News Corp. subsidiary "News of the World" is accused of hacking the voicemail of British murder victim Milly Dowler, a 13-year-old UK schoolgirl.  (Source: PA/The Independent)

British PM David Cameron, who was endorsed by News of the World and who hired a former News of the World staffer to a key position, has been slow to act. He says that inaction was due to caution and that full government inquiries will be coming.  (Source: Matt Dunham/AP)

News of the World (News International) chief executive Rebekah Brooks has refused to resign.  (Source: Getty Images)
British hacking scheme yielded scoops, big profits for Murdoch's tabloids at the price of privacy, integrity

A massive scandal is brewing around News of the World, a series of British tabloid newspapers owned by News Corp. (NWS), much to the dismay of the company's divisive majority owner and chief executive, Rupert Murdoch.  

It has been alleged that Mr. Murdoch's news organization, which also owns Fox News in the United States, may have hired hackers to steal voicemails and text messages from victims of murders and terrorist plots.  

I. Investigators in Murder of Schoolgirl Thrown by News Corp.'s Actions

The scandal has been growing since a few months back when News of the World was accused of hacking into celebrities and politicians' voice mailboxes to try to grab juicy scoops.  But over the last month things took a more serious turn as it was revealed that terrorist victims were also targeted.

Hacking into the voicemail accounts of relatives of victims of the bombings on three London subway trains and a double-decker bus on July 7, 2005 is currently the subject of an ongoing police inquiry.

But the most scandalous intrusion may have been the group's use of a cell phone belonging to Milly Dowler, a missing Surrey schoolgirl.  Led by News of the World employee Glenn Mulcaire, the organization hacked into her phone.  They then intercepted messages from distraught family members and deleted them, to make room for new messages, hoping the new messages would reveal details indicating that the girl was alive.  The activity confused investigators and gave family members false hope.

Mr. Mulcaire, who previously served prison time for hacking the phones of members of England's Royal Family said "relentless pressure" from News of the World's supervisors was responsibility for the acts, commenting "there was a constant demand for results."

He offered an apology to family members of the girl and "to anybody who was hurt or upset", but accused the media of "vilification" that has led to harassment of his wife and children.

II. News Corp. Stands Behind Embattled Branch and Its Chief

Rupert Murdoch has stood behind News of the World chief Rebekah Brooks, commenting, "Recent allegations of phone hacking and making payments to police with respect to the News of the World are deplorable and unacceptable."

"I have made clear that our company must fully and proactively cooperate with the police in all investigations and that is exactly what News International has been doing and will continue to do under Rebekah Brooks’ leadership. We are committed to addressing these issues fully and have taken a number of important steps to prevent them from happening again."

Ms. Brooks denies having knowledge that the hacking was occurring.  She writes in a staff memo, "[We will] pursue the facts with vigor and integrity. I am aware of the speculation about my position. Therefore it is important you all know that as chief executive, I am determined to lead the company to ensure we do the right thing and resolve these serious issues."

Tim Luckhurst, a journalism professor at the University of Kent, told The New York Times that News Corp. is unlikely to be able to sweep this one under the rug. He states, "The Milly Dowler story has taken this from an issue for people who are concerned about media ethics to one that is of broader concern to the general public. News Corporation thought they could put a lid on this, and this has blown the lid right off."

III. Britain's PM Attacked for Ties to News Corp.

Britain's Prime Minister and conservative party leader David Cameron has been attacked for his support of News Corp. and News of the World.

Mr. Cameron enjoys close ties to both organizations.  He was a guest at Ms. Brooks’ marriage to her second husband, Charlie Brooks, in 2009.  And he's frequently attended social functions with Mr. Murdoch.

Andy Coulson, a former News International (News of the World) editor, was appointed by Mr. Cameron as director of communications.  He was forced to resign in January after the phone scandal broke, despite denying having any knowledge of it during his time with News of the World.

BBC News, however, reports that documents obtained indicate that Mr. Coulson authorized payments to the police in exchange for information.  The news network adds that News Corp.'s British properties -- the Sun, The Times of London, and the News of the World -- all threw their weight behind Mr. Cameron and the conservative party, helping push for his election.

Coincidentally, Mr. Cameron initially resisted a British federal probe into News Corp., even as the police investigation struggled.  Mr. Cameron tried to defend himself, stating, "We do need to have an inquiry, possibly inquiries, into what has happened. We are no longer talking here about politicians and celebrities, we are talking about murder victims, potentially terrorist victims, having their phones hacked into. It is absolutely disgusting, what has taken place, and I think everyone in this House and indeed this country will be revolted by what they have heard and what they have seen on their television screens."

He says that the delay in calling for an inquiry was precautionary.  He claims, "It seems to me there are two vital issues we need to look into. The first is the original police inquiry and why that didn’t get to the bottom of what has happened. "

"The second is about the behavior of individual people and individual media organizations and a wider look into media practices and ethics in this country. Clearly, we cannot start all that sort of inquiry immediately because you must not jeopardize the police investigation. But it may be possible to start some of that work earlier."

Mr. Cameron's newfound desire to investigate News Corp. was not enough to placate his political rivals, though.  Labour Party parliamentarian David Milibrand comments that it was "catastrophic error of judgment by [Mr. Cameron] bringing Andy Coulson into the heart of his Downing Street machine."  

He says that the British PM "has not shown the leadership necessary" to handle the affair.  He urges Ms. Brooks to "consider her position" (resign).

IV. Financial Fallout for News Corp.

Even as the legal, political, and journalistic fallout of the scandal continues to be weighed, it appears that the scandal will also have a major impact on News Corp.'s bottom line.

Ford Motor Company (F) and other prominent advertisers have pulled the plug on print and video spots with News Corp.'s British properties.  That backlash could hurt the bottom line of a traditionally lucrative News Corp. property.

Further, the scandal has led Parliament to question the authorization of a News Corp. takeover of British Sky Broadcasting, a pay TV company in which it is already the largest shareholder.  Mr. Cameron continues to support the deal and insists that News Corp. has done nothing wrong there.

"So, I think the same thing of the music industry. They can't say that they're losing money, you know what I'm saying. They just probably don't have the same surplus that they had." -- Wu-Tang Clan founder RZA
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