Murdoch Gets Dangerous for Politicians, Advertisers

Sainsbury and Mitsubishi Join Advertiser Pullout as BSkyB Deal Is Reportedly Delayed

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Rupert Murdoch
Rupert Murdoch Credit: Daniel Acker/Bloomberg News

For three decades, Britain's powerful have sought close relations with Rupert Murdoch and his newspapers. Now politicians, police and businesses are all finding that closeness is becoming dangerous, at least in the short term.

News International said late yesterday it will investigate allegations its News of the World tabloid hacked the phones of relatives of dead soldiers, after reports that the voicemail of murder and terror victims was intercepted. The Sainsbury supermarket store chain and Mitsubishi Motors said they would pull advertising from the paper, joining General Motors, Lloyds Banking Group, Ford Motor, Co-operative Group and the power company RWE. Senior policemen who dined with editors of the paper now have 45 detectives investigating it.

As Murdoch's News Corp. attempts to win approval for buying British Sky Broadcasting Group, Britain's politicians are questioning the extent of his power there.

Prime Minister David Cameron insisted the current furor offers no legal basis for Culture Secretary Jeremy Hunt to postpone a decision on approving News Corp.'s $12.5 billion bid for the 61% of BSkyB it doesn't own, but Labor Party leader Ed Miliband said Mr. Cameron was "out of touch" and the Daily Mail reported that the decision on approving the takeover will now be delayed until fall, citing unidentified government officials.

Mr. Cameron is also under pressure for hiring a former editor of the News of The World who had already resigned over phone-hacking. Metropolitan Police Commissioner Paul Stephenson confirmed yesterday that News International had passed the police evidence of payments to some of its officers.

"We have let one man have far too great a sway over our national life," Labor lawmaker Chris Bryant told Parliament in London in an emergency debate yesterday. "Murdoch is not resident here, does not pay tax here. No other country would allow one man to garner four national newspapers, the second largest broadcaster, a monopoly on sports rights and first-view movies."

News Corp. stock fell 3.6% in Sydney after declining 3.6% Wednesday in New York as scandal at one of the company's newspapers -- never News Corp. shareholders' favorite investment -- roiled the whole business. "Perhaps ironic is the fact that the least valued division of the corporation by investors is creating the most negative headlines," Nomura analyst Michael Nathanson wrote in a note.

Trinity Mirror, the publisher of rival tabloid the Sunday Mirror, meanwhile surged 17% yesterday on expectations it will gain advertising revenue from companies withdrawing from the News of the World.

Politicians have long courted the support of the newspapers run by News Corp.'s News International division. The News of the World, the biggest selling Sunday paper, has a daily sibling, The Sun, which has backed the winner in every election since 1979, when it supported Margaret Thatcher.

"There was a synergy between her and the paper -- they were both pursuing the same kind of goals, and she appealed to its southern working-class readership," Justin Fisher, professor of politics at Brunel University, said in a telephone interview. "When Tony Blair was prime minister, the paper was a consistent cheerleader for him."

Mr. Blair, the last man to lead Labor in opposition before Mr. Miliband, flew to Australia to address a meeting of News Corp. executive in the mid-1990s as he sought to woo Mr. Murdoch.

Two hours before yesterday's debate, Mr. Cameron promised inquiries into the police's early investigations of phone-hacking, "why that did not get to the bottom of what has happened" and "a wider look into media practices and ethics in this country." From 2007, when one of its reporters was jailed for phone-hacking, to 2010, News International has denied that there was any widespread culture of illegality at the newspaper. The company was supported in this by London's Metropolitan Police, which said there wasn't enough evidence to support further prosecutions.

Mr. Miliband yesterday demanded the resignation of Rebekah Brooks, the CEO of News International, who was editor of the News of the World when some of the hacking is alleged to have happened. Mr. Murdoch, 80, later issued a statement in which he stood by her.

Energy Secretary Chris Huhne, who last year was caught having an affair by the News of the World, said the inquiries should be led by a judge, with people giving evidence under oath.

"The key thing is to bring criminal charges," Mr. Huhne told BBC Radio 4 today. Asked if Ms. Brooks should quit, Mr. Huhne, a former journalist, said it was "a matter for her," before going on to observe that "an editor knows what's going on."

"Either they know what's going on or they're frankly incompetent," he said.

Another News Corp. newspaper, the London-based Times, reported today that journalists suspected of involvement in hacking were expected to be arrested within days, without saying where it got the information.

Another Labour lawmaker, Tom Watson, demanded action against James Murdoch, Rupert's 38-year-old son, who runs News Corp.'s European operations. Mr. Watson referred to the News of the World's statement to a parliamentary committee in 2009 that James Murdoch had approved a 700,000-pound payment to a phone-hacking victim that was accompanied by a non-disclosure agreement. The company had been trying to organize a "cover-up," the lawmaker said.

"It is clear now that he personally, and without board approval, authorized money to be paid by his company to silence people who'd been hacked," Mr. Watson said. "This is nothing short of an attempt to pervert the course of justice."

Ivor Gaber, research professor in media and politics at the University of Bedfordshire, said there's no certainty how rupert Murdoch will emerge from the scandal. In the mid-1980s, Murdoch faced down labor unions resisting the introduction of new technology after secretly establishing a new production plant at Wapping in east London. His victory in the dispute changed Britain's newspaper industry. "It could be a turning point, but there are turning points where history refuses to turn," Mr. Gaber said in a telephone interview. "Never underestimate the capacity of Rupert Murdoch to survive a crisis."

-- Bloomberg News --

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