Scandal at News Corp.

News Corp. Scandal Rages as Murdochs' Parliament Trip Looms

Observers Say Crisis Will Move Family Out of the C-Suite

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The phone-hacking scandal engulfing the Murdoch empire continued to rage today despite damage-control efforts that now included the establishment of a company committee to investigate charges of wrongdoing at News Corp.'s British newspapers division News International. A second top police official also stepped down in relation to the scandal, and News Corp.'s stock continued to slide as Rupert and James Murdoch's trip to Parliament loomed.

News Corp. named Lord Grabiner, a British commercial lawyer, as chairman of a new Management and Standards Committee, described as an independent body authorized to cooperate with investigations into charges of phone hacking and police bribery at News International. It will also propose new ethics and governance procedures at the subsidiary.

News International operated the now-defunct Sunday tabloid News of the World, where phone hacking and police bribery are alleged to have been rampant. News Corp. shut down the paper as part of an earlier effort to contain the scandal and save an endangered $12 billion deal for all of the satellite TV service British Sky Broadcasting. News Corp. eventually withdrew its bid for the portion of BSkyB that it didn't already own.

Also today, John Yates, assistant commissioner of the Metropolitan Police, handed in his resignation, one day after the commissioner, Sir Paul Stephenson, stepped down. Both officials have been accused of bungling an earlier investigation into illegal practices at News of the World and of maintaining ties to News International insiders while the company was being investigated.

Both Mr. Yates and Mr. Stephenson have maintained that they are innocent of any wrongdoing.

Mr. Yates' resignation came a day after former News International Chief Executive Rebekah Brooks was arrested by Scotland Yard for questioning in regard to allegations of phone hacking and corruption. She had resigned her post Friday -- the same day that Les Hinton, CEO of Dow Jones & Co. and publisher of The Wall Street Journal, also resigned.

Mr. Hinton was chairman of News International from 1995 to 2007 -- years when the illegal conduct was taking place. Ms. Brooks was editor of News of the World in 2002, when the paper is believed to have hacked into the voicemail of 13-year-old kidnap and murder victim Milly Dowler.

A report in the Guardian newspaper on July 4 about that phone hacking sparked the uproar over the Murdoch paper's practices that has yet to let up.

News Corp.'s Class A shares were down 3.7% on Monday to $15.06 in mid-day trading. The stock has fallen 18% since this latest chapter of the phone-hacking saga began.

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Matthew Flamm is a reporter for Crain's New York Business.

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