Rupert Murdoch’s empire in crisis following News of the World closure

Rupert Mur­doch’s News of the World may have print­ed its final edi­tion yes­ter­day, but the fall­out from the uneth­i­cal and like­ly ille­gal activ­i­ties of its for­mer employ­ees con­tin­ues to swell. The phone-hack­ing scan­dal is beyond a headache for Rupert Mur­doch — it’s become a cri­sis that is threat­en­ing his entire media empire.

Here’s a roundup of the most recent devel­op­ments since late last week:

• On Fri­day, police arrest­ed Prime Min­is­ter David Cameron’s for­mer spokesman, Andy Coul­son (who was in charge of the News of the World while it was try­ing to cov­er up its activ­i­ties) and ques­tioned him about the phone hack­ing scan­dal. He was released sev­er­al hours lat­er, but his trou­bles are far from over. Cameron is under fire for his deci­sion to hire Coul­son and is also being pres­sured to come out against News Cor­po­ra­tion’s bid for BSkyB.
• The Guardian is report­ing today that scum­bags work­ing for Mur­doch papers (not just News of the World) harassed for­mer Labour Prime Min­is­ter Gor­don Brown for years. They evi­dent­ly tried to get into his voice­mail, his bank account, his legal file, and fam­i­ly med­ical records.  “Brown was tar­get­ed dur­ing a peri­od of more than 10 years, both as chan­cel­lor of the exche­quer and as prime min­is­ter. Some of the activ­i­ty clear­ly was ille­gal. Oth­er inci­dents breached his pri­va­cy but not the law,” the arti­cle says.
• The BBC’s busi­ness edi­tor reports that he has seen some reveal­ing emails that show that News of the World appar­ent­ly paid a police offi­cer assigned to pro­tect the roy­al fam­i­ly to get access to sen­si­tive con­tact infor­ma­tion. “In one of the dyna­mite e‑mails, Clive Good­man — the paper’s dis­graced for­mer roy­al edi­tor — was request­ing cash from the news­pa­per’s edi­tor, Andy Coul­son, to buy a con­fi­den­tial direc­to­ry of the Roy­al Fam­i­ly’s land­line tele­phone num­bers, and all the phone num­bers — includ­ing mobiles — of the house­hold staff,” the BBC’s Robert Pre­ston says.
• The Dai­ly Mir­ror is report­ing that a for­mer New York police offi­cer is alleg­ing that News of the World employ­ees want­ed to pay him to retrieve voice­mail record­ings of vic­tims of the Sep­tem­ber 11th attacks. The Mir­ror quot­ed its source (who is not named or described) as say­ing, “His pre­sump­tion was that they want­ed the infor­ma­tion so they could hack into the ­rel­e­vant voice­mails, just like it has been shown they have done in the UK. The PI [pri­vate inves­ti­ga­tor] said he had to turn the job down. He knew how insen­si­tive such research would be, and how bad it would look.”
• Forbes reports that a group of News Cor­po­ra­tion share­hold­ers has amend­ed a class action law­suit they filed in Delaware chancery court against Mur­doch and his board to take into account the events of this week and last. The suit, trig­gered months ago by a sweet­heart deal, alleges that Mur­doch and his fam­i­ly have been using News Cor­po­ra­tion to enrich them­selves at share­hold­ers’ expense. The updat­ed com­plaint contends:
  

  Through­out his tenure, Mur­doch has treat­ed News Corp like a fam­i­ly can­dy jar, which he raids when­ev­er his appetite strikes. Ignor­ing the dis­tinc­tion between the busi­ness of a pub­lic cor­po­ra­tion and a fam­i­ly busi­ness, the Board has repeat­ed­ly per­mit­ted Mur­doch to: (i) inter­twine ram­pant nepo­tism in the con­duct of Com­pa­ny busi­ness; (ii) under­take actions designed to main­tain his con­trol over News Corp; (iii) use News Corp resources for his own per­son­al and polit­i­cal objec­tives; and (iv) reward him­self hand­some­ly with exces­sive compensation.

Mean­while, Mur­doch’s bid to take over BSkyB appears to be in increas­ing dan­ger of being nixed. Britain’s Labour Par­ty has called for a vote on the mat­ter, and the Lib­er­al Democ­rats have sig­naled they’ll back Labour in vot­ing to block News Cor­po­ra­tion’s acqui­si­tion of the broad­cast­er. Deputy Prime Min­is­ter Nick Clegg, the leader of the Lib­er­al Democ­rats, told the BBC:

Rupert Mur­doch is now in town in Lon­don seek­ing to sort things out. I would sim­ply say to him, look how peo­ple feel about this. Look at how the coun­try has react­ed with revul­sion to the revelations.

So do the decent and sen­si­ble thing and recon­sid­er: think again about your bid for BSkyB.

News Cor­po­ra­tion has for­mal­ly with­drawn its (fake) promise to make Sky News inde­pen­dent so that it could avoid a deep­er reg­u­la­to­ry review of its BSkyB bid. The move means that the deal will now go before Britain’s Com­pe­ti­tion Com­mis­sion. Mur­doch and his exec­u­tives may have decid­ed to do this out of the real­iza­tion that their takeover bid had already been jeop­ar­dized for the time being. They may be hop­ing to keep the bid alive long enough to weath­er the storm. Whether their strat­e­gy will actu­al­ly work is anoth­er mat­ter. We hope it doesn’t.

As of the time that this post was writ­ten, News Cor­po­ra­tion’s stock was down more than 7% in after­noon trad­ing. (These are Class B shares).