The Guardian reports: One of Rupert Murdoch’s most senior European executives has resigned following Guardian inquiries about a circulation scam at News Corporation’s flagship newspaper, the Wall Street Journal.

The Guardian found evidence that the Journal had been channelling money through European companies in order to secretly buy thousands of copies of its own paper at a knock-down rate, misleading readers and advertisers about the Journal’s true circulation.

The bizarre scheme included a formal, written contract in which the Journal persuaded one company to co-operate by agreeing to publish articles that promoted its activities, a move which led some staff to accuse the paper’s management of violating journalistic ethics and jeopardising its treasured reputation for editorial quality.

Internal emails and documents suggest the scam was promoted by Andrew Langhoff, the European managing director of the Journal’s parent company, Dow Jones and Co, which was bought by Rupert Murdoch’s News Corporation in July 2007. Langhoff resigned on Tuesday.

The Guardian reports:

James Desborough, an award-winning reporter at the former News of the World newspaper, has been arrested by officers investigating the phone-hacking scandal.

Desborough was arrested on suspicion of conspiring to intercept communications, contrary to section 1 (1) of the Criminal Law Act 1977 after arriving at a south London police station on Thursday morning at 10.30am. He had arrived at the station by appointment for questioning about criminal activities at the paper.

The allegations are believed to relate to events prior to Desborough being promoted to be the newspaper’s Los Angeles-based US editor in April 2009.

He was given the job less than a month after winning the British Press Award for showbusiness reporter of the year.

His move to the US makes his arrest, the 13th made by Operation Weeting, particularly significant. If Desborough was involved in hacking while in Britain, as police appear to believe he was, it raises the question of whether he practised those techniques in the US – and if so, whether he was the first and only News of the World journalist in the US to do so.

Meanwhile, News Corp shareholders have been warned about the cost of phone hacking.

Rupert Murdoch’s News Corporation has warned that it is “not able to predict the ultimate outcome or cost” of the phone-hacking scandal, admitting it could “impair” its ability to conduct its business.

In its annual report filed on Wednesday, News Corp said its reputation could be damaged by the crisis that has engulfed the company and led to the closure of the News of the World.

The report also revealed that Freud Communications, the public relations firm run by Matthew Freud, Rupert Murdoch’s son-in-law, was paid $202,000 (£122,000) by News Corp in the financial year ended 30 June 2011 for “press and publicity activities”.

News Corp, which is the subject of a wide-ranging FBI investigation, said it was “not able to predict the ultimate outcome or cost” of the police investigations and civil actions related to alleged unlawful activity.

“UK and US regulators and governmental authorities are conducting investigations after allegations of phone hacking and inappropriate payments to police at our former publication, News of the World, and other related matters, including investigations into whether similar conduct may have occurred at the company’s subsidiaries outside of the UK,” said News Corp in its report.

“The company is co-operating fully with these investigations. It is possible that these proceedings could damage our reputation and might impair our ability to conduct our business.”

The Guardian reports:

Five years ago Robert Emmel was enjoying the American dream. He lived in a detached house in a suburb of Atlanta, Georgia, drove a BMW, and earned $140,000 a year as an accounts director in a highly successful advertising company called News America Marketing.

Today, Emmel is described by his lawyers as destitute. Jobless and in debt, he was discharged from bankruptcy last year. He does occasional consultancy work that last month brought in $500, and this month, court documents show, will probably produce nothing. His wife’s earnings raise monthly household income to about $3,000 – half their outgoings.

This is a cautionary tale about what can happen to someone who dares to become a corporate whistleblower. Or, more specifically, someone who incurs the wrath of News Corporation, the media empire owned by Rupert Murdoch, of which News America forms a part.

Emmel’s lawyer, Philip Hilder, has had a ringside seat at the gradual unravelling of his client’s life. A former federal prosecutor based in Houston, Texas, Hilder is well versed in whistleblower cases having represented Sherron Watkins, who helped uncover the Enron scandal. Hilder said: “News America has engaged in Rambo litigation tactics. They have a scorched earth policy, and it’s taken a huge toll on him.”

News Corp has devoted the efforts of up to 29 lawyers to pursuing Emmel personally, at a cost estimated at more than $2m. Emmel, by contrast, has relied on two lawyers, Hilder and Marc Garber in Atlanta, working for no pay since January 2009.

