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The Journal Becomes Fox-ified

The New York Times

By JOE NOCERA, Opinion Page

July 16, 2011

It’s official. The Wall Street Journal has been Fox-ified.

It took Rupert Murdoch only three and a half years to get there, starting with the moment he acquired the paper from the dysfunctional Bancroft family in December 2007, a purchase that was completed after he vowed to protect The Journal’s editorial integrity and agreed to a (toothless) board that was supposed to make sure he kept that promise.

Fat chance of that. Within five months, Murdoch had fired the editor and installed his close friend Robert Thomson, fresh from a stint Fox-ifying The Times of London. The new publisher was Leslie Hinton, former boss of the division that published Murdoch’s British newspapers, including The News of the World. (He resigned on Friday.) Soon came the changes, swift and sure: shorter articles, less depth, an increased emphasis on politics and, weirdly, sometimes surprisingly unsophisticated coverage of business.

Along with the transformation of a great paper into a mediocre one came a change that was both more subtle and more insidious. The political articles grew more and more slanted toward the Republican party line. The Journal sometimes took to using the word “Democrat” as an adjective instead of a noun, a usage favored by the right wing. In her book, “War at The Wall Street Journal,” Sarah Ellison recounts how editors inserted the phrase “assault on business” in an article about corporate taxes under President Obama. The Journal was turned into a propaganda vehicle for its owner’s conservative views. That’s half the definition of Fox-ification.

The other half is that Murdoch’s media outlets must shill for his business interests. With the News of the World scandal, The Journal has now shown itself willing to do that, too.

As a business story, the News of the World scandal isn’t just about phone hacking and police bribery. It is about Murdoch’s media empire, the News Corporation, being at risk — along with his family’s once unshakable hold on it. The old Wall Street Journal would have been leading the pack in pursuit of that story.

Now? At first, The Journal ignored the scandal, even though, as the Murdoch biographer Michael Wolff pointed out in Adweek, it was front-page news all across Britain. Then, when the scandal was no longer avoidable, The Journal did just enough to avoid being accused of looking the other way. Blogging for Columbia Journalism Review, Dean Starkman, the media critic, described The Journal’s coverage as “obviously hamstrung, and far, far below the paper’s true capacity.”

On Friday, however, the coverage went all the way to craven. The paper published an interview with Murdoch that might as well have been dictated by the News Corporation public relations department. He was going to testify before Parliament next week, he told the Journal reporter, because “it’s important to absolutely establish our integrity.” Some of the accusations made in Parliament were “total lies.” The News Corporation had handled the scandal “extremely well in every way possible.” So had his son James, a top company executive. “When I hear something going wrong, I insist on it being put right,” he said. He was “getting annoyed” by the scandal. And “tired.” And so on.

In the article containing the interview, there was no pushback against any of these statements, even though several of them bordered on the delusional. The two most obvious questions — When did Murdoch first learn of the phone hacking at The News of the World? And when did he learn that reporters were bribing police officers for information? — went unasked. The Journal reporter had either been told not to ask those questions, or instinctively knew that he shouldn’t. It is hard to know which is worse. The dwindling handful of great journalists who remain at the paper — Mark Maremont, Alan Murray and Alix Freedman among them — must be hanging their heads in shame.

To tell you the truth, I’m hanging my head in shame too. Four years ago, when Murdoch was battling recalcitrant members of the Bancroft family to gain control of The Journal, which he had long lusted after and which he viewed as the vehicle that would finally allow him to go head-to-head against The New York Times, I wrote several columns saying that he would be a better owner than the Bancrofts.

The Bancrofts’ history of mismanagement had made The Journal vulnerable in the first place. I thought that Murdoch’s resources would stop the financial bleeding, and that his desire for a decent legacy would keep him from destroying a great newspaper.

After the family agreed to sell to him, Elisabeth Goth, the brave Bancroft heir who had long tried to get her family to fix the company, told me, “He has a tremendous opportunity, and I don’t think he’s going to blow it.” In that same column, I wrote, “The chances of Mr. Murdoch wrecking The Journal are lower than you’d think.”

Mea culpa.

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Poster's note: Like any ordinary criminal who has been caught and exposed, only now is Murdock contrite.

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Leading article: You're right, Mr Murdoch, saying sorry is not enough

The Independent

Saturday, 16 July 2011

Eight days ago – yes, it really is only eight days – Rupert Murdoch sacrificed his best-selling British Sunday paper in order to shield his chief executive, Rebekah Brooks, and the rest of his empire from the latest ravages of the phone-hacking scandal.

Yesterday, the futility of that gambit was demonstrated for all to see when Ms Brooks' resignation was accepted at the second time of asking. By then, though, it was already far too little, much too late.

Rupert Murdoch has been known for creative, nimble and, above all, timely business footwork. It is a faculty that appears to have deserted him. Since the phone-hacking affair escalated from slow burn to full-blown frenzy, with the claims that Milly Dowler's messages had been intercepted, he and his lieutenants have grievously misread the signals and been left perpetually scrambling to catch up.

Having dismissed the charges against the News of the World as just a little local difficulty, Mr Murdoch was forced to broach the possibility that the consequences might not be so easily contained. Having convinced himself that the bid for BSkyB could proceed, unaffected by everything else going on, he finally accepted it was doomed, but only as Government and Opposition closed ranks against it. Having declined to appear before the Commons committee, pleading full diaries until mid-August, Mr Murdoch and his son, James, suddenly found time to appear next Tuesday.

A week ago, the head of Ms Brooks offered up on a platter might have been sufficient. Now, it risks adding fuel to the fire. As rival papers finalised plans to carve up the News of the World's erstwhile readership, Mr Murdoch and News Corp were drafting an apology to be published in every national newspaper. The very notion of the name Murdoch and "sorry" appearing in proximity, let alone in paid advertising in other people's papers, illustrates how dramatically the climate has changed. Yesterday he apologised to the Dowler family in person, while recognising in his advert that apologising was not enough.

The timing of an apology is all. Get it right, and the damage is limited; leave it too long, and it smacks of empty public relations. That is also true of the apology offered by Ms Brooks in her resignation statement. When the Milly Dowler revelations first broke, Ms Brooks spoke the words, but failed to follow through. To say, as she did yesterday, that she feels "a deep sense of responsibility for the people we have hurt", does not cut it, especially not when she insists – in a striking echo of Andy Coulson's resignation from No 10 – that she is departing essentially because she has become the story, rather than for anything she might or might not have done.

The other reason why Ms Brooks' resignation will not cut it is that this juggernaut of revelations is already moving on. With connections now disclosed between the NOTW and the Metropolitan Police; the fateful detail that the paper's former deputy editor, Neil Wallis, was media consultant for the Met at the same time as its former editor was working for David Cameron; new questions about why James Murdoch approved payments to the first hacked celebrities; and the rising political heat in the US, where the FBI is investigating reports that NOTW reporters hacked into the phones of 9/11 victims, Ms Brooks has already been relegated to a bit part. The scandal has already outgrown her.

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Murdochs 'in family fallout' over crisis

Biographer Michael Wolff claims Elisabeth Murdoch outburst was directed not just at Rebekah Brooks but also her brother James

By Jamie Doward and Lisa O'Carroll

guardian.co.uk,

Saturday 16 July 2011 19.03 BST

Tensions at the heart of Rupert Murdoch's empire were threatening to explode into the open last night amid claims that the media mogul's children were turning on each other.

A biographer of Murdoch, Michael Wolff, claimed that the tycoon's daughter, Elisabeth, had said her brother James had "xxxxed the company".

Last week Murdoch denied she had said something similar about the ousted News International chief executive, Rebekah Brooks. But Wolff wrote on Twitter that those reports were "incomplete": "She said: 'James and Rebekah xxxxed the company.' " Wolff said Elisabeth made the remark on Sunday at a book launch for the political analyst Philip Gould, hosted by her husband, Matthew Freud, and the editor of the Times, James Harding.

News Corp insiders questioned the truth of the claims, pointing out that Wolff has long been a critic of James Murdoch and has written about him disparagingly many times. But Elisabeth is known to have been dismayed by what is happening to her father's empire and it is understood there are tensions within the family.

Wolff, who last night stood by his claims, said: "What we are seeing is an enormous amount of frustration. James absolutely cannot survive. Whether or not he is legally culpable, he certainly mishandled this entire situation and has done for a long period of time."

Wolff suggested the world was witnessing the end of the Murdochs' dynastic ambitions. "The Murdochs will be moved out of this company. James will go into some form of exile and Rupert will be put out to pasture and an outsider not named Murdoch will be put in charge."

Reliable sources have told the Observer the family have been having quarterly "summits" to discuss News Corp's long-term future. "The family have been getting together every quarter to discuss News Corp's legacy and what it stands for; the last meeting they had was held in Australia," said the source. "The fascinating thing now is that whatever the brand stood for earlier this year has been shot to pieces. News Corp is a world-class company in terms of how it is run and who it employs – it employs the brightest and the best throughout. Now it could be all over, if they find any evidence of hacking of 9/11 victims."

The concerns will add to the sense of crisis enveloping James Murdoch, who this week will be placed under further pressure when a parliamentary committee asks him to name those within News International whom he has publicly referred to as "wrongdoers".

In a highly unusual twist, the culture, media and sport select committee is contemplating placing Brooks and James and Rupert Murdoch under oath when they appear before it this Tuesday.

The committee is keen to probe James Murdoch on his statement to News International staff shortly before the News of the World was closed down. He said at the time: "Wrongdoers turned a good newsroom bad and this was not fully understood or adequately pursued. As a result, the News of the World and News International wrongly maintained that these issues were confined to one reporter."

A series of News International figures had previously appeared before the committee to insist there was no evidence of widespread phone hacking at the paper, including Les Hinton, former chief executive; Stuart Kuttner, then managing editor; former editor Andy Coulson and then editor Colin Myler; and Tom Crone, then its senior lawyer.

"Our inquiry is not going to end on Tuesday," said Paul Farrelly, a Labour MP on the committee. "We are going to ask James Murdoch which of the people who have come in front of us, as far as he knows, told us the truth or not."

Farrelly said the committee would recall witnesses in the light of Murdoch's statement. "We couldn't believe what he said when he closed the News of the World," Farrelly said. "He must have realised he would be summoned."

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Murdochs 'in family fallout' over crisis

Biographer Michael Wolff claims Elisabeth Murdoch outburst was directed not just at Rebekah Brooks but also her brother James

By Jamie Doward and Lisa O'Carroll

guardian.co.uk,

Saturday 16 July 2011 19.03 BST

Tensions at the heart of Rupert Murdoch's empire were threatening to explode into the open last night amid claims that the media mogul's children were turning on each other.

