Murdoch Gets Dangerous for Cameron Amid Phone-Hack Scandal

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.

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. J Sainsbury Plc (SBRY) and Mitsubishi Motors Corp. (7211) joined companies pulling advertising. Senior policemen who dined with editors of the paper now have 45 detectives investigating it.

As Murdoch’s News Corp. (NWSA) attempts to win approval for buying British Sky Broadcasting Group Plc (BSY), politicians are questioning the extent of his power. Prime Minister David Cameron is under pressure for hiring a former editor of the News of The World who had already resigned over phone-hacking. The police must now deal with allegations the newspaper made payments to officers.

“We have let one man have far too great a sway over our national life,” Labour 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.”

Shares Fall

News Corp. stock fell 3.6 percent to A$16.55 in Sydney after declining 3.6 percent yesterday in New York. BSkyB fell 1.5 percent to 814.5 pence at 8:55 a.m. in London. Trinity Mirror Plc (TNI), publisher of rival tabloid the Sunday Mirror, surged 17 percent yesterday on expectations it will gain advertising revenue from companies withdrawing from the News of the World. It was up another 1.5 percent today.

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 sister, 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.”

BSkyB Decision

Two hours before yesterday’s debate, Cameron promised inquiries into the police’s early investigations of phone-hacking “and why that did not get to the bottom of what has happened” and also “a wider look into media practices and ethics in this country.”

Still, the prime minister insisted the current furor offers no legal basis for Culture Secretary Jeremy Hunt to postpone a decision on approving News Corp.’s 7.8 billion-pound ($12.5 billion) bid for the 61 percent of BSkyB it doesn’t own.

Ed Miliband, the leader of the opposition Labour Party, said Cameron was “out of touch.”

“The public will not accept the idea that with this scandal engulfing the News of the World and News International, the government should in the coming days be making a decision outside the normal processes for them to take control of one of the biggest media organizations in the country,” Miliband told Cameron.

Ad Suspension

The Labour leader is “trying to present himself as the clean voice of reason in all this,” Wyn Grant, professor of politics at Warwick University, said in a telephone interview. “Cameron is implicated because he gave Coulson a job.”

The decision on approving the takeover will be delayed until the fall amid the hacking allegations, the Daily Mail newspaper reported, citing unidentified government officials.

Sainsbury, the U.K.’s third-largest supermarket chain, and Mitsubishi Motors Corp. of Japan said on their Twitter sites that they would pull ads from News of the World. General Motors Co., Lloyds Banking Group Plc, Ford Motor Co. (F), RWE AG, and Co-operative Group have also announced suspensions.

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

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

Another Labour lawmaker, Tom Watson, demanded action against James Murdoch, Rupert’s 38-year-old son, who runs News Corp.’s European operations.

‘Cover-Up’

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,” Watson said. “This is nothing short of an attempt to pervert the course of justice.”

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.

Criminal Charges?

“The key thing is to bring criminal charges,” Huhne told BBC Radio 4 today. Asked if Brooks should quit, 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.”

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. Hacking involves dialing into someone else’s mobile phone and then listening to the owner’s voicemail after obtaining the access code by guesswork or otherwise.

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.

Coulson Quits

The balance tipped in January. With more celebrities such as actor Jude Law and interior designer Kelly Hoppen suing the paper, evidence came to light that led to the suspension of one of the paper’s executives. In the following three weeks, Coulson announced he was resigning from his job in Cameron’s office and News International handed over a file of information to the police, who opened a fresh investigation.

Metropolitan Police Commissioner Paul Stephenson confirmed yesterday that News International had passed the police evidence of payments to some of its officers. The BBC reported that these payments had been authorized by Coulson when he was editor of the News of the World. Stephenson said he had begun a police corruption investigation.

“Anyone identified of wrongdoing can expect the full weight of disciplinary measures and, if appropriate, action through the criminal courts,” Stephenson said, adding that no senior officers were alleged to be involved.

Police Pressure

“What the public need to know is that the police are going to go about their job properly,” Cameron told lawmakers yesterday.

According to Warwick University’s Grant, that may be one of the lasting effects of the scandal. “The police have always had a very close relationship with the tabloid press,” he said. “That may not survive this.”

Chancellor of the Exchequer George Osborne’s office said he’d been told by police yesterday that a private detective working for the News of the World had his phone number.

Ivor Gaber, research professor in media and politics at the University of Bedfordshire, said there’s no certainty how 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,” Gaber said in a telephone interview. “Never underestimate the capacity of Rupert Murdoch to survive a crisis.”

To contact the reporter on this story: Robert Hutton in London at rhutton1@bloomberg.net.

To contact the editor responsible for this story: James Hertling at jhertling@bloomberg.net.

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Photographer: Peter Macdiarmid/Getty Images

Dummies and puppets representing Prime Minister David Cameron, left, and Culture Secretary Jeremy Hunt are held aloft by Rupert Murdoch at the launch of the campaign group "Hacked Off" in London.

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Photographer: Peter Macdiarmid/Getty Images

Dummies and puppets representing Prime Minister David Cameron, left, and Culture Secretary Jeremy Hunt are held aloft by Rupert Murdoch at the launch of the campaign group "Hacked Off" in London. Close

Dummies and puppets representing Prime Minister David Cameron, left, and Culture Secretary Jeremy Hunt are held aloft... Read More

Photographer: Chris Ratcliffe/Bloomberg

The News of the World, the biggest selling Sunday paper, has a daily sister, The Sun, which has backed the winner in every election since 1979, when it supported Margaret Thatcher. Close

The News of the World, the biggest selling Sunday paper, has a daily sister, The Sun, which has backed the winner in... Read More

Photographer: Chris Ratcliffe/Bloomberg

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. Close

News International said late yesterday it will investigate allegations its News of the World tabloid hacked the... Read More

Photographer: Jock Fistick/Bloomberg

David Cameron, U.K. prime minister. Close

David Cameron, U.K. prime minister.

Photographer: Lionel Bonaventure/AFP/Getty Images

Rupert Murdoch, chairman and chief executive officer of News Corp. Close

Rupert Murdoch, chairman and chief executive officer of News Corp.

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