Attention has been focused on News Corporation’s activities in the UK, where the News of the World phone-hacking scandal has led to the arrest of 10 people associated with the company. In the US, oversight of News Corp is gathering pace with the department of justice and the FBI looking into the company, while senators are considering launching committee hearings into News Corp practices.

One incident that US investigators are exploring is the hacking of a website run by one of News America’s rivals, an instore advertising business called Floorgraphics. The firm discovered that its password-protected site had been breached from an IP address at News America’s offices in Connecticut. News America has condemned the breach as a “violation of the standards of our company” but says it does not know how it happened.

Emmel was one of the main witnesses for Floorgraphics at a subsequent trial against his old company. He worked for News America for seven years from 1999 to 2006, turning whistleblower in his final year there. The company is the leading US provider of in-store advertising services, helping to bring products from firms such as Coca-Cola, Kraft and Nabisco to the attention of supermarket shoppers. Headed by Paul Carlucci, who now publishes Murdoch’s tabloid the New York Post, it enjoys annual revenues of more than $1bn and has a 90% stranglehold on the market. News America also has a record of legal disputes with its commercial rivals, three of whom have launched lawsuits against it in recent years accusing the firm of using unlawful practices.

All three lawsuits – including the Floorgraphics one and cases initiated by Valassis and Insignia – were eventually settled, but not before News America agreed to pay an astounding $655m to end the disputes. Emmel acted as a whistleblower in all three cases. He gave two days of evidence in the Floorgraphics trial after which News America rapidly settled, and was also named in the Valassis and Insignia cases.

The Guardian reports:

Rupert Murdoch, James Murdoch and their former editor Andy Coulson all face embarrassing new allegations of dishonesty and cover-up after the publication of an explosive letter written by the News of the World’s disgraced royal correspondent, Clive Goodman.

In the letter, which was written four years ago but published only on Tuesday, Goodman claims that phone hacking was “widely discussed” at editorial meetings at the paper until Coulson himself banned further references to it; that Coulson offered to let him keep his job if he agreed not to implicate the paper in hacking when he came to court; and that his own hacking was carried out with “the full knowledge and support” of other senior journalists, whom he named.

The claims are acutely troubling for the prime minister, David Cameron, who hired Coulson as his media adviser on the basis that he knew nothing about phone hacking. And they confront Rupert and James Murdoch with the humiliating prospect of being recalled to parliament to justify the evidence which they gave last month on the aftermath of Goodman’s allegations. In a separate letter, one of the Murdochs’ own law firms claim that parts of that evidence were variously “hard to credit”, “self-serving” and “inaccurate and misleading”.

Nicholas Wapshott writes:

The first letter, from News of the World royal reporter Clive Goodman, who became the patsy for the affair, gives the lie to the suggestion to Parliament by Murdoch’s most trusted retainer Les Hinton that phone hacking was the work of a single rogue reporter. In the letter, Goodman lets slip that “the actions … were carried out with the full knowledge and support” of some of the paper’s other journalists and that “other members of staff were carrying out the same illegal procedures.” The names of those others have been redacted for now, at the request of Scotland Yard, for fear of jeopardizing a prosecution.

Prime Minister David Cameron’s judgment is also called into question by the letter. The socially remote Cameron felt he could not connect with humdrum voters and hired Andy Coulson, top editor at the News of the World when the hacking took place, to explain his government’s policies in language the ordinary person could understand. Cameron says he hired the tainted Coulson because Coulson denied knowing of the illegality going on under his nose. But Goodman reports that hacking “was widely discussed in the daily editorial conference, until explicit reference to it was banned by the Editor [Coulson].” The “smoking gun” letter makes Cameron look naïve and gullible for being taken in so easily.

As in the Watergate affair, the coverup is becoming as important to understanding the culture within Murdoch’s business, and the failure of corporate governance by the board, as the crimes themselves. The Commons media committee received two copies of the Goodman letter, one from News International lawyers Harbottle & Lewis, who were released from their confidentiality after sharp questioning of James Murdoch by committee members Paul Farrelly and Tom Watson. News International executives repeatedly tried to have Watson removed from the committee, and when they failed ran vicious stories about him.