A biographer of Murdoch, Michael Wolff, claimed that the tycoon's daughter, Elisabeth, had said her brother James had "xxxxed the company".

Last week Murdoch denied she had said something similar about the ousted News International chief executive, Rebekah Brooks. But Wolff wrote on Twitter that those reports were "incomplete": "She said: 'James and Rebekah xxxxed the company.' " Wolff said Elisabeth made the remark on Sunday at a book launch for the political analyst Philip Gould, hosted by her husband, Matthew Freud, and the editor of the Times, James Harding.

News Corp insiders questioned the truth of the claims, pointing out that Wolff has long been a critic of James Murdoch and has written about him disparagingly many times. But Elisabeth is known to have been dismayed by what is happening to her father's empire and it is understood there are tensions within the family.

Wolff, who last night stood by his claims, said: "What we are seeing is an enormous amount of frustration. James absolutely cannot survive. Whether or not he is legally culpable, he certainly mishandled this entire situation and has done for a long period of time."

Wolff suggested the world was witnessing the end of the Murdochs' dynastic ambitions. "The Murdochs will be moved out of this company. James will go into some form of exile and Rupert will be put out to pasture and an outsider not named Murdoch will be put in charge."

Reliable sources have told the Observer the family have been having quarterly "summits" to discuss News Corp's long-term future. "The family have been getting together every quarter to discuss News Corp's legacy and what it stands for; the last meeting they had was held in Australia," said the source. "The fascinating thing now is that whatever the brand stood for earlier this year has been shot to pieces. News Corp is a world-class company in terms of how it is run and who it employs – it employs the brightest and the best throughout. Now it could be all over, if they find any evidence of hacking of 9/11 victims."

The concerns will add to the sense of crisis enveloping James Murdoch, who this week will be placed under further pressure when a parliamentary committee asks him to name those within News International whom he has publicly referred to as "wrongdoers".

In a highly unusual twist, the culture, media and sport select committee is contemplating placing Brooks and James and Rupert Murdoch under oath when they appear before it this Tuesday.

The committee is keen to probe James Murdoch on his statement to News International staff shortly before the News of the World was closed down. He said at the time: "Wrongdoers turned a good newsroom bad and this was not fully understood or adequately pursued. As a result, the News of the World and News International wrongly maintained that these issues were confined to one reporter."

A series of News International figures had previously appeared before the committee to insist there was no evidence of widespread phone hacking at the paper, including Les Hinton, former chief executive; Stuart Kuttner, then managing editor; former editor Andy Coulson and then editor Colin Myler; and Tom Crone, then its senior lawyer.

"Our inquiry is not going to end on Tuesday," said Paul Farrelly, a Labour MP on the committee. "We are going to ask James Murdoch which of the people who have come in front of us, as far as he knows, told us the truth or not."

Farrelly said the committee would recall witnesses in the light of Murdoch's statement. "We couldn't believe what he said when he closed the News of the World," Farrelly said. "He must have realised he would be summoned."

I believe Murdoch will fall but it looks like he wants to take Cameron with him .You were right about the apology Douglas We get 2 here in the U.K. all across the papers yesterday a whole page apology and we get a bonus "Sorry" today.

I intend to Boycott all of His products if possible.

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Rupert Murdoch's empire must be dismantled Ed Miliband

Labour leader urges for new media ownership rules saying News Corporation chief has too much power in the UK

By Toby Helm, Jamie Doward and Daniel Boffey

guardian.co.uk,

Saturday 16 July 2011 21.00 BST

Ed Miliband has demanded the breakup of Rupert Murdoch's UK media empire in a dramatic intervention in the row over phone hacking.

In an exclusive interview with the Observer, the Labour leader calls for cross-party agreement on new media ownership laws that would cut Murdoch's current market share, arguing that he has "too much power over British public life".

Miliband says that the abandonment by News International of its bid for BSkyB, the resignation of its chief executive, Rebekah Brooks, and the closure of the News of the World are insufficient to restore trust and reassure the public.

The Labour leader argues that current media ownership rules are outdated, describing them as "analogue rules for a digital age" that do not take into account the advent of mass digital and satellite broadcasting.

"I think that we've got to look at the situation whereby one person can own more than 20% of the newspaper market, the Sky platform and Sky News," Miliband said. "I think it's unhealthy because that amount of power in one person's hands has clearly led to abuses of power within his organisation. If you want to minimise the abuses of power then that kind of concentration of power is frankly quite dangerous."

The move takes Miliband's campaign against the abuse of media power to new heights after a fortnight in which he has reinvigorated his own leadership by leading the attack on the Murdoch empire. While he insisted that the recently announced inquiries should take their course, the Labour leader said he hoped the main parties could agree on a common approach.

His latest intervention, as a poll on Saturday night showed his personal rating up seven points on a month ago, comes ahead of what promises to be a dramatic appearance by Rupert Murdoch, his son James, the chief executive of News Corporation Europe and Asia, and Brooks before the Commons culture, media and sport committee.

Committee members preparing to grill the trio are to be given legal advice on the morning of the hearing on how far they can push the News Corp boss and his son for answers. The committee's chairman, the Tory MP John Whittingdale, has asked for details of their lines of questioning to avoid duplication.

News Corp is understood to be concerned that the committee will set a trap by asking questions the Murdochs are unable to answer due to the continuing criminal investigations and are taking advice on how to avoid yet another public relations disaster as the company attempts to rebuild its reputation.

Further pressure was piled on Murdoch after the Liberal Democrats wrote to the media regulator, Ofcom, urging it to launch an investigation that could see his holding company, News Corp, forced to sell its stake in satellite broadcaster BSkyB.

The Broadcasting Act places a duty on the regulator to consider "any relevant conduct of those who manage and control such a licence".

Although News Corp, whose News International subsidiary owned the News of the World, has only a minority 39% share in BSkyB, the Lib Dems argue the company is "strongly placed materially to influence the policy and strategic direction of BSkyB", suggesting the regulator is duty bound to investigate.

Simon Hughes, the Lib Dem party's deputy leader, Don Foster, its media spokesman, and Tim Farron, its president, are demanding that the watchdog's members "take measures now to satisfy yourself that the owners of the BSkyB licence continue to be 'fit and proper'", given "the manifest public concern about News International's activities, the close integration of News International with its parent company News Corporation, [and] News Corp's effective control of BSkyB".

The three dismissed claims that the regulator could not act while criminal investigations were current, saying there were "no legal reasons to stop Ofcom from conducting its work alongside that done by the police".

A spokeswoman for Ofcom said: "We received this letter early on Friday evening. We will be considering our response next week."

She added that the regulator was continuing to gather information, which it hoped would assist in the discharge of its duties. "We have already written to a number of relevant authorities and can confirm that follow-up meetings will now be taking place."

In his interview Miliband said that once a Sunday Sun was launched, possibly in August, this would add further to the Murdoch empire's penetration of the UK media market.

Meanwhile, the foreign secretary, William Hague, defended David Cameron's regular meetings with News International executives and his decision to invite Andy Coulson, his former director of communications who was arrested 10 days ago, to Chequers several weeks after Coulson's resignation over the phone-hacking scandal.

"In inviting Andy Coulson back, the prime minister has invited someone back to thank him for his work he's worked for him for several years that is a normal, human thing to do," Hague told BBC Radio 4's Today programme. "I think it shows a positive side to his character."

He added: "Personally I'm not embarrassed by it in any way but there is something wrong here in this country and it must be put right. It's been acknowledged by the prime minister and I think that's the right attitude to take."

Hague continued: "It's not surprising that in a democratic country there is some contact between leaders of the country, and indeed opposition leaders, and indeed I believe on that list of meetings there are also meetings with the executives of the Guardian and Trinity Mirror and whatever other news organisations."

Cameron has acknowledged that he met Coulson since his resignation, but "not recently and not frequently".

"When you work with someone for four years as I did, and you work closely, you do build

Edited by Douglas Caddy
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Murdochs fight to stay afloat in US as sharks circle News Corp

Pressure is growing for the Murdoch family to provide an even greater sacrifice for the survival of media empire's profits

By Paul Harris

guardian.co.uk,

Saturday 16 July 2011 20.26 BST

Pundits were chatting in a television studio during a commercial break early this week on Fox News Watch, dedicated to hot topics in the media world. Believing themselves off-air, the three guests, conservative commentators James Pinkerton and Cal Thomas and former New York Times reporter Judy Miller, laughed and joked among themselves.

"Anybody want to bring up the subject we're not talking about today?" Thomas asked. "Sure, go ahead, Cal!" said Pinkerton. "No, go ahead, Jim," Thomas replied.

The joke, of course, was that no one wanted to be the first to bring up the crisis afflicting Rupert Murdoch on his own TV channel. Fox is owned by News Corp, the giant US-based media company which, inexorably – terrifyingly for its shareholders – is being drawn into the phone-hacking scandal that has dominated the headlines in Britain for a fortnight.

Such reticence on the part of the Fox pundits was perhaps born out of a desire and expectation that the troubles assailing Murdoch's News International would remain firmly on the British side of the Atlantic and not infect its giant American parent company.

Many News Corp managers and investors saw what was happening in London as an outbreak of disease in a far-flung offshoot of the empire. The key thing for them was to insulate the rest of the body corporate from contagion. That was especially important in the US, where its lucrative TV, film and publishing properties bring in billions of dollars of profit and give it immense political influence.

But by the end of the week that mission was in tatters. Allegations and fears that phone hacking might have occurred in the US led to a series of calls from politicians for investigations into News Corp. The department of justice and the Securities and Exchange Commission have been asked to examine the company's work and the FBI has now started an investigation.

The scandal has also revealed a battle at the heart of News Corp, which is listed on the New York Stock Exchange, for the future of the US empire. That has exposed a corporate structure where the Murdoch family squabble among themselves but are also pitted against other factions. It is a fight that puts highly profitable TV interests against those of a declining print industry.

Rebel shareholders despair of family control of the company and a coterie of top corporate managers are fearful that one of 80-year-old Rupert Murdoch's children may take over the firm and not be up to the job. The scandal has also opened up an unexpected opportunity for Murdoch's US critics – especially those on the left who hate Fox News – to question the company's suitability to own a good chunk of the US media.

The damage has already begun in the US. Within hours of Rebekah Brooks's departure on Friday morning, any hope that the tide of outrage would ebb quickly faded. The American operation saw its first big casualty when Les Hinton resigned. Hinton, who was intimately involved with running News International when much of the phone hacking went on, dramatically quit on Friday afternoon, New York time, as head of the gleaming jewel of Murdoch's US media empire: Dow Jones, which owns the Wall Street Journal.

