Bloomberg News

Murdoch Backs Brooks as Cameron Promises Phone-Hacking Probe

July 06, 2011

(Updates with comment from Cameron’s office in ninth paragraph, analyst in 11th.)

July 6 (Bloomberg) -- Rupert Murdoch stood by News International Chief Executive Officer Rebekah Brooks after U.K. Prime Minister David Cameron promised an inquiry into phone- hacking at the News of the World, the newspaper she once edited.

“Allegations of phone-hacking and making payments to police with respect to the News of the World are deplorable and unacceptable,” Murdoch, the chairman of New York-based News Corp., said in an e-mailed statement today. ‘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’s leadership.”

British media published further allegations today that the newspaper tapped the voicemails of murder victims and their families and paid police officers for stories. Lloyds Banking Group Plc and General Motors Co. canceled advertising in the tabloid. The revelations came as the government reviews the company’s 7.8 billion-pound ($12.5 billion) bid for the 61 percent of British Sky Broadcasting Group Plc it doesn’t own.

“We do need to have an inquiry, possibly inquiries, into what has happened,” Cameron told lawmakers at his weekly question-and-answer session in Parliament in London today. “It’s absolutely disgusting what has taken place. I’m sure everyone in this house, indeed this country, will be revolted.”

‘Set of Abuses’

Opposition Labour Party leader Ed Miliband called for Brooks to step down and demanded that the takeover be referred to the Competition Commission. “These events show a systematic set of abuses that show the exercise of power without responsibility in our country,” he told lawmakers.

Cameron said the government would adhere to the law in ruling on the BSkyB takeover. Culture Secretary Jeremy Hunt is completing a consultation on the deal this week. News Corp. already owns four of the U.K.’s largest newspapers.

“We have followed absolutely to the letter the correct legal processes,” Cameron told lawmakers. “This government will behave in a proper way.”

Any decision on BSkyB that failed to follow the law “would be judicially reviewed and struck down in the courts,” Cameron said. “We’d look pretty for a day and useless for a week.”

Cameron’s spokesman, Steve Field, told reporters that the takeover review can only take into account the issue of media plurality.

Shares Fall

News Corp. fell as much as 96 cents, or 5.3 percent, to $17.17 for its steepest decline in almost four months. The stock was down 4.5 percent to $17.32 at 12:17 p.m. in New York. BSkyB, the U.K.’s biggest pay-television broadcaster, declined 18 pence, or 2.1 percent, to 827 pence in London, valuing the company at 14.5 billion pounds.

Murdoch’s statement, his first on the new allegations, is “confirmation of how seriously he’s taking” the phone-hacking scandal, Doug McCabe, an analyst at Enders Analysis in London. “The point is he said something.”

Cameron’s statement pre-empted an emergency debate in the Commons on a call for a public inquiry into phone-hacking. Chris Bryant, a Labour lawmaker who is one of more than two dozen people suing the newspaper, opened the debate by calling for the takeover to be “put on ice” while the investigation continues.

Another Labour lawmaker, Tom Watson, urged News Corp. to tack action against James Murdoch, Rupert’s son and the head of the company’s European operations.

‘Personal Authorization’

“James Murdoch should be suspended from office while the police investigate what I believe is his personal authorization to plan the cover-up of this scandal,” Watson said. James Murdoch and Brooks “are not fit and proper persons to control any part of the media in this country,” he said.

Brooks, 43, has denied any knowledge of phone-tapping.

Lloyds, Britain’s biggest mortgage lender, said today it will pull a planned advertisement for its Halifax unit in the News of the World. GM’s Vauxhall division suspended its advertising after Ford took similar action yesterday.

London’s Metropolitan Police said in a statement today that documents provided by News International indicate that inappropriate payments might have been made to some officers and that the force would investigate. News Corp. appointed Ken Macdonald, a former director of public prosecutions, to advise it on co-operation with the police, News International said in an e-mailed statement.

E-Mails

The BBC reported that News International passed e-mails to the police that showed Andy Coulson, another former News of the World editor, authorized payments to police officers worth tens of thousands of pounds.

Coulson, who resigned from the newspaper in 2007 when a reporter was jailed for phone hacking, went on to work for Cameron as director of communications. He quit in January, just before News International began handing information to the police. He has always denied any knowledge of illegality.

The four-year-old phone-hacking scandal widened this week after previously centering on celebrities, politicians and sports stars.

The Guardian newspaper reported July 4 that a private detective working for the News of the World deleted messages from the voicemail of murdered schoolgirl Milly Dowler in 2002, when Brooks was editor.

Terror Victims

Detectives investigating phone-hacking have contacted the parents of Holly Wells and Jessica Chapman, two girls murdered in eastern England in 2002, the Press Association newswire reported yesterday. Families of the victims of the July 7, 2005, terror bombings in London were also told they may have been the target of phone hacking. Graham Foulkes, whose son David died, told the BBC he was contacted by police yesterday.

“We are no longer talking here about politicians and celebrities. We are talking about murder victims, potentially terrorist victims, having their phones hacked into,” Cameron said. “There is a major police investigation under way. It is one of the biggest police investigations currently under way in our country.”

News Corp. is already facing a trial in January, when a court will decide how much the company should pay in damages to Bryant and four others alleged to be phone-hacking victims, including actor Jude Law. News International has apologized and agreed to pay about 100,000 pounds to settle claims brought by actress Sienna Miller and another 20,000 pounds to former soccer player Andy Gray.

Liberal Democrat lawmaker Simon Hughes said he would ask Ofcom, Britain’s media regulator, this week to consider if News International is fit to hold a broadcasting license. “It would mean the act of merging BSkyB would not be able to go ahead,” Hughes told lawmakers.

Ofcom said in an e-mailed statement it is “closely monitoring the situation and in particular the investigations by the relevant authorities into the alleged unlawful activities.”

--With assistance from Jonathan Browning, Amy Thomson, Andrew Atkinson, Gavin Finch, Anthony Aarons, Colin Keatinge and Benjamin Purvis in London and Chris Reiter in Berlin. Editors: Eddie Buckle, Kenneth Wong.

To contact the reporters on this story: Robert Hutton in London at rhutton1@bloomberg.net; Thomas Penny in London at tpenny@bloomberg.net

To contact the editors responsible for this story: James Hertling at jhertling@bloomberg.net; Kenneth Wong at kwong11@bloomberg.net


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