While Harbottle & Lewis redacted a single line from the Goodman letter, at the request of the police, a second copy was issued by News International, on the instructions of James Murdoch. This version not only redacts the names of other employees implicated in the crime but also blots out the sentence saying Coulson openly spoke about the hacking in editorial meetings. Further, it blanks the section that shows that Murdoch’s company wanted to buy Goodman’s silence: “[H.R. director] Tom Crone and the Editor [Coulson] promised on many occasions that I could come back to a job at the newspaper if I did not implicate the paper or any of its staff in my mitigation plea. I did not, and I expect the paper to honour its promise to me.”

A second letter also provides evidence of a coverup of the original crime. At the Commons hearing in July, questioning centred on what Rupert and James Murdoch knew about a Harbottle & Lewis investigation into thousands of e-mails that showed extensive use of hacking by Murdoch journalists in which the legal firm appeared to clear the company of permitting wrongdoing. James Murdoch used the letter to suggest that he had no reason to believe criminality was widespread. Released from its confidentiality, however, Harbottle & Lewis has now revealed that it was never asked to comment on whether they found that the hacking was prevalent, only whether Goodman had been ordered to hack by others. “There was absolutely no question of the firm being asked to provide News International with a clean bill of health which it could deploy years later in wholly different contexts for wholly different purposes,” it writes. “Nor was it being given a general retainer, as Mr. Rupert Murdoch asserted it was, ‘to find out what the hell was going on.’” They found James Murdoch’s attempt to hide behind their letter “hard to credit” and Rupert Murdoch’s assertion “inaccurate and misleading.”

David Carr writes:

Over the last month, many Americans watched from a distance in horror or amusement as it became evident that the News Corporation regarded Britain’s legal and political institutions as its own private club.

That could never happen in the United States, right?

As it turns out, a News Corporation division has twice come under significant civil and criminal investigations in the United States, but neither inquiry went anywhere. Given what has happened in Britain with the growing phone-hacking scandal, it is worth wondering why.

Both cases involve News America Marketing, an obscure but lucrative division of the News Corporation that is a big player in the business of retail marketing, including newspaper coupon inserts and in-store promotions. The company has come under scrutiny for a pattern of conduct that includes below-cost pricing, paying customers not to do business with competitors and accusations of computer hacking.

News America Marketing came to control 90 percent of the in-store advertising business, according to Fortune, aided in part by a particularly quick and favorable antitrust decision made by the Justice Department in 1997. That year, the News Corporation announced it wanted to buy Heritage Media, a big competitor, for about $754 million in stock plus $600 million in assumed debt. The News Corporation said it would sell the broadcast properties and hang onto the marketing division, which serviced 40,000 groceries and other retailers.

The deal would make News America Marketing the dominant player in the business and, for that reason, the San Francisco field office of the Justice Department recommended to Washington that the News Corporation’s takeover bid be challenged on antitrust grounds. Typically, such a request from a field office would carry great weight in Washington and, at a minimum, delay the deal for months.

But the Justice Department brass overrode San Francisco’s objections and gave its blessing in just two weeks. So who ran the antitrust division at the Justice Department at the time? Joel Klein, who this year became an executive vice president at the News Corporation, head of its education division and a close adviser to Rupert Murdoch on the phone-hacking scandal in Britain.

Michael Massing says that now Rupert Murdoch’s media empire is under examination, it’s time to scrutinize Fox News.

Since being launched in 1996, Fox has had a profound and toxic effect on the press and politics in this country. With a daily prime-time viewership of around 2 million—more than that of CNN and MSNBC combined—it has become the Republican Party’s most powerful booster. “Republicans originally thought that Fox worked for us, and now we are discovering we work for Fox,” David Frum, a former George W. Bush speechwriter, has observed. Fox has put several Republican presidential hopefuls on its payroll and allowed other candidates to fund-raise on its shows. After appearing on Sean Hannity’s program, for instance, 2010 senatorial candidate Sharron Angle boasted that that she had raised $40,000 before even leaving the studio.

Fox has helped to foster the Tea Party and amplify its message. In the days prior to the nationwide Tea Party gatherings on April 15, 2009, Fox ran more than 100 promos touting both its coverage and the movement. (“Americans outraged over unfair and crippling taxes,” went one. “They fight for their future. Neil Cavuto [a Fox anchor] is giving them a voice.”) The endless publicity given the Tea Party, in turn, helped make possible the sweeping Republican gains in the 2010 midterm elections. According to New York magazine, FOX News president Roger Ailes, disappointed with the Republican presidential field, called New Jersey Governor Chris Christie to urge him to enter the race—one of a number of king-making bids by Ailes, who, the magazine observed, has in a sense become “the head of the Republican Party.”