The pain of Hinton's loss to Murdoch cannot be overestimated. The two had worked together for more than half a century and, in his farewell email, Hinton spoke of his "sorrow". Murdoch too said it was a matter of "much sadness". Breaking the bond between two men who defined News Corp could not have been easy. Yet it showed the size of the stakes being played for. The crisis had crossed the Atlantic spectacularly.

There could be more drama to come. Possibly next in the line of fire is James Murdoch, son and heir presumptive to the News Corp crown. His fall would be shocking. But it may not even end there. If the FBI probe finds anything, all bets will be off. This crisis could perhaps even assail Murdoch himself. "If anything gets uncovered here in the US there will be a very, very high price to pay," said Jack Lule, journalism professor at Lehigh University, Pennsylvania.

The American empire is vast. In print it runs the Journal and the feisty tabloid the New York Post. As well as Fox, it owns publishers HarperCollins and the DowJones financial newswire, and the 20th Century Fox film studio. But those are just the big names. It owns scores of other properties from the Fox Soccer Channel to the Daily iPad newspaper to a big stake in the TV website Hulu to a small group of New York community newspapers and many, many more.

Yet News Corp is not run like many normal companies. Instead it has a dual share structure whereby its stock is split into two classes: 'A' shares that carry with them voting powers and 'B' shares that do not. This structure, with Murdoch and his family owning the biggest stakes in the 'A' shares, allows Murdoch to run the firm tightly without actually owning the majority of it. To increasingly unnerved shareholders – who have seen the value of their investments lose hundreds of millions of dollars over the week – that no longer looks like a good idea. "This is a new climate. The largest shareholders of this company are not happy any more at how it is being run," said Michael Wolff, a media expert who wrote a biography of Murdoch.

With Brooks and Hinton gone, many shareholders are concerned that they will not be the last senior figures to fall – or be pushed. The focus is now on James Murdoch. His position as deputy chief operating officer means the crisis has now reached the giddiest heights of News Corp and threatens the grip of the family itself. James, who has admitted misleading parliament over phone hacking and said he had not been given all the information he needed, has suffered a catastrophic loss of his reputation. The man who was once clearly next-in-line now faces an uncertain future. "One can safely rule out James taking over at this point. That's not going to happen. Everybody in the company recognises that," Wolff said.

But if not James, then who? Among other Murdoch children Elisabeth – whose TV production company Shine was recently bought by News Corp – might perhaps move up. But she is unknown at such a high corporate level. Or, perhaps, Lachlan Murdoch might return to the fold after years of seeing James favoured. But increasingly there is a belief that the Murdoch name is no longer the force within News Corp that it was. In order to placate restless shareholders Murdoch has poured billions of dollars into a share buyback scheme aimed at stabilising the plunging stock and sparing investors further pain. Some financial experts see that as a way of saving the current set-up. "A lot of it depends on the stock price. If it stabilises then the current management might survive," said Rebecca Arbogast, a managing director at Stifel Financial.

But even if the buyback does halt the share slide the influence and power of non-family figures will still have been greatly strengthened. One man to watch is Chase Carey, the chief operating officer who was brought back into the company fold only in 2009 from satellite TV company DirectTv. Some have Carey acting as a sort of "prince regent", running News Corp until a Murdoch is able to take over. Others go further and believe he will become the heir. This week Jason Subotky, a portfolio manager at News Corp's eighth largest investor, The Yacktman Funds, broke cover and said he would be thrilled if Carey took over. Another non-family person to emerge strengthened is Roger Ailes, the liberal bete noire behind Fox News. While Murdoch's UK newspapers have lost their political power amid allegations of illegal skulduggery, Ailes's Fox News has won huge influence solely by the power of its opinions and the controversial style of its broadcasting. Ailes, Fox insiders say, is upset at the crisis in the UK and the potential blowback to Fox. Which could unnerve some of the Murdoch children. Ailes and the children have had their differences, especially after Matthew Freud – the husband of Elisabeth Murdoch – publicly said he was "ashamed" of Ailes's journalistic standards.

Now a lawsuit has been filed against senior News Corp management by upset shareholders. It was placed on behalf of a group of investors, led by Amalgamated Bank, who were furious at Murdoch's purchase of Elisabeth's business for $675m. That suit alleged nepotism on behalf of News Corp. "Murdoch has treated News Corp like a family candy jar," the lawyers said. It has now been updated to include outrage at the fallout from the phone-hacking scandal and an argument that News Corp's handling of the crisis has been catastrophic for investors. "[it shows] a culture run amok within News Corp, and a board that provides no effective review or oversight," the suit now reads. Experts expect more such cases to be filed as shareholders circle the floundering corporation.

"This is now fertile ground for shareholder lawsuits," said Jeffrey Silva, a communications industry expert at Medley Global Advisers.

But the greatest legal threat to News Corp in America is likely not to come from courts where lawsuits are filed on behalf of investors. It is from the threat of investigation by top US law enforcement officials. In a sign of how quickly and dangerously things had spun out of control, a single report in the Daily Mirror about an alleged attempt to obtain the phone records of victims of the 9/11 terror attacks sparked a political firestorm in the US.

The report, which used an anonymous source and admitted no phone records had been passed on, provided the cover for a wave of politicians to demand investigations into News Corp. Democratic senators Jay Rockefeller and Barbara Boxer sent a joint letter to the justice department and the SEC calling for an investigation into whether News Corp had violated the Foreign Corrupt Practices Act which bans US firms from engaging in corruption abroad.

Some experts think payments made by News International to policemen and others in the UK could fit that bill. Two more Democratic senators, Frank Lautenberg and Robert Menendez, then joined the hunt and wrote to the SEC. Then, to the shock of many, a Republican stepped up too. New Yorker Peter King fired off a missive to FBI director Robert Mueller demanding a probe into the 9/11 allegations. "Any person guilty of this purported conduct should receive the harshest sanctions available under the law," King said. That seemed to be enough for the FBI, which promptly began a preliminary investigation.

Two FBI units have been assigned to the task, one that specialises in white collar crime and corruption, and a cybercrimes unit. Though the public evidence of wrongdoing in the US – in the form of that Mirror report – is scant, experts believe that may not be the point. "This allows a fishing expedition for the FBI. They are able to probe and find out what else might be going on," said Lule. If that expedition finds criminal evidence in the US then many believe that News Corp's suitability to run TV stations in the US could be called into question. "If it turns out they did things here, then that would up the risk," said Arbogast.

Some, however, think huge damage has already been done to News Corp's reputation: enough to cost many millions of dollars in the future. Even if the crisis in the US stops and the FBI investigation finds no evidence of illegality, the aftermath of the last two weeks has left a scar across the empire in the US. With the deal to buy the rest of the satellite broadcaster BSkyB off the table, News Corp suddenly has billions of dollars to spend and a desire to expand. But with its tainted brand, News Corp may not find its path to growth as easy as it has done in the past. There will be no special treatment from regulators in the future. Indeed, it is likely to be the reverse. "Murdoch is going to have to apply for permits and permissions and licences and this company has been tainted. It is going to be a problem. Their ability to expand has been hurt," said Lule.

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Stain From Tabloids Rubs Off on a Cozy Scotland Yard

The New York Times

By DON VAN NATTA Jr.

July 17, 2011

LONDON — For nearly four years they lay piled in a Scotland Yard evidence room, six overstuffed plastic bags gathering dust and little else.

Inside was a treasure-trove of evidence: 11,000 pages of handwritten notes listing nearly 4,000 celebrities, politicians, sports stars, police officials and crime victims whose phones may have been hacked by The News of the World, a now defunct British tabloid newspaper.

Yet from August 2006, when the items were seized, until the autumn of 2010, no one at the Metropolitan Police Service, commonly referred to as Scotland Yard, bothered to sort through all the material and catalog every page, said former and current senior police officials.

During that same time, senior Scotland Yard officials assured Parliament, judges, lawyers, potential hacking victims, the news media and the public that there was no evidence of widespread hacking by the tabloid. They steadfastly maintained that their original inquiry, which led to the conviction of one reporter and one private investigator, had put an end to what they called an isolated incident.

After the past week, that assertion has been reduced to tatters, torn apart by a spectacular avalanche of contradictory evidence, admissions by News International executives that hacking was more widespread, and a reversal by police officials who now admit to mishandling the case.

Assistant Commissioner John Yates of the Metropolitan Police Service publicly acknowledged that he had not actually gone through the evidence. “I’m not going to go down and look at bin bags,” Mr. Yates said, using the British term for trash bags.

At best, former Scotland Yard senior officers acknowledged in interviews, the police have been lazy, incompetent and too cozy with the people they should have regarded as suspects. At worst, they said, some officers might be guilty of crimes themselves.

“It’s embarrassing, and it’s tragic,” said a retired Scotland Yard veteran. “This has badly damaged the reputation of a really good investigative organization. And there is a major crisis now in the leadership of the Yard.”

The testimony and evidence that emerged last week, as well as interviews with current and former officials, indicate that the police agency and News International, the British subsidiary of Rupert Murdoch’s News Corporation and the publisher of The News of the World, became so intertwined that they wound up sharing the goal of containing the investigation.

Members of Parliament said in interviews that they were troubled by a “revolving door” between the police and News International, which included a former top editor at The News of the World at the time of the hacking who went on to work as a media strategist for Scotland Yard.

On Friday, The New York Times learned that the former editor, Neil Wallis, was reporting back to News International while he was working for the police on the hacking case.

Executives and others at the company also enjoyed close social ties to Scotland Yard’s top officials. Since the hacking scandal began in 2006, Mr. Yates and others regularly dined with editors from News International papers, records show. Sir Paul Stephenson, the police commissioner, met for meals 18 times with company executives and editors during the investigation, including on eight occasions with Mr. Wallis while he was still working at The News of the World.

Senior police officials declined several requests to be interviewed for this article.

The police have continually asserted that the original investigation was limited because the counterterrorism unit, which was in charge of the case, was preoccupied with more pressing demands. At the parliamentary committee hearing last week, the three officials said they were working on 70 terrorist investigations.

Yet the Metropolitan Police unit that deals with special crimes, and which had more resources and time available, could have taken over the case, said four former senior investigators. One said it was “utter nonsense” to argue that the department did not have enough resources.

Another senior investigator said officials saw the inquiry as being in “safe hands” at the counterterrorism unit.

Interviews with current and former officials show that instead of examining all the evidence, investigators primarily limited their inquiry to 36 names that the private investigator, Glenn Mulcaire, mentioned in one list.

As a result, Scotland Yard notified only a small number of the people whose phones were hacked by The News of the World. Other people who suspected foul play had to approach the police to see if their names were in Mr. Mulcaire’s files.

