Protégée's acquittal boosts Murdoch, but spell over UK politics broken

LONDON Tue Jun 24, 2014 6:53pm IST

Rupert Murdoch arrives at the Time 100 gala celebrating the magazine's naming of the 100 most influential people in the world for the past year, in New York April 29, 2014. REUTERS/Lucas Jackson/Files

Rupert Murdoch arrives at the Time 100 gala celebrating the magazine's naming of the 100 most influential people in the world for the past year, in New York April 29, 2014.

Credit: Reuters/Lucas Jackson/Files

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LONDON (Reuters) - The acquittal of Rupert Murdoch's protegee over phone hacking at his News of the World tabloid is a relief for the 83-year-old tycoon and his businesses, although his 40 year spell over British politics is probably still broken for good.

A jury on Tuesday found former News of the World editor Andy Coulson guilty of conspiracy to hack into voicemail messages. But Murdoch's protegee Rebekah Brooks was cleared of those charges, as well as accusations of making illegal payments to officials and perverting the course of justice.

That suggests that illegal activity - rampant at the tabloid in its hunt for scoops about the rich and famous - had not penetrated deep into senior management at Murdoch's News Corp., and may reduce the risk that Murdoch's global businesses could face corporate charges in Britain or in the United States.

But Murdoch will probably never again hold the influence he once had, symbolised by Coulson who had moved from the editorship of the News of the World into Downing Street as Prime Minister David Cameron's media chief.

Cameron apologised on Tuesday for ever employing him.

"I don't think you can expect members of the Murdoch family to be in and out of Downing Street anytime soon," said Paul Farrelly, a lawmaker with the opposition Labour Party and a member of the parliamentary group that investigated the scandal.

Murdoch's $86 billion media empire is now well prepared for any further claims. Arguably, the restructuring that followed the scandal has only made the businesses stronger.

On the advice of some of the most prominent lawyers in the United States, Murdoch set up a committee to investigate his own staff and help the police. To appease investors, he split his firm to separate the more profitable assets from the problematic newspapers, and he bought back shares, boosting their value.

He remains chairman of both companies - 21st Century Fox (FOXA.O) which owns cable networks and News Corp (NWSA.O) which retains the publishing assets - while his two sons Lachlan and James sit on both boards.

"His political clout is no longer evident," former Murdoch editor Roy Greenslade said. "But if we use the metaphor of a liner hitting an iceberg, he has managed to patch it up so successfully it is sailing on into the future.

"He's still the captain on the bridge. And given his age and the fact it was the most humble day of his life, he's survived in remarkable spirits."

The future even looks brighter for News UK, the organisation that rose from the ashes of the British newspaper arm.

The daily Sun tabloid, while losing readers in line with all British newspapers, is still the country's biggest selling title with over 2 million copies sold a day. The weekly News of the World, shut down because of the scandal, has been replaced by a new Sunday edition of the Sun. Emails that were read out in court revealed that move had in fact been long planned anyway.

News Corp, which includes newspapers, publishing and an educational business, has a market value of nearly $10 billion. Fox, with its cable TV and film assets, is worth $76 billion.

DRASTIC ACTIONS

The scandal was the biggest setback Murdoch has ever faced. One former senior News Corp. executive, speaking on condition of anonymity, said Murdoch had taken his eye off the ball when the trouble hit his British newspapers.

With his four titles dominant, the market saturated and British politics stable, Murdoch's attention had turned elsewhere. In 2007, he bought Dow Jones, and the jewel in the crown: the Wall Street Journal.

"He lost interest in the UK and that was a real turning point," the former senior News Corp. executive told Reuters.

Much has happened since the tumultuous days of July 2011, when revelations emerged that the News of the World had illegally eavesdropped on phone messages of just about anyone who might make headlines, from movie stars to cabinet ministers to a teenaged murder victim.

Murdoch shut the 168-year-old News of the World, the paper that had first brought him to Britain and helped launch an expansion that results in today's sprawling global empire.

Despite the relatively small size of the British newspaper operations in its global media empire, the scandal wiped billions of dollars off his company's market valuation and threw the media magnate's position into jeopardy for the first time.

The business consequences went far beyond newspapers: Murdoch was forced to abandon a politically sensitive $12 billion bid to buy out the share he did not own of highly cash generative British pay TV company BSkyB.

He responded to the hit to News Corp's reputation by cooperating with the authorities. The firm set up the committee to investigate its own staff and employed some of the most experienced lawyers on both sides of the Atlantic.

Sources familiar with the operation told Reuters at the time that some 100 personnel from several of London's top law firms worked alongside forensic advisers and computer experts to search through more than 300 million emails, expense claims, phone records and other documents within the company.

Some 15 police officers were embedded within the team.

The result was an angry backlash from journalists, who accused the company of sacrificing its staff to protect itself. One unidentified executive was famously quoted as saying they were "draining the swamp".

In its defence, the company said it was trying to help the police, although by May 2012 it ended its cooperation when it became clear the firm itself could face potential legal action.

In a London meeting in March 2013 designed to improve the strained relations with employees, Murdoch dropped his profuse public apologies to rail against the authorities.

"Why are the police behaving in this way?" he told the staff. "It's the biggest inquiry ever, over next to nothing."

Critics at the time said the remarks proved he had never been sincere in his efforts to make amends.

PERSONAL PAIN

Although his grip on his business empire is now in no doubt, away from the boardroom Murdoch's position is less certain, with his peculiar hold over British politics likely broken for good.

Ever since Margaret Thatcher's Conservative Party took office in 1979, the shadow of Murdoch has hung over the corridors of power in the Westminster seat of government.

"No one could be closer than her (to Murdoch)," Norman Fowler, a minister in Thatcher's government, told Reuters, recalling how she believed Murdoch could help get her Conservatives into power and keep them there.

Over time politicians came to believe that his Sun, News of the World and Times titles could help decide an election.

In 1995, Tony Blair of the centre-left Labour Party flew across the world to address a News Corp. event on Hayman Island off Australia. Two years later he took power, with the backing of Murdoch's right-leaning Sun.

"If the British press is to be believed, today is all part of a Blair-Murdoch flirtation," the tycoon told the event. "If that flirtation is ever consummated, Tony, I suspect we will end up making love like two porcupines - very carefully."

The careful courtship continued for years: among revelations at the Brooks and Coulson trial was that Blair, no longer in power, was giving personal advice to Brooks at the height of public revulsion over wrongdoing at the News of the World.

In 2008, the then-opposition Conservative leader David Cameron interrupted a family holiday to fly out to the Greek Island of Santorini to meet Murdoch on his yacht.

Two years later, Cameron was elected prime minister with Coulson as his media chief. Murdoch was one of the first to meet the new leader, entering through Downing Street's back door.

Murdoch's critics, including business rivals and some politicians, have long held that he used those close ties to further his corporate ambitions, a charge he has always denied.

"Things can't go back to what they were before," said Damian Collins, a lawmaker in Cameron's Conservative party who was also on the media committee. "There is now more transparency. That's part of the hangover of the hacking affair."

At a public inquiry set up to investigate the ethics of the press in the wake of the hacking scandal, Murdoch said he had never asked a prime minister for anything and dismissed suggestions he used the Sun to gain political influence.

Still, the papers answered to their owner. Former staff told Reuters they knew to follow the Murdoch line. Editors recalled how he would ring to find out what the big stories were.

"It would be a grave mistake to believe that because the Murdoch empire has had its wings clipped that somehow the influence doesn't exist," a senior cabinet minister under Blair who was targeted by News of the World hackers told Reuters.

(Editing by Peter Graff)

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