Unlike the News of the World, there’s no indication (as of now) that Fox has engaged in illegal activity. What it has done is violate every journalistic and ethical standard. It has promoted preposterous conspiracy theories, peddled blatant falsehoods, and given a soapbox to all sorts of cranks and crackpots. It ballyhooed President Obama’s “terrorist fist jab,” spread false reports that he attended a madrasa, gave Donald Trump a platform for questioning the president’s US citizenship, and endlessly promoted “Climategate,” the faux-controversy surrounding the leak of emails from climate specialists at the University of East Anglia in England. According to a public-opinion study released six months after the invasion of Iraq, 67 percent of regular Fox viewers believed that the United States had found clear evidence that Saddam Hussein had worked closely with al-Qaeda; another poll released last December reported that 60 percent of Fox viewers believe that most scientists have concluded that climate change is not occurring—examples of how the network has contributed to the steady seepage of know-nothingness throughout the American body politic.

David Beetham writes:

The News International scandal has rightly caused public outrage and led to a sea-change in relations between UK politicians and media moguls. Yet Murdoch’s empire has been only part of a much wider structure of unaccountable power which has exercised a dominant influence over British politics and policy making in the past two decades or more. This ‘unelected oligarchy’ extends to the corporate sector as a whole, including the major financial and banking institutions.

To be sure News International has been unique in its descent to pervasive illegality to maximise sales and profits. Yet it shares the same features that have compromised British democracy from across the corporate sector. These include the use of offshore tax havens, complex legal entities and transfer pricing to minimise the tax contribution of businesses to our public services. They have shared a common anti-public sector agenda which has shaped public opinion and government policy alike: privatisation and outsourcing of government functions and services; cutting the ‘burden’ of government regulation and promoting self-regulation; lowering taxes, especially on business and the wealthy; remedying the deficit in public finances in short order. This agenda has become embedded at the heart of government through a range of corporate stratagems – personal contact with politicians, lobbying power, financing political parties and think tanks, the ‘revolving door’ between business and government appointments, joint partnerships, corporate hospitality, and so on – which have brought governments of all parties under their sway.

The Guardian reports:

Glenn Mulcaire, the private investigator at the centre of the News of the World phone-hacking scandal, has said that he only ever acted on instructions from his employers.

The day after revelations that Sara Payne’s phone may have been targeted by Mulcaire, who worked for the News of the World for several years before being jailed for intercepting voicemail messages in early 2007, the statement issued by his solicitors firmly pushed the spotlight back on his former News International employers.

Mulcaire said he was “effectively employed” by the News of the World from 2002 until 2007 “to carry out his role as a private investigator”.

“As he accepted when he pleaded guilty in 2007 to charges of phone interception he admits that his role did include phone hacking. As an employee he acted on the instructions of others,” said the statement.

“There were also occasions when he understood his instructions were from those who genuinely wished to assist in solving crimes. Any suggestion that he acted in such matters unilaterally is untrue. In the light of the ongoing police investigation, he cannot say any more.”

Reuters reports:

Rupert Murdoch’s biographer says the Murdoch family will no longer be running News Corporation in 60 days’ time, and predicts a massive shake-up at the company as it tries to detach itself from a family name he describes as “toxic.”

“I think actually the Murdochs have to and will step out of not only day-to-day running, but they won’t have jobs within the company,” writer Michael Wolff told Reuters Insider TV late on Thursday.

Wolff said the days of embattled News Corp chief Rupert Murdoch and his son James were numbered because of their handling of a phone hacking scandal that has engulfed the U.S. company’s British newspaper operations.

He said he expected them to step down within two months.

“To restore credibility and to restore trust to this company, the newspapers have to go and the Murdochs have to go,” said Wolff, a Vanity Fair columnist and editorial director of advertising industry magazine Adweek.

The New York Times reports:

Britain was awash in a new surge of outrage over the phone hacking scandal on Thursday as news emerged that Scotland Yard had added to the list of probable victims a woman whose 8-year-old daughter was murdered by a repeat sex offender in 2000.

