When it comes to political clout, the Murdoch News Corp empire has often seemed unassailable. Previous allegations that its reporters had been encouraged by their superiors to hack phone conversations of the Royal family, media celebrities and British politicians had caused investigations, official opprobrium but little in the way of financial hardship. The latest revelation, however, that News Corp reporters had hacked into the phone of a murdered 13 year old girl and her family has evidently crossed an invisible line of business acceptability. And new reports suggest she may not have been the first or last victim. As a result, a growing number of global corporations, including Ford and Virgin, have announced they are pulling their advertising from the publication in question.
Parliament is investigating the hacking scandal and Prime Minister David Cameron, a Murdoch ally, has called for official inquiries. but that does not seem to be the most serious threat. If you are in business and your advertisers feel they can benefit more by publicly disassociating themselves from you than by advertising with you, you have a toxic image problem. And when your own sister publications, like the Wall Street Journal, believe their credibility requires that they report the scandal, the trade-off between gaining scoops and propriety is thrown into high relief.
As a culture we seem torn between our insatiable demand for gossip and our revulsion at the means sometimes used to produce it. Businesses must remember that their behavior reflects on their entire value chain of relationships. When they enter into a commercial partnership with anyone, they own their partners' problems as well as their potential benefits - and vice versa. JL
Paul Sonne and Cassel Bryan-Low report in the Wall Street Journal:
"News Corp.'s tabloid reporting scandal swelled anew Tuesday, as allegations about the possible hacking of a dead teenager's phone unleashed public outrage and placed the company's top U.K. newspaper executive in the hot seat. News Corp. has been under pressure for several years amid investigations into the use of a private detective by its News of the World tabloid to break into the mobile-phone voice mail of celebrities and political leaders.
Public rebuke of the company reached a new level this week with the allegation that, in 2002, the paper used the same tactic to access the voice mail of an abducted 13-year-old girl who, it turned out, had been murdered.
The allegation expands the scope of the scandal beyond celebrities to regular citizens and turns up the heat on Rebekah Brooks—chief executive of News Corp.'s U.K. newspaper unit—who was editor of News of the World at the time. The alleged 2002 incident could mean phone hacking was occurring earlier than previously thought and possibly was more widespread.
It also stirs up controversy as News Corp. awaits final regulatory approval for its bid to buy out U.K. pay-TV giant British Sky Broadcasting Group PLC.
News Corp. also owns The Wall Street Journal.
The U.K. Parliament scheduled an emergency hearing on the allegations for Wednesday.
Some advertisers said they were reviewing their support of the News of the World and waiting for further details. Ford Motor Co. pulled its ads from the tabloid, but indicated it would use alternative media within and outside News International, the U.K. newspaper unit of News Corp., pending the outcome of the company's investigation.
U.K. Prime Minister David Cameron said Tuesday that if the latest allegation proves true it is "a truly dreadful act and a truly dreadful situation." He urged police to pursue their investigation "in the most vigorous way" possible.
The current firestorm involves Milly Dowler, a 13-year-old British girl who was abducted and murdered in 2002. Mark Lewis, a lawyer for Milly's parents, said police in April showed his clients evidence that the tabloid intercepted the girl's voice mails after she went missing.
It appears that whoever accessed Milly's voice mail didn't just listen to messages left after she disappeared, but also deleted some of them—raising false hopes in the days after her abduction that she might have been alive and deleting them herself, Mr. Lewis says.
A nightclub doorman was later convicted of her murder.
"This is disgusting, disgraceful," Mr. Lewis said, standing outside the Royal Courts of Justice in London after going public with the allegation on Monday. "There are no words to describe how awful this was—or how awful it is—to the parents."
Police declined to comment on the alleged hacking of the girl's phone.
A spokeswoman for News International said the company was shocked by the allegations and is cooperating with police.
The phone-hacking scandal dates back to late 2005, when Prince William's staff first alerted authorities to the possibility that the News of the World had hacked the prince's phone, sparking a police inquiry. The criminal investigation reignited in January, after new information surfaced through civil lawsuits and an internal investigation at News International.
There have been five arrests in the renewed probe so far. No one has been charged.
Andy Coulson, Ms. Brooks's successor as News of the World editor, resigned from his post in 2007, saying he took responsibility for the hacking that occurred on his watch though he didn't know about it. It came after royal-family correspondent Clive Goodman and Glenn Mulcaire, a private investigator hired by the tabloid, received jail sentences of four and six months, respectively, for phone hacking.
Mr. Coulson later became a top aide to Mr. Cameron, but resigned that post recently amid scrutiny of the case. As the scandal flared Tuesday, Mr. Mulcaire broke his silence and issued a public apology for his conduct, though he made no mention of Milly Dowler's phone.
Ms. Brooks on Tuesday faced a torrent of criticism and calls for her to step down, from politicians and the public. She was News of the World's editor until 2003, putting her at the helm during the time of the alleged Dowler hacking.
Since then, she has become one of the U.K's most powerful journalists, first serving as editor of The Sun and later as chief executive of News International, making her a top lieutenant to News Corp. Chairman and Chief Executive Rupert Murdoch.
Ms. Brooks defended herself in an e-mail to staff that suggested she would not resign. "I hope you all realize it is inconceivable that I knew or worse, sanctioned these appalling allegations," Ms. Brooks wrote.
She added: "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."
Separately, News International has given authorities e-mails suggesting that Mr. Coulson, while editing the News of the World, may have known about the tabloid paying police for information, a person familiar with the matter said. When asked, News International confirmed in a statement that it had provided new information to authorities but did not say what the dossier included. Mr. Coulson could not immediately be reached.
Metropolitan Police in April said they were examining whether to open a criminal investigation in relation to allegations that the U.K. press, including tabloids owned by News International, paid police officers for information. The police have not communicated anything publicly on the matter since then, and a spokesman declined to comment Tuesday night.
Ms. Brooks, while editor of The Sun in 2003, was asked by a parliamentary committee about such allegations. She said: "We have paid the police for information in the past." She didn't elaborate further at the time. In April, she said in a letter to lawmakers that her intention was to comment on a "widely held belief" rather than suggest she knew of specific cases.
News International previously set up a management-standards committee to handle the scandal and deal with the police. That committee is overseen by News Corp. board members Joel Klein and Viet Dinh.
News International issued an apology to phone-hacking victims in April, admitted liability in some civil lawsuits and set up a compensation fund.
Yet the phone-hacking firestorm has continued to build, with roughly 30 lawsuits filed against the company, according to lawyers representing victims.
That includes high-profile politicians, sports personalities and other celebrities, such as actor Jude Law. Two individuals—actress Sienna Miller and sports broadcaster Andy Gray—have publicly announced they have taken up News International settlement offers.
Several News of the World advertisers on Tuesday said they were monitoring the situation. Among them, Halifax, the mortgage-lending unit of HBOS, now part of Lloyds Banking Group, said the company was considering pulling its advertising. Npower, the U.K. business of German utility RWE AG, said it was reviewing its options following the latest allegations.
"We are in dialogue with advertisers about the steps we have been taking and those conversations will continue," a spokeswoman for News International said.
News Corp. is trying to secure final regulatory approval from the U.K. government to buy the 60.9% of pay-TV broadcaster BSkyB it doesn't already own. Jeremy Hunt, the U.K. government minister in charge of the matter, has said he is inclined to approve the takeover, but he has yet to issue a final decision.
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