“It’s one thing to decide not to investigate,” said Jeremy Reed, one of the lawyers who represents numerous phone-hacking victims. “But it’s quite another thing not to tell the victims. That’s just mind-blowing.”

Among the possible victims was former Prime Minister Gordon Brown, who asked the police last year to look into suspicions that his phones were hacked. In response, Scotland Yard sent him a form letter saying it was unclear whether the tabloid had eavesdropped on his conversations, people with knowledge of the request said.

The police assigned a new team to the hacking allegations in September after The New York Times published a magazine article that showed that the practice was far more widespread and which raised questions about Scotland Yard’s handling of the case.

Shortly after, the police finally reopened those “bin bags.” Now, the police are enduring the painstaking and humiliating exercise of notifying nearly 4,000 angry people listed in the documents that they may have been targets of what now appears to be industrial-strength hacking by The News of the World. The chore is likely to take years.

A Series of Inquiries

Scotland Yard’s new inquiry, dubbed Operation Weeting, has led to the arrests of a total of nine reporters and editors, with more expected. And the police have opened another inquiry into allegations that some officers were paid for confidential information by reporters at The News of the World and elsewhere.

The Metropolitan Police itself is now the subject of a judicial inquiry into what went wrong with their initial case, as well as into the ties between the department’s top officers and executives and reporters for News International.

At a parliamentary committee hearing last week, three current and former officials who ran the case were openly mocked. One member of Parliament dubbed an investigator “more Clouseau than Colombo.”

At the hearing, the senior investigator in charge of the day-to-day inquiry, Peter Clarke, blamed The News of the World’s “complete lack of cooperation” for the shortcomings in the department’s initial investigation.

While editors were not sharing any information, they were frequently breaking bread with police officers. Andy Hayman, who as chief of the counterterrorism unit was running the investigation, also attended four dinners, lunches and receptions with News of the World editors, including a dinner on April 25, 2006, while his officers were gathering evidence in the case, records show. He told Parliament he never discussed the investigation with editors.

Mr. Hayman left the Metropolitan Police in December 2007 and was soon hired to write a column for The Times of London, a News International paper. He defended the inquiry that he led, writing in his column in July 2009 that his detectives had “left no stone unturned.”

Three months later, Mr. Wallis, the former deputy editor of The News of the World, was hired by Scotland Yard to provide strategic media advice on phone-hacking matters to the police commissioner, among others. Scotland Yard confirmed last week that the commissioner, Sir Paul, had personally approved nearly $40,000 in payments to Mr. Wallis for his work.

But when Mr. Wallis was interviewed in April by a New York Times reporter working on a story about the hacking, he did not disclose his new media role at Scotland Yard. In the interview, Mr. Wallis defended both the newspaper and the vigor of Scotland Yard’s initial investigation.

A person familiar with the hacking investigation said on Friday that Mr. Wallis had also informed Rebekah Brooks about The New York Times’s reporting. Ms. Brooks, who resigned on Friday as chief executive officer of News International, has maintained that she was unaware of the hacking.

A News International spokeswoman said the company was reviewing whether it had paid Mr. Wallis at the same time.

It is unclear whether Scotland Yard knew about Mr. Wallis’s activities. While The New York Times was working on its article last year, Scotland Yard was refusing to answer most of the detailed questions that The Times submitted to it in a freedom of information request.

It was not until Thursday night that Scotland Yard revealed that Mr. Wallis had worked for it for a year. That revelation came about 10 hours after he was arrested at his west London home in connection with the phone hacking.

“This is stunning,” a senior Scotland Yard official who retired within the past few years said when informed about Mr. Wallis’s secret dual role. “It appears to be collusion. It has left a terrible odor around the Yard.”

Sky News raised further questions about a possible link between Sir Paul and Mr. Wallis on Saturday night. Just after Christmas last year Sir Paul recovered from surgery at a Champneys Spa in Hertfordshire, and his $19,000 bill was paid by a friend, the spa’s managing partner, Sky News reported. Sir Paul learned Saturday that Mr. Wallis had worked as a public-relations consultant for the spa, a police spokesperson said, adding that “Commissioner Sir Paul Stephenson is not considering his position.” Mr. Stephenson had declared the stay on a gifts list, Sky reported.

A lawyer for Mr. Wallis said there was no connection between Sir Paul’s stay at the spa and Mr. Wallis. Mr. Wallis did not return calls seeking comment.

He had worked as second in command at the tabloid under Andy Coulson, who left the paper in 2007 after the private investigator and the reporter were found guilty of hacking into the phones of members of the royal family and their staff.

Shortly after, Mr. Coulson was hired by the Conservative Party to lead its communications team. Last year, when David Cameron became prime minister, he brought Mr. Coulson to 10 Downing Street. But Mr. Coulson could never escape the hacking controversy. Once Scotland Yard decided to reopen the case, he resigned and was arrested on July 8.

It was not until last autumn that the police were forced to confront their own mistakes. By then, they were facing an escalating stream of requests by people who suspected that their phones might have been hacked. Two dozen people had also brought civil cases against News International, and that compelled the police to release information from Mr. Mulcaire’s files.

The documents were seized on Aug. 8, 2006, from Mr. Mulcaire’s home in Cheam, south of London. Mr. Mulcaire, a 40-year-old former soccer player whose nickname was “the Trigger,” was nothing if not a meticulous note-keeper. On each page of the 11,000 documents, in the upper-left-hand corner, he wrote the name of the reporter or editor whom he was helping to hack phones.

Also seized from his home was “a target list” of the names of a total of eight members of the royal family and their staff, and 28 others, which Scotland Yard’s investigators used as their first road map of Mr. Mulcaire’s activities.

‘A Mutual Trust’

From the beginning, Scotland Yard investigators treated The News of the World with deference, searching a single desk in its newsroom and counting on the staff’s future cooperation. “A mutual trust” is how one police investigator described the relationship.

Leaders of the Metropolitan Police decided not to pursue a wide-ranging “cleanup of the British media,” as one senior investigator put it. Mr. Hayman, the investigator in charge, said in testimony before Parliament last Tuesday that the inquiry was viewed as “not a big deal” at the time.

The police charged only Mr. Mulcaire and the royal affairs reporter, Clive Goodman. When the case was done, the evidence went into plastic bags in a storage locker, several officials said. It was occasionally reviewed, but a complete accounting would not be done until late 2010.

On July 9, 2009, Mr. Yates, the assistant commissioner, said, “It is important to recognize that our inquires showed that in the vast majority of cases there was insufficient evidence to show that tapping had actually been achieved.”

And then last year, he told two parliamentary committees that a full accounting of all the evidence had been done.

Mr. Yates said investigators presumed that the material in the files was for legitimate purposes since it was the job of both Mr. Mulcaire and Mr. Goodman “to gather personal data about high-profile figures.”

Yet on numerous occasions Mr. Yates assured the public that all those affected had been notified.

He said the police had “taken all proper steps to ensure that where we have evidence that people have been the subject of any form of phone tapping, or that there is any suspicion that they might have been, that they have been informed.”

The parliamentary committees declined to pursue the matter.

In the fall of 2006, Sir Ian Blair, then the police commissioner, had the option of assigning the case to the Specialist Crime Directorate, the division that handles homicides, robberies and the like. It had 3,500 detectives at its disposal and could have reviewed every document, several former officials said.

The man leading the unit, Tarique Ghaffur, was known among his colleagues for refusing to toe the line. Mr. Ghaffur had led an internal inquiry into the police harassment of a prominent black activist and concluded that the man had been the victim of “unreasonable targeting by police officers.”

It was not until July 2009, three years after the evidence was seized, that Mr. Yates ordered some of the names in Mr. Mulcaire’s files to be put into a database, former officials said. But it fell far short of a complete accounting, they said.

In one instance, the police thwarted a deeper look at their handling of the evidence.

Last autumn, four people, including John Prescott, the former deputy prime minister, and Brian Paddick, a former senior police official, sought a judicial review to determine why Scotland Yard had not notified all the hacking victims.

In response, lawyers for the police claimed that none of the four plaintiffs’ phones had been accessed.

Last February, a judge ruled against going forward with an inquiry. Within days, several plaintiffs received word from the police that their phones might have been hacked.

“The court was misled,” said Tamsin Allen, who represents four people who claim their phones were hacked. “It was pretty outrageous.”

A judge recently decided to open a new review of why Scotland Yard did not notify everyone in Mr. Mulcaire’s files.

“I still don’t think we know the extent of what the police did and did not do because we are only about halfway down into the murky pond,” said Chris Bryant, a Labour member of Parliament who is one of the four plaintiffs who applied for the judicial review.

A Toxic Atmosphere

Current and former officials said that shortly after Scotland Yard began looking into the hacking, five senior police investigators discovered that their own phones might have been broken into by The News of the World.

At last week’s hearing in Parliament, Mr. Hayman, one of the five, denied knowing if his phone had been hacked.

So far, only 170 phone-hacking victims have been notified.

A second police operation is now trying to determine how many officers were paid for information from journalists working at The News of the World and elsewhere. One of the challenges, a senior officer said, was that the journalists’ records contained pseudonyms instead of the officers’ names. There is suspicion that some pseudonyms were made up by reporters to pocket cash from their editors, the officer said.

The atmosphere at Scotland Yard has become toxic. “Everyone is rowing for the shore,” said a former senior Scotland Yard official. “Everyone is distancing themselves from this mess.”

Sue Akers, a deputy assistant commissioner who is leading both police inquiries, said the department faced a deep challenge to repair its reputation.

“I think it is everybody’s analysis that confidence has been damaged,” Ms. Akers told Parliament last week. “But I am confident that we have got an excellent team who are working tirelessly to get this right.”

She added: “I hope that I do not have to come back here in five years’ time to explain why we failed.”

Jo Becker contributed reporting.

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Revealed: Senior MP's secret links to Murdoch

Culture chairman, who will this week quiz media moguls, is friends with Les Hinton and Elisabeth Murdoch

The Independent

By Jane Merrick, Brian Brady, James Hanning and Andy McCorkell

Sunday, 17 July 2011

The MP who will lead the attack on Rebekah Brooks and Rupert and James Murdoch this week over their roles in the phone-hacking scandal has close links with the media empire, it is revealed today.

John Whittingdale, the Conservative chairman of the Culture, Media and Sport committee, admitted he was an old friend of Mr Murdoch's close aide, Les Hinton, and had been for dinner with Ms Brooks.

The Independent on Sunday has also learnt that Mr Murdoch's daughter Elisabeth, seen as the future saviour of the company, has also met Mr Whittingdale a number of times. Among her 386 "friends" on Facebook, the only MP she lists is Mr Whittingdale. He is also the only MP among 93 Facebook "friends" of Mr Hinton.