The tabloid at the center of the scandal, The News of the World, aggressively championed the campaign of the grieving mother, Sara Payne, for a law warning parents if child sex offenders lived nearby. Mrs. Payne had written warmly of the paper in its final issue, calling it “an old friend.”

A statement released on behalf of Mrs. Payne by the Phoenix Foundation, a children’s charity she founded, described her as devastated and disappointed.

“Today is a very sad dark day for us,” the charity added in a posting on Facebook. “Our faith in good people has taken a real battering.” Other postings noted that she was struggling in light of the July 1 anniversary of her daughter’s abduction and from the effects of a stroke she suffered 19 months ago, which paralyzed her left side.

The Guardian was the first to report Scotland Yard’s alert to Mrs. Payne, but the e-mail newsletter Popbitch suggested earlier this month that Mrs. Payne’s voice mail had been hacked and that the phone in question might have been provided to her by Rebekah Brooks, then the editor of The News of the World.

In a statement, Ms. Brooks confirmed that The News of the World had provided Mrs. Payne with a cellphone “for the last 11 years” as part of the campaign for the law, but said that “it was not a personal gift.” She said that she found the allegations that Mrs. Payne’s voice mail had been hacked “abhorrent and particularly upsetting, as Sara Payne is a dear friend.” In recent testimony on the scandal in Parliament, Ms. Brooks cited the measure named after Mrs. Payne’s daughter, Sarah’s Law, as evidence of the good she had done in her years at the tabloid’s helm.

Geoff Colvin at Forbes writes:

Some people aren’t at all surprised by the unending scandal at Rupert Murdoch’s News Corp. They are the investors, insurers, lawyers, and others who had read the “Governance Analysis” report on the company from The Corporate Library, a research firm. The firm grades companies’ governance from A to F, and for the past six years News Corp. has received an F — “only because there is no lower grade,” says Nell Minow, who co-founded The Corporate Library in 1999 on the premise that governance “can be rated like bonds, from triple-A to junk.” News Corp.’s overall risk, says the prophetic report: “very high.” Risk of class-action securities litigation: “very high.” Scandal-related lawsuits are already piling up.

For those who think corporate governance is the concern of prissy do-gooders who don’t understand real-world business, News Corp. (NWS) is the latest example that the truth is just the opposite: Governance is the foundation of real-world business. If it isn’t solid, trouble is inevitable. For News Corp., it’s the reason the trouble is far from over.

News Corp.’s variety of lousy governance is simple — one man exerts control wildly out of proportion to his stake in the business.

At The New Yorker, Anthony Lane describes how a tabloid culture runs amok.

On March 21, 2002, a thirteen-year-old English schoolgirl took the train home. Usually, she took it all the way to Hersham, seventeen miles from London, where she lived, but on that day she got off one stop before, at Walton-on-Thames, to get something to eat. From that decision flowed two events, one terrible and final, the other more ambiguous and by no means complete. The first was the death of the girl, whose name was Milly Dowler. Walking home from Walton, she was abducted and murdered by a man named Levi Bellfield. Her body was found six months later, in a field twenty-five miles away, by mushroom pickers. The second consequence has been the fraying of an empire, and the sight of its emperor under siege. Many people have dreamed of such a day; far fewer would have predicted the swiftness with which it arrived; others view it as an overreaction tinged with hypocrisy and hysteria; and only the unworldly would claim that the end is nigh. Empires strike back.

The emperor is, of course, Rupert Murdoch, the chairman and C.E.O. of News Corporation; the owner of Twentieth Century Fox, Fox News, and the Wall Street Journal; the proprietor, in Britain, of the Times, the Sunday Times, and the Sun, and the holder of a 39.1-per-cent stake in BSkyB, the country’s leading satellite-broadcasting company; an Australian by birth and an American by choice; the proud father of six children; the thirty-eighth-richest person in this country; and, in the words of his mother, the adamantine Dame Elisabeth Murdoch, now a hundred and two years old, “that wretched boy of mine.” Never underestimate the wish, in the heart of a child, even a child aged eighty, to please the matriarch and prove himself less wretched in her eyes. It takes only three minutes, near the start of “Citizen Kane,” to shift from the stony stare of Mrs. Kane, as she watches young Charles leave forever, to the bullish proposal of the grown lad: “I think it would be fun to run a newspaper.”

