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The end of the empire?

THE chief executive of the company that publishes the Wall Street Journal became the first casualty in America of the phone-hacking tsunami that is sweeping through Rupert Murdoch's News Corporation – but he is unlikely to be the last.

Les Hinton, chief executive of Dow Jones, led News International from 1995 until 2007, when some News of the World journalists were hacking phones.

“I have watched with sorrow from New York as the News of the World story has unfolded,” Hinton said. “The pain caused to innocent people is unimaginable.”

The unease about the behaviour of News International journalists last week crossed the Atlantic to the United States, where Murdoch’s stable includes the Fox TV network, 20th Century Fox, Fox News, the Wall Street Journal, the New York Post and a chain of regional television stations.

Senator Frank Lautenberg, from New Jersey, has called for the Department of Justice and the Securities & Exchange Commission to determine whether any US laws were violated. “Further investigation may reveal that current reports only scratch the surface of the problem at News Corporation,” he wrote in an open letter to the Attorney General, Eric Holder, hinting that phone-hacking and bribery may not have been limited to Murdoch’s British tabloids.

Senator Jay Rockefeller suggested that the Senate Commerce Committee, which he chairs, might launch its own investigation, telling reporters that his “bet” would be that “we’ll find some criminal stuff”.

In a joint statement with Senator Barbara Boxer, he warned that if News Corp employees were found to have targeted US citizens then “the consequences will be severe”.

Some of this must be understood as politically motivated. The vast majority of the people calling for a criminal inquiry are Democrats, happy for the chance to kick a right-wing behemoth while it’s down. Fox News is an echo chamber for Republican talking-points and a persistent critic of the Democratic agenda. The New York Post and Wall Street Journal opinion pages are dominated by conservative columnists, and last year Rupert Murdoch donated $1 million to the Republican Governors Association.

So it wasn’t particularly surprising to hear Democratic Congressman Bruce Braley condemning “political espionage” at the media mogul’s papers. He said: “We are very concerned with where these allegations will eventually lead. If employees of News Corporation violated the privacy of US citizens, at the News of the World or the New York Post, then they should be investigated.”

Congressman Peter King, on the other hand, is a prominent Republican, and chairman of the Homeland Security Committee. In a letter to FBI director Robert Mueller, he wrote: “It is revolting to imagine that members of the media would seek to compromise the integrity of a public official for financial gain in the pursuit of yellow journalism.”

King was responding to a Daily Mirror story that alleged News Corp reporters attempted to pay a New York policeman for the phone records of people who died in the September 11 attacks on the World Trade Centre. If the claim is proved, King wrote, the journalists concerned should receive “the harshest sanctions available under law”. On Friday, Attorney General Holder confirmed that an FBI investigation was under way. “There have been serious allegations raised in that regard in Great Britain and there is an ongoing investigation there,” he said. “There have been members of Congress in the United States who have asked us to investigate the same allegations, and we are progressing in that regard.”

Questions were also raised last week about James Murdoch’s handling of the phone-hacking scandal. Critics accused the 38-year-old of being too slow to realise the enormity of the crisis, and questioned whether he should ever succeed his father as News Corp chief. On Friday, former Treasury minister Lord Myners urged BSkyB shareholders to oust James Murdoch as its chairman.

The corporation itself could be subject to a number of penalties in the US, the most drastic of which would involve its licence to broadcast being revoked by the Federal Communications Commission. Just as the British media regulator, Ofcom, must be satisfied that the owners of media companies are “fit and proper,” the FCC has the power to ensure that only people of “good character” are granted licences. In practice, though, it has rarely invoked this clause.

Several politicians have suggested that News Corp should be investigated under the Foreign Corrupt Practices Act (FCPA), which prohibits American citizens or companies from bribing overseas officials. John Podesta, a former Democrat chief of staff who is close to President Obama, said that News Corp might have broken US laws if it paid bribes to police in Britain. He added: “This is an empire that was built on a set of journalistic ethics that’s beginning to explode and unravel.”

Eliot Spitzer, former governor of New York, said: “If the department [of justice] fails to open an immediate investigation into News Corp’s violations of the FCPA, there will have been a major breach of enforcement … it is hard to believe that the misbehaviour in Murdoch’s media empire stopped at the water’s edge.” Spitzer has an axe to grind: his political career was destroyed when he was exposed as a user of prostitutes by the New York Post.

A group of disaffected News Corp shareholders has filed a lawsuit in Delaware, accusing Rupert and James Murdoch of failing to deal with the phone-hacking crisis until it was too late. More than £4 billion was wiped off the company’s value in a week. But plenty of New York traders believe the stock is undervalued and will eventually climb back to around $20 a share from its current price below $16.

 

For the time being, it is open season on a man with plenty of enemies. NBC roped in the actor Hugh Grant, a victim of phone hacking, to express some very English outrage. He said: “Only three weeks ago, all our major politicians in this country were sucking up to Rupert Murdoch and drinking champagne on his lawn at his summer party. So it’s almost comic that today in Parliament they’re all competing to say he’s a terrible person. I would’ve thought it was of interest to Americans simply because Rupert Murdoch does own an enormous amount of your media.”

Even Conrad Black, the disgraced media baron who will soon be returning to jail to complete a sentence for fraud, took a swipe, calling Murdoch “a malicious myth-maker, an assassin of the dignity of others and of respected institutions, all in the guise of anti-elitism”.

Murdoch’s biographer, Michael Wolff, predicted that the scandal will deepen in the US.

“What is happening in the UK is a nuclear meltdown,” he said. “News Corp will have to dispose of its assets there which are losing value by the minute, so that puts the US in a peculiar position -- that a company could essentially fold in one country and continue as though nothing happened in another country.

“What it means is that the focus turns here, and the analysis is going to be that this is a company that engaged in practices that are anathema to reasonable men.”

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