It is also understood that the MP for Maldon was invited to Mr Hinton's wedding reception in 2009 but declined to accept in light of the committee's ongoing investigation into hacking.

Mr Hinton resigned as chief executive of Mr Murdoch's Dow Jones company on Friday.

While there is no suggestion of impropriety on the part of the Tory MP – an aide to Margaret Thatcher when she was Prime Minister – the disclosure will fuel the sense that all the key players in the scandal are inextricably linked as members of the Establishment.

It follows revelations that senior police officers, including Metropolitan Police Commissioner, Sir Paul Stephenson, had dinner with senior executives from News International.

"These are people who I've met," Mr Whittingdale said last night. "I've only met Elisabeth Murdoch a couple of times. Les, I've known for about 10 years, and I've been for dinner once or twice with Rebekah. I wouldn't say they are close friends but you can't do the job I've done for six years without having them as acquaintances. It doesn't suggest close intimacy."

It is understood that the committee came under pressure from Conservative Central Office before last year's election over its investigation of the phone-hacking scandal, suggesting that the MPs soft-pedalled on the issue. But a committee source insisted that Mr Whittingdale had been "completely decent and honest" in his approach to their investigation.

The source suggested that Mr Whittingdale would give the Murdochs and Ms Brooks a hard time on Tuesday, adding: "He is not a pugnacious person but has been very frustrated at the way the committee has been treated by News International."

Mr Whittingdale in 2007 secured £3,000 for his local cricket club after approaching Sky – part-owned by Mr Murdoch – for help with funds to provide nets and equipment for coaching local youngsters. The MP, who is a vice-president of Maldon Cricket Club, said Sky supported several sporting groups around the country.

The hearing on Tuesday has been described as the most important select committee session in the history of Parliament.

Committee sources are furious at the suggestion that Ms Brooks will try to close down questioning of her knowledge of hacking while she was News of the World editor by saying she cannot prejudice an ongoing police investigation.

A source said: "If she tries to close down the questioning, the whole world will be watching."

It is understood that the committee has legal advice that as Ms Brooks, and the Murdochs, have not been arrested by officers investigating hacking, they must reveal, under oath, what they knew.

Difficulties emerged in Downing Street's attempt to be open about David Cameron's social and business meetings when inconsistencies came to light in his office's list, published on Friday, of his meetings with senior News International journalists.

The list omitted, for example, Ms Brooks's attendance at Mr Cameron's birthday party in October. "That is a total oversight," said a No 10 source. "It is not a cover up. A very good point. These things get forgotten in the fog of war. When the list is published officially we will include it."

Mr Cameron and Ms Brooks, whose Oxfordshire houses are three miles apart, also had a pre-arranged meeting at a point to point, at Heythrop, on 23 January this year, which was not included in the list.

Two former senior News of the World editors wanted for questioning by police

Detectives investigating phone-hacking allegations at the News of the World are keen to question two former senior journalists at the newspaper. Scotland Yard officers have been told the two, former executive editor Alex Marunchak and deputy news editor Greg Miskiw, were both key figures linked to the use of private investigators to access confidential information.

Rebekah Brooks appointed Mr Miskiw as the News of the World's assistant editor in charge of news, and it was he who employed Glenn Mulcaire, the private investigator at the heart of the phone-hacking scandal.

Last month Mr Miskiw's former girlfriend Terenia Taras was arrested and questioned for several hours by Metropolitan Police officers in West Yorkshire. She has been bailed to return to a police station in the autumn.

After examining documents taken from Mulcaire's home, police are anxious to question Mr Miskiw, who is living in Florida. His also featured in documents obtained by police following a raid on the Hampshire home of private detective Steve Whittamore, who was used by a large number of journalists to obtain information about public figures. Whittamore was later convicted under the Data Protection Act in 2005 at Blackfriars Crown Court of obtaining and disclosing information after passing information obtained from the police national database to customers.

Whittamore's network was investigated and broken up by the Information Commissioner, who discovered he was accessing sensitive information from the Police National Computer, the Driver and Vehicle Licensing Authority, British Telecom and a number of mobile phone companies. The investigation, called Operation Motorman, showed 23 journalists from the News of the World hired Whittamore more than 200 times. The names include Rebekah Brooks, who allegedly commissioned access to confidential data from a mobile phone company.

Mr Miskiw is known to be a close friend of Mr Marunchak, a former crime reporter and senior executive at the NOTW. The two reportedly had mutual business arrangements including the importation of vodka from Ukraine. Mr Marunchak, who left the newspaper in 2006, claims to have been appointed as a special adviser to Ukraine's UK embassy in 1999.

Mr Marunchak is said to be a friend of a private investigator called Jonathan Rees who was employed by the NOTW to help provide reporters with illegally obtained confidential information. Rees was later jailed for falsely planting cocaine in an innocent woman's car but was re-employed by the NOTW's editor Andy Coulson after he served his sentence.

Detectives also suspected Rees of bribing corrupt officers to supply information to the media. A surveillance operation was carried out on Rees including a bug being placed in his office. It was later revealed that among the hours of taped conversations were many between Mr Marunchak and Rees discussing transactions involving thousands of pounds for work carried out for the newspaper.

Police later discovered that NOTW reporters were carrying out surveillance on the senior officer investigating a murder. Concerned that this might be an effort to pervert the course of justice, senior officers confronted Rebekah Brooks at Scotland Yard about Mr Marunchak's relationship with Rees. It is understood that Ms Brooks defended Mr Marunchak strongly and later said the surveillance was carried out because the officer was suspected of having an affair.

Jonathan Owen

What the papers say

Rebekah Brooks intervened to persuade David Cameron to make the ex-News of the World editor, Andy Coulson, his spin-doctor, a report in the Mail on Sunday claimed last night.

The disgraced former News International boss allegedly urged the Prime Minister to scrap plans to give the job to a senior BBC journalist. Mr Cameron was told it should go to someone who was "acceptable" to News International.

The allegation increases pressure on Mr Cameron over his close links to Brooks and the Murdoch empire.

Ed Miliband attempted to drive home his advantage in the war of words over the hacking scandal, telling The Observer that Rupert Murdoch's UK media empire must be broken up. The Labour leader called for a cross-party agreement on new media ownership laws that would cut Murdoch's current market share, arguing that he has "too much power over British public life".

In an exclusive interview, Miliband says NI's decision to abandon its BSkyB bid, the resignation of Brooks and the closure of the NOTW weren't enough to restore trust.

The Sunday Telegraph claimed NI executives including Rupert Murdoch's son James were being investigated over a cover-up of "industrial scale" hacking.

The Metropolitan Police reportedly want to know why a series of emails dating back to 2006 were only made available to detectives in January, prompting the current inquiry that has caused chaos at the highest levels of the company.

"News International appears to have covered up this scandal," a senior Scotland Yard officer reportedly told the paper. "That is potentially a conspiracy to pervert the course of justice."

NI has placed a second apologetic ad in today's newspapers, including The IoS. This also lays out plans to make up for the damage caused by the NOTW's behaviour. It promises action to prevent a repeat of the problems, a compensation scheme and a new independent Manage-ment & Standards Committee.

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Has the old boy finally lost the plot?

At last, he says sorry, and loses his key lieutenants. But is it all too late for an ageing Rupert Murdoch

The Independent

By Margareta Pagano

Sunday, 17 July 2011

It was the oddest of comments. In his first significant remarks since the News of the World scandal broke, Rupert Murdoch had this to say: "The damage to the company is nothing that will not be recovered. We have a reputation of great good works in this country. I think he [James] acted as fast as he could, the moment he could. When I hear something going wrong, I insist on it being put right." He added that News Corporation, the giant US media group which owns News International in the UK, had handled the crisis "extremely well in every possible way", making only "minor mistakes".

Then, when asked by the interviewer on his own newspaper The Wall Street Journal, whether he had been upset by all the negative publicity, Murdoch replied: "Just getting annoyed. I'll get over it. I'm tired."

Tired? How could the greatest media tycoon of all time, the Australian newspaper man who came to Britain in the 1960s to buy the News of the World, going on to snap up some of the country's most treasured newspapers, and build a $40bn (£25bn) TV and cable network in the United States, give in to such a prosaic condition at such a crucial time? Or is it true, as the Telegraph's former owner Lord Black said last week, that while Murdoch is quite an agreeable chap, he has no loyalty to anyone, has betrayed all his friends and political leaders and cares only about his company? It certainly seemed so as the 80-year-old then made no attempt to apologise for hacking the phones of vulnerable families, making payments to police officers or closing the UK's biggest selling newspaper. If it was an attempt to fight back, it was pathetic. One thing is sure he didn't have any spin-doctors telling him what to say then.

His remarks compounded the questions being asked about Murdoch's usually sharp mental faculties, whether the man who up until last week was considered one of the most powerful on earth is finally showing his age, and losing his grip. As Michael Wolff, biographer of the Murdochs who spent hours interviewing him, commented: "These guys are on the run. Now the real issue is how to avoid further humiliation."

Not easy. Being photographed out with his personal trainer, with his jowly jaws, and spindly knees sticking out of his running shorts, the mighty mogul had very clearly aged. Then, those pictures of him alongside someone who could have been a matronly nurse in mufti in his silver-grey Range Rover showed him looking not just old but fragile, too. You could almost see the power seeping from him.

Questions have been asked ever since Rupert flew in from the US last Sunday, ostensibly to take charge of the crisis. When reporters wanted to know what his priority was to be in fixing the scandal and handling the BSkyB bid, he put his arm around his right-hand woman, Rebekah Brooks, still chief executive of News International; saying "this one". It brought gasps from even the most cynical.

Well, "this one" was finally sacrificed on Friday after two weeks of intense pressure from politicians, an outraged public, the parents of Milly Dowler, the murdered schoolgirl whose phone had been hacked, and the press. It's hard to know whether it was Rupert Murdoch's daughter Elisabeth who drove the stake through Brooks after allegedly telling friends that Rebekah had "xxxxed the company"; or perhaps it was the late-night intervention of Saudi Prince Al-Waleed bin Talal, who said on Newsnight that Mrs Brooks would have to go if "her connection [to phone hacking] is explicit" but repeated his backing for James.

But it's clear that the support of Bin Talal, the second biggest single investor in News Corp with 7 per cent of the shares, is critical to the Murdochs' control and stewardship of the company; the Murdoch family itself owns about 40 per cent of the voting shares through various trusts.