The Guardian reports:

Former staff at the News of the World are understood to be underwhelmed by efforts by News International to find them work after they were handed a list of potential jobs which included posts in Siberia, Russia and Dubai.

Some former News of the World journalists said that former News International chief executive Rebekah Brooks’ promise that as many staff as possible would be redeployed is proving an empty gesture as the vast majority of the alternative jobs being discussed are either non-editorial or entail a move abroad.

A job list given to ex-NoW staff include exotic positions such as oil reporter or “symbology analyst – Russian language” for parent company News Corporation’s Dow Jones wire service and “materials manager” for Fox in Siberia.

“The idea that you would go from the News of the World to becoming an oil reporter for Dow Jones, a high end financial wire service, is laughable,” said one former employee.

And:

The editor of the Times, James Harding, has admitted that News International’s handling of the phone-hacking crisis was “catastrophic” and that it impacted on the paper’s sales.

Harding said readers had cancelled subscriptions to the Times and to digital versions of the paper in the immediate aftermath of the revelations about Milly Dowler’s phone allegedly being hacked by News International sister title the News of the World.

Asked whether News International would recover and if he still felt the way the company had reacted had been “catastrophic”, as described by one of his paper’s leader columns, he said: “Yes, I think that would be a pretty descriptive word for what it happened and the struggle they had in getting to grips with it.”

And Roy Greenslade writes:

News Corporation is certainly counting the cost of Wapping’s phone hacking scandal. Top lawyers don’t come cheap.

According to The Lawyer magazine, the barrister hired by the media company for his legal advice, Lord Grabiner QC, commands fees of £3,000 an hour.

The Daily Telegraph reports:

Piers Morgan, the CNN broadcaster, has said that newspaper articles based on the findings of people paid to tap phones and rake through bins were published during his time as a tabloid newspaper editor, it can be disclosed.

Mr Morgan, a former News of the World and Daily Mirror editor who is now a high-profile television presenter in the US, has spent the past week categorically denying ever printing material derived from phone hacking.

He spoke out after being accused by a Conservative MP and political bloggers of being involved in the phone hacking scandal that has engulfed Rupert Murdoch’s media empire, for which he used to work.

“For the record, in my time at the News of the World and the Mirror, I have never hacked a phone, told anyone to hack a phone, or published any stories based on the hacking of a phone,” he said last week on CNN, where he now hosts a talk-show.

But it has emerged that Mr Morgan gave a notably different response when asked during an interview with the BBC about his potential involvement in covert “gutter” journalistic practices during his time as a tabloid editor between 1994 and 2004.

“What about this nice middle-class boy, who would have to be dealing with, I mean essentially people who rake through bins for a living, people who tap people’s phones, people who take secret photographs, who do all that nasty down-in-the-gutter stuff,” he was asked on BBC’s Desert Island Discs in June 2009. “How did you feel about that?”

Mr Morgan replied: “To be honest, let’s put that in perspective as well. Not a lot of that went on. A lot of it was done by third parties rather than the staff themselves. That’s not to defend it, because obviously you were running the results of their work.

“I’m quite happy to be parked in the corner of tabloid beast and to have to sit here defending all these things I used to get up to, and I make no pretence about the stuff we used to do,” he told the programme’s host, Kirsty Young.

“I simply say the net of people doing it was very wide, and certainly encompassed the high and low end of the supposed newspaper market.”

Meanwhile, The Guardian reports:

Sir Hugh Orde, the president of the Association of Chief Police Officers, has lambasted Rupert Murdoch, saying the chairman of News Corporation had shown a complete denial of responsibility for what had gone on in his company.

He contrasted Murdoch’s behaviour with the leadership shown by Sir Paul Stephenson, the Metropolitan police commissioner who quit last week over his indirect links with former News of the World editors.

Orde is tipped as a possible replacement for Stephenson, and it is the second time in a few days that he has attacked the irresponsibility of News Corps.

Speaking on the BBC’s Andrew Marr programme, Orde said “You saw the chief officer of the police service of this country, Sir Paul Stephenson, saying, ‘Look this happened on my watch. I am responsible. I am therefore … It’s on my watch. I am resigning.’ Compare that to Rupert Murdoch – complete denial of any responsibility of his organisation.”