Explainer: Your 5-minute guide to the News Corp. phone hacking scandal
If you haven’t closely followed the News of the World phone hacking scandal, it can be difficult to grasp the magnitude of it. So, we’ve created an explainer that highlights the key implications of the scandal and the key players and organizations involved. You can also follow our @NOTWfallout Twitter feed for the latest updates.
Earlier this month, the British public, Parliament and police responded with shock to revelations that journalists at British tabloid News of the World had illegally accessed voice mails and bribed law enforcement officers. Though this practice had been investigated previously, new information about phone hacking victims intensified the response.
The business implications for News Corp.
When Rupert Murdoch announced that he was shutting down News of the World following the phone hacking scandal, many believed it was a smart business decision. Now some suspect that Murdoch’s News Corp. -- one of the world’s largest media conglomerates -- will have to get out of the U.K. newspaper business to save itself.
The $41 billion company’s value fell 13 percent as of last week, and shares have been dropping. Standard & Poor's put the company on its CreditWatch list due to the scandal.
The scandal also led the company to withdraw its $12 billion bid for the remaining shares of British Sky Broadcasting, which it had been trying to acquire for more than a year. There are questions about whether James Murdoch will continue as chairman of BSkyB. And there is speculation about whether Rupert Murdoch will step down as News Corp. CEO and appoint COO Chase Carey to the position.
The political implications
The scandal has stirred an outrage in British Parliament as legislators denounced The News of the World’s reporting tactics. British Prime Minister David Cameron -- who himself is under fire for hiring former News of the World editor Andy Coulson as his press chief in 2007 -- requested that Rupert and James Murdoch appear before Parliament. They initially declined the request but have since accepted it. They testified Tuesday morning, along with Rebekah Brooks, former editor of News of the World and former head of Murdoch's News International, which operates his British papers.
During his testimony Rupert Murdoch said, "This is the most humble day of my life." He explained that News of the World is less than 1 percent of his company and employs over 50,000 people around the world, so he was unaware of detailed actions. He was asked directly whether he was responsible for his company's wrongdoing and he said no. The people he trusted and the people they trusted were responsible. Murdoch's testimony was briefly interrupted when a man attacked him with a shaving cream pie. (Watch archived video.)
Across the pond, several members of Congress have called for investigations into News Corp.’s dealings in the U.S. West Virginia’s Jay Rockefeller was the first to call for an investigation, saying the government needs to “ensure that Americans have not had their privacy violated.” New Jersey’s Robert Menendez has asked Attorney General Eric Holder for an investigation into whether any News Corp. journalists tapped into the phones of 9/11 victims. Holder has confirmed the FBI is investigating.
The legal implications
Nearly a dozen people have been arrested as a result of the scandal, including former News of the World editors Neil Wallis, Andy Coulson, Clive Goodman and Rebekah Brooks.
Former News of the World chief reporter Neville Thurlbeck and former senior editor Ian Edmondson were arrested in April for their role in the scandal. In 2007, former private investigator Glenn Mulcaire served six months in prison for his role in it. While the scandal has been simmering for a few years, the majority of arrests were made after Guardian reporter Nick Davies reported that News of the World had hacked the voicemail of 13-year-old Milly Dowler, giving her family false hope that the missing child was alive.
News Corp. is now bracing for legal trouble in the U.S, including allegations of phone hacking here and possible violations of the US Foreign Corrupt Practices Act for its actions in Britain.
Law enforcement resignations
British police have been under intense scrutiny following allegations that News of the World paid law enforcement officials for information. Police have also been criticized for not prosecuting more people during their original hacking investigation years ago. In the wake of the scandal, Assistant Commissioner John Yates and London Police Chief Paul Stephenson both resigned.
How might this affect other media companies?
Ed Miliband, leader of the Labour Party, has urged an overhaul of media regulation in the U.K., saying large concentrations of power lead to abuses of power. Recently on the “Andrew Marr Show,” Deputy Prime Minister Nick Clegg called for the end of self-regulation by the press.
The scandal has also fueled debate in the U.S. about media ownership and consolidation.
Rupert Murdoch, the 80-year-old chairman and controlling shareholder of News Corp., has defended the handling of the scandal. In an interview with The Wall Street Journal, Murdoch defended News Corp., saying the company has dealt with the controversy “ ‘extremely well in every way possible,’ making just ‘minor mistakes.’ "
Shortly after the WSJ piece ran, British national newspapers ran a full-page company ad signed by Murdoch titled “We are sorry.”
James Murdoch, who is deputy chief operating officer of News Corp., admitted to approving payments to some of the News of the World’s hacking victims but said he “did not have a complete picture” when he approved them. Murdoch has long been the heir apparent to his father’s media empire. His siblings Elisabeth Murdoch and Lachlan Murdoch are also in the family business.
Rebekah Brooks was chief executive of News International from 2009 to 2011 and editor of the News of the World from 2000 to 2003. Following criticism about her suspected role in the controversy, Brooks resigned on July 15 and was arrested two days later. Brooks, who was the first female editor of the Murdoch-owned Sun, has been referred to as “Murdoch’s fiery favorite.”
Les Hinton, the former Dow Jones CEO , resigned on July 15 in the wake of the scandal. Hinton, who worked for Murdoch for 52 years, was chairman of News International during the phone hacking years.
Hinton said in his resignation letter: “That I was ignorant of what apparently happened is irrelevant and in the circumstances I feel it is proper for me to resign from News Corp, and apologize to those hurt by the actions of the News of the World.”
He is the only executive from News Corp.’s American operations to step down.
News Corporation, which is owned by Murdoch, is one of the world’s largest media conglomerates. The company owns The Wall Street Journal, 20th Century Fox, HarperCollins book publishers, along with newspapers in Britain and Australia. News Corporation is the parent company of News International.
Murdoch's British newspapers -- including The Sun and The Times of London -- are overseen by News International.
British Sky Broadcasting
News Corporation owns 39.1 percent of BSkyB and was close to taking over the oustanding percentage of Britain’s largest pay-per-view broadcaster, but decided to drop its $12 billion bid following opposition from the public and politicians. James Murdoch is currently chairman.
The Wall Street Journal
Murdoch purchased Dow Jones, which owns the newspaper, in 2007 from the Bancroft family. In a July 18 editorial, the Murdoch-owned Wall Street Journal redirected criticism of its parent company to journalists who drove coverage of the story. The unsigned editorial, which defends News Corp. and Hinton, says: “We also trust that readers can see through the commercial and ideological motives of our competitor-critics. The Schadenfreude is so thick you can't cut it with a chainsaw.”
News Corp.-owned Fox News has been criticized for staying silent about the News of the World scandal.
Here are a few other explainers that offer background on the scandal:
- The New York Times’ interactive timeline of events
- ProPublica’s readers’ guide to the scandal
- Businessweek infographic of players & connections
What other explainers have you found helpful? Add them in the comments.