Bin Talal will have been watching News Corp's share price, which has plunged more than $3 to $15 a share, wiping billions off the value of the company, now worth around $42bn. The selling has been triggered by big US investors who fear that the Murdochs will be investigated in the US, that they face lawsuits running into hundreds of millions of dollars and that they may even be forced to give up running the company. Already, the FBI and the Department of Justice have said allegations that US citizens involved in 9/11 were the victims of phone hacking will be investigated, while News Corp is also facing inquiries by America's corporate watchdog, the Securities and Exchange Commission, over potential violations of a law that forbids US companies from bribing foreign officials the Foreign Corrupt Practices Act.

It was only a few weeks ago that Rupert, his son James, daughter Elisabeth and Rebekah Brooks were the talk of the town; hailed as the king-makers to the political classes. At the Murdochs' summer party, there was the usual mish-mash of politicos from David and Samantha Cameron to Ed Balls and Yvette Cooper, alongside celebrities such as Mariella Frostrup, all paying homage at Kensington's elegant restaurant, the Orangery. The talk was merry, both Rupert and James confident that their longed-for £7bn bid for a full takeover of BSkyB was about to be cleared by the Culture Secretary, Jeremy Hunt. This was to be the jewel in the News Corp crown generating about £1bn a year in revenue. The Murdochs had hoped to use the TV station and broadcaster to cross-subsidise the loss-making part of the empire, the newspapers only The Sun and the News of the World made money. Now the value of BSkyB has collapsed as hedge fund investors, who were hopeful of a takeover, have sold out. The position of James as chairman is under pressure from investors who question his handling of the phone-hacking allegations. As one said: "It seems to be that James, like his father, is a cynic but a cynic without his father's charm."

It's not the first time investors have queried Murdoch's commercial strategy over the past few years: investments in ITV, the pricey $580m purchase of Myspace, which he later sold for $35m, a fortune for the Dow Jones group and for Shine, the TV production company owned by Elisabeth Murdoch, have all been fiercely criticised. Shareholders have claimed that Murdoch either over-paid out of vanity, or misjudged the value of the assets he was buying. Either way, it's led to many disgruntled investors in the US arguing that Murdoch was becoming too much of a risk factor; this is one of the reasons the News Corp shares are depressed relative to its media peers. It was concerns that Rupert Murdoch had paid £415m for his daughter's company, Shine, that prompted the Amalgamated Bank to lodge a court action against News Corp in Delaware where the company is registered alleging it paid too much for her production house and trying to block her appointment to the News Corp board. Independent analysts disagreed, claiming Murdoch paid the going rate and that Elisabeth's business was sound.

That's perhaps academic now as Amalgamated, along with the Central Laborers' Pension Fund and the New Orleans Employees Retirement Scheme, has triggered fresh legal action against Rupert and James Murdoch in the phone-hacking case, alleging the two men have a fiduciary duty to shareholders and should take responsibility for what happened.

While Rupert Murdoch may appear to have lost some of his grip, there are signs that his supporters are fighting back, and many of them are emerging on the airwaves to defend him. After two weeks of being behind the curve, the Murdochs have appointed the high-profile PR firm Edelman, which, with offices in London and New York, will be working flat out to restore reputations. It didn't take Edelman long: within hours of Murdoch's bizarre ramblings appearing in the WSJ on Friday came his mea culpa in the afternoon, followed by the full-page ads in most of Britain's newspapers on Saturday. He apologised profusely for all that had happened at the News of the World, personally apologised to the Dowler parents, and, according to reports, with head in hands told them that the standards that had been followed at his newspapers would not have pleased his mother, who is still alive, or his newspaperman father. It was a strangely revealing remark, showing how deep the ties of this family run.

As one insider said: "Don't underestimate this family; it's as close as any Mafia family and will battle to the end. Watch out for Elisabeth she has come through this clean and could even emerge in a more powerful position. Rupert certainly rates her the highest of all." But in the meantime the one to watch is Chase Carey, the man with the walrus moustache and an unsentimental attitude to newspapers, who is president and chief operating officer of News Corp. He's in London helping to sort out the mess and is said to have persuaded Murdoch to drop the BSkyB bid.

Carey, an American who rose through the movie channel and satellite business, is being tipped as the new broom, and is perfect to succeed Murdoch as chief executive, leaving him to be chairman, thus taking the damaged James out of the succession. It's certainly what the US investors would like to happen, arguing that Carey has proved he can make money and doesn't run the business as a personal candy jar. But, more importantly, Rupert actually listens to his chief operating officer, who acts as a brake on his more extreme actions.

It's for the historians to judge just how pervasive the influence of Rupert Murdoch's reign has been on the British body politic. For now, the judgement of the amateur historian Lord Black seems rather apt. As the former media mogul also said, quoting Clarendon on Cromwell, Murdoch is a "great bad man. It is as wrong to dispute his greatness as his badness."

Five uses for an ex-CEO

1. Southern Cross, leaders in elderly care, hire Rebekah to spearhead their new initiative to improve quality of life for their male residents. A spokesman said: "She has a proven track record at boosting the self-esteem of old men. Rebekah will lead a team that will accompany the old guys everywhere, agreeing with everything they say."

2. Fox TV introduces Rebekah as a new character in The Simpsons. A spokesman for the Murdoch-owned channel said: "This is a natural move, given her hairstyle. She will play Marje's long-lost sister."

3. She joins the Top Gear team as their first female presenter. A BBC spokesperson said: "In a way, this is a job Rebekah has been preparing for charging arrogantly around the place, doing irresponsible and indefensible things." He added that the producers will ask James May to dye his hair blonde so there is no confusion between him and Rebekah.

4. The Mail on Sunday unveils Rebekah as its new female columnist with the blurb: "Are you missing what she's missing? She forgets! She's on holiday when important things happen! She's the columnist all Britain is talking about!"

5. Trustee on E block at Holloway women's prison.

Edited by Douglas Caddy
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People who are following this case are very excited about the televised grilling from a parliamentary select committee on Tuesday. Rupert Murdoch is a very poor performer in these kind of situations. He is being briefed this weekend by lawyers and a public relations expert who helped salvage the reputation of American chat show host David Letterman when he was blackmailed over a series of affairs with work colleagues. The media mogul has drafted in Steven Rubenstein to offer advice on how best to present himself during the hearing on Tuesday. Murdoch is also being briefed by Dan Tench, one of the UK's leading media lawyers. Next week's parliamentary hearing, taking place in the Boothroyd room, is set to be a moment of high drama watched by millions.

The group of journalists who have been working on the case have suggested the following questions for Rebekah Brooks, James and Rupert Murdoch

Questions for Rebekah Brooks

1) As editor of the Sun and NoW, did you honestly not know about phone hacking, when so many of your reporters and executives say it was openly discussed in the newsroom?

2) If not, who was checking the source or veracity of the material on which Sun and NoW stories were based? Was it the legal department? If not, why not?

3) Did you ever see any transcripts of voicemail messages?

4) In November 2002 you were personally confronted by senior Scotland Yard officers with evidence that a Metropolitan Police detective was being targeted by your newspaper acting on behalf of murder suspects. What action did you take as a result of that meeting?

5) After this meeting, you knew that private investigators with criminal backgrounds were employed by your newspaper. What did you do to or stop, or at least monitor, this?

6) In 2003, you admitted paying police officers but were interrupted in your explanation by your deputy, Andy Coulson. Would you now like to explain how many police officers your newspapers paid, when you paid them, and why?

7) On 10 July, you wrote to John Whittingdale saying that the Guardian had "deliberately misled the British public" in its report saying that News International had paid Gordon Taylor and others £1m in damages and costs over phone hacking. Why did you say that and would you like to withdraw it?

8) Why, as the CEO of a major British company, did you refuse to come and give evidence to a committee of the House of Commons? Did that not show contempt for parliamentary democracy?

9) How often did you meet (formally and socially) David Cameron in the year before he became prime minister?

10) How often have you met him (formally and socially) since?

11) Did you ever at any stage privately brief David Cameron and/or Andy Coulson on material NI reporters were gathering?

12) If so, was any of this information from illegally obtained material?

13) How often have you met (formally or informally) Dick Fedorcio, the head of press at Scotland Yard? Is it correct that you have had dinners with him?

14) How was it possible for the NoW to be employing private investigators without your knowledge? Did you not have control or sight of your own editorial budget?

15) Have you seen any evidence that Sara Payne's voicemail messages were hacked by the NoW or Sun? Did you persuade Sara Payne not to complain about this?

16) Can you give your account of the conversations that preceded your decision to publish the fact that Gordon and Sarah Brown's son, Fraser, was suffering from cystic fibrosis?

Was the source a health worker or the relative of a health worker? Was the source paid for the story?

17) Did the former prime minister, then chancellor of the exchequer, welcome having his son's medical condition revealed in your newspaper?

18) Why was it necessary to close down a profitable newspaper?

19) What did you mean when you told staff that there were worse revelations to come? What are these revelations?

20) Are you remaining on the NI payroll and continuing as an employee of the company?

Questions for James Murdoch

1) Why did you pay £1m in damages and costs to Gordon Taylor and others in 2009 and seal the evidence? Would you agree that this could be described as "hush money"?

2) On whose advice did you make this decision?

3) Why did you agree the payoff to Max Clifford? Is it right that the value of this was £1m? Is it fair to describe this as "hush money"?

4) Why didn't you make a clean breast of what was discovered in the spring of 2009 instead of covering it up?

5) You have said this decision was based on "incomplete information". What further information would have made these payments right?

6) Was evidence of criminality concealed at any time from:

The News Corp board?

The NI board?

Parliament?

Police?

The PCC?

7) Are you aware of section 79 of RIPA which can be used to prosecute any director showing "consent, connivance or neglect" of offences relating to interception of communications?

8) The Guardian story of 9 July 2009 showed that the "one rotten apple" story NI had stuck to for three years was untrue – and known by then within NI to be untrue. Why did you issue a statement denying it?

9) Did you read the full email evidence upon which the May 2007 report from Harbottle & Lewis was based? Those emails, according to the advice of a former DPP, Ken MacDonald, are believed to contain evidence of possible illegal activity by staff.

10) Why, in 2007, didn't you take the action that Will Lewis is said to have taken in 2011 in relation to the evidence upon which the Harbottle & Lewis report was based?

11) Why did it take at least four years for the significance of these emails to become evident – and why did the company sit on the evidence before handing it over to the police?

12) The Metropolitan Police's former head of counter terrorism, Peter Clarke, has said of NI's behaviour: "This is a major global organisation with access to the best legal advice deliberately trying to thwart a criminal investigation. [it offered] prevarication and what we now know to be lies." Is that a fair description of how your company behaved towards the police? Until 2011?

13) If it was right for Andy Coulson, Les Hinton and Rebekah Brooks to resign, even though they denied knowledge of what happened on their watch, why is the same not true for you?

Questions for Rupert Murdoch

1) When did you become aware of the 2009 payments authorised by your son James to buy the silence of people whose voicemails had been hacked by NI employees?

