such as Yacktman Asset Management Co. of Austin, Texas, say they are confident News Corp. will be able to put the scandal behind it fairly quickly.  Chief Investment Officer Donald Yacktman told Reuters that the U.K. papers and BSkyB are not really that important to News Corp.'s bottom line.  

That might be true, but the newspapers are close to Murdoch's heart. He collects newspapers the way others collect baseball cards or works of art. Murdoch’s father was a newspaper publisher and the mogul learned while building his publishing business that sex and sensationalism sell.

What it means for you
For now, shareholders should stay clear of News Corp. shares until the situation becomes clearer.  Investors can also look for competitors such as Time Warner (NYSE: TWX) and Viacom (NYSE: VIA) (NYSE: VIA-B) to pounce while News Corp. management faces distraction after distraction.

Jonathan Berr does not own shares of any securities listed in this story. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.