News Corp. May Face Questions Over Computer Hacking, Watson Says

Rupert Murdoch’s News Corp. (NWSA), rocked by a phone-hacking scandal at one of its London newspapers, may face questions about computer hacking too, according to a British lawmaker at the company’s annual meeting today.

Tom Watson, a Labour lawmaker, said British police are looking into at least three private investigators who have done work for News Corp. newspapers, in addition to Glenn Mulcaire, who was arrested in the phone-hacking scandal. At least one of those investigators was breaking into computers, he said.

“In the U.K., the Serious Organized Crime Agency holds the hard drives of a number of those investigators,” said Watson. “News Corp. is potentially facing Mulcaire 2.”

Murdoch, chairman and chief executive officer, said he wasn’t aware of computer hacking in the U.K. and told shareholders News Corp. would investigate any issues.

“These rumors you speak of are being addressed,” Murdoch said at the meeting in Los Angeles. “We will put this right.”

Murdoch, 80, jousted with shareholders at the gathering, parrying charges of lax oversight and employing wit as he sought to disarm critics. He ended the meeting without reporting the results of a board election and a shareholder bid to split the CEO and chairman’s roles.

The company later reported that all directors had been elected and the proposal to split the chairman and CEO roles wasn’t approved. It said it will provide specific vote tallies next week.

Teri Everett, a spokeswoman for News Corp., didn’t return e-mails and a phone call seeking additional comment.

Bloomberg LP, the parent of Bloomberg News, competes with News Corp. units in providing financial news and information,

Must Be ‘Principled’

Watson also questioned Murdoch about the involvement of News Corp. employees with private investigator Jonathan Rees. Rees did work for News International, the U.K. newspaper unit, including at least 500 investigations, Watson said in an interview before the meeting.

Murdoch responded, without specifying Rees, that some of the things that happened years ago were “absolutely wrong” and that the company was cooperating with police investigations.

During the meeting, Murdoch said News Corp. was performing well in news, entertainment, sports and digital programming. Still, the company must focus on more than finances, he said.

“We cannot just be a profitable company, we must be a principled company,” he said. “There are real issues that we must confront and are confronting. We could not taking this more seriously.”

Milly Dowler

The 168-year-old News of the World was closed in July after admitting it had hacked the phone of murdered schoolgirl Milly Dowler. News Corp.’s U.K. unit today agreed to pay 3 million pounds to settle claims by the family of Milly Dowler, who was killed in 2002. The scandal has led to at least 16 arrests, including former company executives.

News Corp. may be liable for “way, way, way more” than the 20 million pounds ($32 million) it has set aside to settle the cases, Watson said in an interview with Bloomberg Television today.

Watson went straight from a hearing on phone-hacking in Parliament in London to the airport for a flight to Los Angeles.

“I want to leave News Corp. investors in no doubt that the scandal is not over,” Watson said today. “I don’t think the board has been fully straight with investors.”

News Corp. spokeswoman Miranda Higham declined to comment on Watson’s allegations before the meeting.

Today’s settlement includes a 2 million-pound payment to the Dowler family and a 1 million-pound donation by Rupert Murdoch to charity.

Including these two payments, News Corp. has agreed to pay more than 4 million pounds in at least six settlements with celebrities and crime victims -- including Sienna Miller, Andy Gray, Gordon Taylor and Max Clifford -- who were the subjects of News of the World stories.

‘Not Acceptable’

News Corp., based in New York, rose 2.1 percent to $17.20 and has gained 18 percent this year.

A member of the Labour Party, Watson has used his seat on Parliament’s Culture Committee since 2009 to pursue News Corp. over hacking allegations. He was the lawmaker who informed Parliament of the Dowler accusations.

Watson said he accepted that Rupert Murdoch and his family control enough News Corp. shares to retain power. After the meeting was over, Watson said he wasn’t sure whether he had accomplished his goal of persuading shareholders to push for change.

“I don’t know,” he said. “We’ll have to wait and see.”

To contact the reporter on this story: Edmund Lee in New York at elee310@bloomberg.net; Amy Thomson in London at athomson6@bloomberg.net

To contact the editor responsible for this story: Kenneth Wong at kwong11@bloomberg.net

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