2) It is understood the value of these payments was in the region of £2m. Which News Corp executives or board members knew about them?

3) Were News Corp's audit committee, board or general counsel made aware of these payments? If not, why not? Should they have been?

4) When previously unknown evidence of criminality within your company becomes known to senior executives isn't it their responsibility to inform the police and regulators rather than try to cover it up?

5) What do you now think of your son's decision to try to conceal this evidence of criminality with secret payments rather than inform the appropriate law and regulatory authorities?

6) The Guardian's story of 9 July 2009 exposed these payments and the fact that the "lone rotten apple" theory within your company was wrong. What action did you and/or the News Corp board take as a result of this story?

7) Once it became publicly known in July 2009 that more than one reporter had been involved in illegal practices did it not concern anyone within News Corp that they had been misled?

8) Did the News Corp general counsel not read the email evidence upon which the 2007 Harbottle & Lewis report commissioned by NI was based? If he did, why did he miss the material which led to the emails being handed over to the police four years later?

9) Do you agree with the evidence of the senior police officer who told MPs last week that your company had "deliberately tried to thwart" a criminal investigation… "with prevarication and ... lies"?

10) How could a company which obstructs the police and misleads Parliament and regulators be considered a fit and proper company to run a media organisation?

11) Do you agree that the actions of your company between the beginning of 2009 and the end of 2010 could be termed a cover-up?

12) You apologised in every newspaper at the weekend. But in your own Wall Street Journal last week you said you and your fellow executives had handled the crisis "very well… with just a few minor mistakes". Is that still your view? What were those mistakes?

13) Does News Corp ever use security/corporate intelligence companies in its business dealings?

14) Have you ever personally seen or been aware of material derived from the accessing of intercepted communications?

15) In your negotiations with the Wall Street Journal shareholders did you have any access or intelligence supplied by external security companies?

16) If it was right for Andy Coulson, Les Hinton and Rebekah Brooks to resign, even though they denied knowledge of what happened on their watch, why is the same not true for you?

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Has anything like this happened before at any time? If so, what did you learn?

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Rebekah Brooks arrested over phone-hacking allegations

Spokesman for Rebekah Brooks says she did not know she was going to be arrested when she handed in her resignation

By Vikram Dodd and Juliette Garside

guardian.co.uk,

Sunday 17 July 2011 16.20 BST

Rebekah Brooks has been arrested by police investigating allegations of phone hacking by the News of the World and allegations that police officers were bribed to leak sensitive information.

The Metropolitan police said a 43-year-old woman was arrested at noon on Sunday, by appointment at a London police station.

Brooks, 43, resigned on Friday as News International's chief executive. She is a former News of the World editor and was close to Rupert Murdoch and the prime minister, David Cameron.

A spokesman for Brooks said she did not know she was going to be arrested when she handed in her resignation.

Brooks was taken into custody at midday on Sunday, after agreeing to attend a London police station for questioning. Her spokesman, Bell Pottinger chairman David Wilson, said she did not know she was to meet with police until late on Friday, and that she did not know the appointment would result in her arrest.

The News International chief executive announced her immediate departure from the company on Friday morning. She had agreed to give evidence this coming Tuesday to the culture select committee's inquiry into allegations of phone-hacking at the News of the World.

Her lawyers are currently in discussion with the committee about whether she should attend. Wilson said: "It's left Rebekah in a very difficult position and has left the committee in a very difficult position".

An arrest by appointment on a Sunday by police is unusual.

In a statement the Met said: "The MPS [Metropolitan police service] has this afternoon, Sunday 17 July, arrested a female in connection with allegations of corruption and phone hacking.

"At approximately 12.00 a 43-year-old woman was arrested by appointment at a London police station by officers from Operation Weeting [phone hacking investigation] together with officers from Operation Elveden [bribing of police officers investigation]. She is currently in custody.

"She was arrested on suspicion of conspiring to intercept communications, contrary to Section1(1) Criminal Law Act 1977 and on suspicion of corruption allegations contrary to Section 1 of the Prevention of Corruption Act 1906.

"The Operation Weeting team is conducting the new investigation into phone hacking.

"Operation Elveden is the investigation into allegations of inappropriate payments to police. This investigation is being supervised by the Independent Police Complaints Commission.

"It would be inappropriate to discuss any further details regarding these cases at this time."

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British Police Arrest Rebekah Brooks in Phone Hacking

The New York Times

By ALAN COWELL and RAVI SOMAIYA

July 17, 2011

LONDON — The British police on Sunday arrested Rebekah Brooks, the former head of Rupert Murdoch’s media operations in Britain, according to a former associate at News International, the newspaper group at the heart of a phone-hacking scandal convulsing the Murdoch empire, the British political elite and the police.

The development was the latest twist in a series of events that has transformed Mr. Murdoch from a virtually untouchable force in the British media landscape to a mogul fighting for the survival of his power and influence.

Earlier on Sunday, the Labour opposition leader, Ed Miliband, who has taken a lead in assailing Mr. Murdoch’s operations, called for the breakup of News International, the British subsidiary of Mr. Murdoch’s News Corporation. Mr. Miliband called the newspaper group’s influence “dangerous.”

A police statement did not identify Ms. Brooks by name but said a 43-year-old woman had been detained for questioning by officers investigating both the phone-hacking scandal and payments made to corrupt police officers. A News International official, speaking on the condition of anonymity, confirmed that the woman detained was Ms. Brooks.

The British Press Association news agency said Ms. Brooks was arrested by appointment at a London police station around midday and remained in custody.

The move came two days after Ms. Brooks quit as chief executive at News International, the latest maneuver as the Murdoch family struggled to contain the fallout.

It also came two days before Ms. Brooks was to join Rupert Murdoch and his son James to testify before an investigative parliamentary panel. The body is focusing on the phone-hacking scandal that has erupted in the two weeks since reports emerged that The News of the World, once the top-selling Sunday tabloid and a central part of the Murdoch outpost in Britain, ordered the hacking of the phone of a 13-year-old girl, Milly Dowler, who was abducted and murdered. The case provoked huge public outrage and sympathy.

It was not immediately clear whether the arrest would inhibit Ms. Brooks’ ability to testify to the parliamentary panel because of British laws that protect police inquiries. But it did seem to bring police scrutiny ever closer to the family that controls News International.

“The water is now lapping around the ankles of the Murdoch family,” said Chris Bryant, a Labour parliamentarian who has taken legal action against The News of the World because he suspects his phone was hacked. Ms. Brooks was editor of The News of the World at the time of Milly Dowler’s abduction but has denied knowledge of the phone hacking. In response to the crisis, the Murdoch family closed The News of the World and withdrew a $12 billion bid to assume control of Britain’s biggest satellite broadcaster, British Sky Broadcasting.

Mr. Murdoch and his family still own the top-selling daily tabloid, The Sun, as well as The Times of London and The Sunday Times of London. He also has a 39 percent stake in British Sky Broadcasting.

Referring to Mr. Murdoch, Mr. Miliband, the opposition leader, told The Observer newspaper on Sunday that the “amount of power in one person’s hands has clearly led to abuses of power in his organization.” He called the concentration of media ownership in Mr. Murdoch’s hands “unhealthy.”

Since the scandal erupted, the British police force — itself under fire for its close relationship with News International — has arrested five former editors from News International, including Ms. Brooks, whose highflying career included spells as editor of The Sun and The News of the World.

She was 31- years-old when she became editor of The News of the World and in 2003, she became the first woman to edit The Sun, a tabloid that claimed its influence was so great that it could sway the outcome of national elections. Indeed, both Tony Blair in 1997 and the Conservative Party leader David Cameron in 2010 were backed by The Sun when they came to power.

Her arrest followed the earlier detention of Andy Coulson, another former editor of The News of the World who later became Mr. Cameron’s director of communications — a job he quit in January as the hacking scandal grew more serious.

Both Ms. Brooks and Mr. Coulson enjoyed friendly relations with Mr. Cameron, prompting the opposition Labour Party to question his judgment. Ms. Brooks was also reported to be close to Mr. Blair during his time in office from 1997 to 2007.

Ms. Brooks was the most senior of former Murdoch employees to be arrested. She had been depicted as particularly close to Rupert Murdoch, who once described her as “a great campaigning editor who has worked her way up through the company with an energy and enthusiasm that reflects true passion for newspapers and an understanding of the crucial contribution that independence journalism makes to society.”

At a public hearing in 2003, however, Ms. Brooks seemed to admit to lawmakers that journalists on her staffs had paid the police for information. That statement — which she later sought to retract — seems likely to offer the police a potentially rich seam of questioning.

Police officers themselves are under scrutiny, the most senior of them Sir Paul Stephenson, the head of Scotland Yard, as London’s Metropolitan Police is known. News reports have accused him of hiring a former News of the World executive, Neil Wallis, as a public relations adviser. Mr. Wallis was himself arrested for questioning last week.

Mr. Wallis also worked for a spa where Mr. Stephenson was treated for five weeks while recovering from a fractured leg earlier this year, the Press Association said. But Scotland Yard said Mr. Stephenson did not know that Mr. Wallis worked there. Indeed, Scotland Yard said, Mr. Stephenson’s stay at the spa, a £12,000 expense (about $17,000) that was extended to him as a gift, was arranged by a friend, who was the managing director of the establishment.

Scotland Yard said the police paid for Mr. Stephenson’s “intensive physiotherapy” to hasten his return to work.

Referring to the arrest of Ms. Brooks, Chris Bryant, the Labour legislator, said in a telephone interview, “It looks as though the Metropolitan Police are now doing the investigation they should have been doing years ago.”

“Being of a suspicious mind,” Mr. Bryant added, “I do find it odd that they should arrest her now by appointment,” he said, suggesting that the timing might jeopardize parliamentary questioning scheduled for Tuesday.

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How Sir Paul Stephenson's £12,000 spa break triggered downfall

Former Metropolitan police chief says he had no reason to suspect adviser of involvement in phone hacking

By Vikram Dodd, crime correspondent

guardian.co.uk,

Sunday 17 July 2011 23.19 BST

Sir Paul Stephenson was brought in as a safe pair of hands in December 2009 with the remit of placing the Metropolitan police back on a stable footing following the turbulent reign of Sir Ian Blair.

However, the confidence of senior politicians began to drain away in recent days after the phone-hacking crisis enveloped both News International and the Met.

Just hours before Stephenson's resignation, Nick Clegg, the deputy prime minister, told the BBC that a growing public perception of police corruption was deeply concerning.

"I think when the public starts losing faith in the police, it's altogether much more serious and you know you really are in some trouble."

