News Corp. Inquiry Turns on Staff Ahead of James Murdoch's Second Hearing

Deputy Chief Operating Officer Returns to Parliament Tomorrow

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James Murdoch
James Murdoch

News Corp. investigators found evidence that more reporters participated in the U.K. phone- hacking and bribery scandal, and informed the police, who arrested one person last week, according to two people familiar with the probe.

Sun reporter Jamie Pyatt was arrested last week as News Corp. prepared for deputy Chief Operating Officer James Murdoch to face lawmakers in Parliament again tomorrow on why he didn't act more quickly to stop unlawful behavior at the company's newspapers. Before Mr. Pyatt's arrest, Matt Nixson, an editor at tabloid the Sun, was fired and a file on him was given to police, said the people, who declined to be identified because the investigation is confidential.

News Corp. closed the News of the World Sunday tabloid and formed the Management and Standards Committee in July to deal with the phone-hacking scandal after it emerged that reporters at the paper deleted messages on a murdered girl's mobile phone. Media analyst Chris Goodall said the company should have acted sooner to investigate the practices.

"Crisis management handbooks would not have told them to handle this problem this way, no question" said Mr. Goodall, who advised the U.K. government on News Corp.'s now-abandoned bid for all of pay-TV operator British Sky Broadcasting Group.

Last month, News Corp. shareholders lodged a protest vote against Chairman Rupert Murdoch and his sons, following an annual meeting at which investors called for governance changes and an end to voting practices that cement the family's control. James Murdoch received the highest percentage of votes against his election to the company's board, at 35%.

Initial reports from celebrities and politicians who believed they had been hacked by reporters at the News of the World dated back to 2006. A July report by the Guardian newspaper that hacking had spread to include the phone of murdered schoolgirl Milly Dowler -- hampering a police search when she was still missing -- triggered a public outcry.

News Corp.'s internal standards committee initially assisted with the police investigations and lawsuits.

This was in line with the company's decision earlier this year to settle civil suits and comply with police investigations rather than attempting to uncover more evidence of hacking in the newsroom or disclose what had been revealed in lawsuits, said one of the people who was close to the company's U.K. operations at the time.

The committee is now carrying out inquiries into its U.K. newsrooms. News Corp. is reviewing emails and interviewing reporters at its remaining U.K. titles -- the Sun, the Times and the Sunday Times -- for signs employees hacked into voice mails or emails, or hired private detectives improperly, two people familiar with the investigation said last month.

Mr. Nixson, who hasn't been arrested and has sued News Corp. over his firing, declined to comment. Contact details for Pyatt weren't available via the internet or the U.K. phone directory. Paul Durman, a spokesman for the standards committee in London, declined to comment. News Corp. spokeswoman Miranda Higham declined to comment, referring questions to News International. Daisy Dunlop, a News International spokeswoman, said the company is cooperating with police, declining to comment further.

Separately, News Corp. said Kim Williams will head its News Ltd. Australian division from Dec. 5 after the resignation of John Hartigan. Rupert Murdoch will become chairman of the unit. The changes come a day after the start of a government inquiry into Australia's print media, where News Corp. controls more than half of the nation's newspaper readership with titles including the Herald Sun, Daily Telegraph and the Australian. The phone-hacking scandal in the U.K. has led to at least 17 arrests and the resignations of top executives, including Les Hinton, the head of the Dow Jones unit, and the former CEO of News International, Rebekah Brooks.

Michael Grade, former chairman of U.K. broadcaster ITV, said last week News Corp. should have disclosed all the information about phone hacking as soon as they discovered it. Mr. Grade compared the crisis with ITV's response to the 2007 premium-rate phone line case where consumers paid to enter competitions they had no chance of winning.

"It was commercially inept, frankly," Mr. Grade said. "The thing we did differently to News International is that we got to the bottom of it ourselves."

-- Bloomberg News --

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