Announcing his resignation, Stephenson admitted he was doing so because of the speculation relating to the Met's links with News International, but also "in particular in relation to Mr Neil Wallis", the former News International executive who was arrested last Thursday, and who it then emerged had worked for the Met.

The Guardian was also preparing to publish a story about how Scotland Yard chiefs invited Wallis to apply for a senior communications post with the force, a decision which Stephenson was aware of.

Stephenson dated his relationship to Wallis back to 2006, a meeting that took place in the context of the latter's work as a journalist.

From October 2009 to September 2010, Wallis's part-time work at the Met involved strategic communications, advising the commissioner and the assistant commissioner, John Yates, as the force said there was no need to reopen the criminal investigation into phone hacking at the News of the World.

The Guardian understands Wallis was approached to apply for the two-day-a-month contract with the Met after discussions which involved the most senior figures in the force. He was the lowest bidder after a tender process and was paid more than £1,000 a day, earning £24,000.

Stephenson said that he had no role in the management of Wallis's contract.

His relationship with Wallis had always been "one maintained for professional purposes and an acquaintance".

He went on: "I have heard suggestions that we must have suspected the alleged involvement of Mr Wallis in phone hacking. Let me say unequivocally that I did not and had no reason to have done so.

"I do not occupy a position in the world of journalism. I had no knowledge of the extent of this disgraceful practice and the repugnant nature of the selection of victims that is now emerging, nor of its apparent reach into senior levels."

Stephenson insisted the contract only became of relevance when Wallis's name became linked with the new investigation into phone hacking, although he admitted that "the interests of transparency might have made earlier disclosure of this information desirable".

But it was with a flash of anger that he addressed the question of his acceptance of around £12,000-worth of hospitality at a health spa for which Wallis worked as a PR consultant. Yesterday's Sunday Times had revealed Stephenson stayed at Champneys in Tring, Hertfordshire, as he recovered from a serious illness.

"There has been no impropriety and I am extremely happy with what I did and the reasons for it – to do everything possible to return to running the Met full time, significantly ahead of medical, family and friends' advice," he said. "The attempt to represent this in a negative way is both cynical and disappointing."

Wallis had served as deputy to the then NoW editor Andy Coulson during a period when it is alleged there was wide-scale phone hacking at the paper and among private investigators it employed.

Police sources said that the decision to employ Wallis is regretted now, but they insist he had nothing to do with the Met's handling of the phone-hacking controversy. Their account of the appointment is that in 2009, the Met's deputy PR chief was diagnosed with a serious illness, and there was a need for someone to be brought in temporarily. A number of PR firms were "sounded out" about the role, including Wallis's company, Chamy media. A source with knowledge of the Yard's thinking at the time said part of Wallis's attraction was his connection to Coulson, who was a top aide to David Cameron, then in opposition and expected to become prime minister.

Part of the Met's thinking was that Wallis's past connections would help the force's relationship with Cameron: "One [Wallis] is a lot cheaper and gives you direct access into No 10," the source added.

The contract was terminated in September 2010 after new allegations in the media about the extent of hacking at NoW.

It also emerged that Charlie Brooks, the husband of the former News International chief executive Rebekah Brooks, claims to run an alternative treatment therapy centre at Champneys.

Stephenson is a career policeman who was brought up in the Lancashire town of Bacup. He had once wanted to become a shoe salesman, but joined Lancashire constabulary in 1975, following in the footsteps of his elder brother.

His first real test after taking the Met hotseat came within months. The Met was criticised for its handling of the G20 summit protests in London, when thousands of demonstrators clashed with officers.

The most vociferous criticism came after a 47-year-old newspaper seller, Ian Tomlinson, collapsed and died on the fringes of the demonstrations after a confrontation with police officers.

There were also reports that Stephenson, who received a knighthood in the Queen's birthday honours list last June, offered to stand down after a Rolls-Royce carrying the Prince of Wales and Camilla was mobbed during the riots

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Scotland Yard Leader Quits Over Tabloid Scandal

The New York Times

By SARAH LYALL and DON VAN NATTA Jr.

July 17, 2011

LONDON — Britain’s top police official resigned on Sunday, the latest casualty of the phone-hacking scandal engulfing British public life, just hours after Rebekah Brooks, the former chief executive of Rupert Murdoch’s News International, was arrested on suspicion of illegally intercepting phone calls and bribing the police.

The official, Sir Paul Stephenson, commissioner of the Metropolitan Police Service, commonly known as the Met or Scotland Yard, said that he had decided to step down because “the ongoing speculation and accusations relating to the Met’s links with News International at a senior level” had made it difficult for him to do his job.

But he said that he had done nothing wrong and that he would not “lose sleep over my personal integrity.” He also said that because he had not been involved in the original phone-hacking investigation, he had had no idea that Neil Wallis, a former News of the World deputy editor who had become a public-relations consultant for the police after leaving the paper, was himself suspected of phone hacking.

Mr. Wallis, 60, was arrested last Thursday.

The commissioner’s resignation came as the London political establishment was still digesting the stunning news about the arrest of Ms. Brooks — who apparently was surprised herself. A consummate networker who has always been assiduously courted by politicians and whose friends include Prime Minister David Cameron, Ms. Brooks, 43, is the 10th and by far the most powerful person to be arrested so far in the phone-hacking scandal.

Her arrest is bound to be particularly wounding to Mr. Murdoch, who, asked early last week to identify his chief priority in the affair, pointed to Ms. Brooks and said, “This one.”

Ms. Brooks has not yet been formally charged, but it is significant that she is being questioned in connection with two separate investigations. One, called Operation Weeting, is examining allegations of widespread phone hacking at the News of the World, the tabloid at the center of the scandal, where Ms. Brooks was editor from 2000 to 2003. The other is Operation Elveden, which is looking into more serious charges that News International editors paid police officers for information.

Ms. Brooks has always maintained that she was unaware of wrongdoing at The News of the World, which was summarily closed by Mr. Murdoch a week ago in an unsuccessful damage-control exercise. But the tide rose against her, and on Friday she resigned, saying in a written statement that her presence was “detracting attention” from the company.

The arrest was a shock to the News Corporation, the parent company of News International, and the other properties in Mr. Murdoch’s media empire, which is reeling from the traumas of last week: the forced withdrawal of its cherished $12 billion takeover bid for British Sky Broadcasting and the resignations not only of Ms. Brooks but also of Les Hinton, a longtime Murdoch ally and friend who was the chairman of Dow Jones and the publisher of The Wall Street Journal.

Speaking of Ms. Brooks, an official at News International said: “When she resigned on Friday, we were not aware that she would be arrested by the police.” Another person briefed on the News Corporation’s plans said that on Friday, when the company was preparing to announce her exit and the departure in New York of Mr. Hinton, the possibility of her arrest was not discussed.

Until Ms. Brooks arrived at a London police station by prearranged appointment on Sunday, she believed she would merely be helping the police as a witness, her spokesman said.

“She was very surprised, I think, to then be arrested,” said the spokesman, David Wilson, chairman of the Bell Pottinger public relations firm. Mr. Wilson said it all happened so quickly that both her lawyer and he were brought in to handle her case over the weekend.

Ms. Brooks was arrested “under caution,” he said, meaning that she was read her rights and treated as a suspect. “She maintains her innocence, absolutely,” he said. She was released on bail after about 12 hours in police custody, news services reported.

For months, Ms. Brooks had been willing to talk to the police but had been rebuffed, Mr. Wilson said. “As recently as last week, she was told she wasn’t required to do so and she wasn’t on their radar.”

No formal charges have yet been brought against Ms. Brooks, or indeed against any of the others — mostly former editors and reporters at The News of the World — arrested in the phone-hacking case so far. These include Andy Coulson, who resigned as the paper’s editor in in 2007, was then hired by the Conservative Party, and most recently worked as the chief spokesman for Mr. Cameron’s government. Under British law, suspects can be detained 24 to 36 hours without being charged.

Sir Paul, who took over the top police job in 2009, stepped down in large part because of a furor over his contacts with News International officials. The New York Times reported over the weekend that he met for meals 18 times with News International executives and editors during the phone-hacking investigation, and that other top other police officials had had similar meetings.

These included meeting Mr. Wallis eight times while he was still working at The News of the World. Both Theresa May, the home secretary, and Boris Johnson, the London mayor, said they were angry that he had not disclosed these meetings earlier.

In his statement, Sir Paul explained that he had withheld information about his contacts with Mr. Wallis, even after Mr. Wallis became a phone-hacking suspect, because he “did not want to compromise the prime minister in any way by revealing or discussing a potential suspect who clearly had a close relationship with Mr. Coulson” — Mr. Cameron’s friend and former employee.

“Unlike Mr. Coulson, Mr. Wallis had not resigned from News of the World or, to the best of my knowledge, been in any way associated with the original phone-hacking investigation,” Sir Paul said, in what appeared to be a criticism of the prime minister.

Indeed, Mr. Cameron is in the awkward position of counting two of the arrested parties — Mr. Coulson and Ms. Brooks — as personal friends. As leader of the opposition, he attended Ms. Brooks’s wedding in 2009 (Rupert Murdoch and Gordon Brown, then the prime minister, of the Labour Party, were also guests).

Mr. Cameron was friendly enough with Ms. Brooks to socialize with her twice in December, according to records released by Downing Street last Friday. Once was at a cozy family dinner at her country house over the Christmas holiday; James Murdoch, Mr. Murdoch’s son and the head of News Corporation’s European and Asian divisions, was also present.

The meetings took place while Mr. Cameron’s government was considering, favorably, the News Corporation’s bid to take over the part of BskyB that it did not already own.

Oddly enough, both Sir Paul and Ms. Brooks were due to give testimony on Tuesday to different Parliamentary committees looking into phone hacking. Keith Vaz, the chairman of the home affairs committee, where Sir Paul was due to be questioned, said that there was no reason the session should not still proceed.

But Ms. Brooks’s appearance, at the committee on culture, media and sport, is now in doubt. Before her arrest, she had warned that because of the investigation, she might be limited in what she could say. Now, it is unclear whether she will come at all.

Although they will still get to question her former bosses, Rupert and James Murdoch, committee members seem disappointed at the prospect of losing Ms. Brooks. Some even said that they wondered if the timing of the arrest was intended to ensure that she was unavailable to answer their questions.

“Being of a suspicious mind, I do find it odd that they should arrest her now by appointment,” said Chris Bryant, a Labour member of the committee, who suspects his phone was hacked by The News of the World. He said that Ms. Brooks’s arrest brings the scandal closer to the top.

“The water is now lapping around the ankles of the Murdoch family,” he said.

Jo Becker and Ravi Somaiya contributed reporting from London, and Jeremy W. Peters from New York.

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