James Murdoch quits at News Corp. in phone-hacking scandal
— -- Britain's expanding phone-hacking scandal claimed its highest-profile executive Wednesday when James Murdoch resigned as the head of News Corp.'s embattled British newspaper division.
It's unclear how Murdoch's move will affect succession plans at the global media giant, where Murdoch's 80-year-old father, Rupert Murdoch, holds a tight grip.
The move appears to solidify — at least for the short term — News Corp. President Chase Carey's role as Rupert Murdoch's successor. "It clarifies management structure at the company," says media stock analyst Thomas Eagan of investment bank Collins Stewart. "Wall Street likes Carey."
News Corp. shares jumped nearly 1.5% in early trading to a 52-week high before closing virtually flat at $20.29.
Hacking was under his watch
The younger Murdoch, 39, was long considered heir apparent to head News Corp., a media empire with U.S. holdings including Fox News, film studio Twentieth Century Fox and The Wall Street Journal. But that was before revelations that, under his watch, Britain's daily News of the World had illegally intercepted the telephone messages of thousands of British politicians, the royal family, athletes, celebrities and Milly Dowler, a missing teen whose remains were found six months later.
News Corp. paid Dowler's family more than $2 million after it was revealed that a private investigator hired by NOTW deleted some messages on Dowler's phone, giving false hope to her family that the 13-year-old was still alive. British actors Jude Law and Sienna Miller and other high-profile hacking victims also have received financial settlements.
The controversy resulted in the closure of News of the World and the resignations of several company executives, 15 arrests in Britain and ongoing government investigations into suspected wrongdoing by current and former employees. It also forced both Murdochs to testify before a British parliamentary committee.
James Murdoch has twice publicly changed his story about what he knew, and when, in the scandal. In dramatic testimony before Parliament last year, he insisted he had never been shown a critical piece of evidence that suggested that illegal practices went much further than News Corp. had admitted.
That evidence, an incriminating e-mail recovered by police, was the basis of a $1.4 million payout to settle a 2008 phone-hacking lawsuit. James Murdoch authorized the settlement but insisted he was never told about the damning e-mail.
Contradicted by his former lieutenants, Murdoch later had to return to Parliament to adjust his testimony. He said he was told about the evidence but wasn't told why it was important. Another document uncovered since then has cast doubt on that explanation as well.
"James' resignation was inevitable," says Boston University journalism professor Louis Ureneck. "He either condoned the hacking or was irresponsibly unaware. Neither is acceptable in a top executive of a media company."
Wednesday's announcement came after fresh allegations by British investigators that the other top-selling British tabloid owned by News Corp., The Sun, had a long history of bribing government and police sources for news tips. On Monday, News Corp. paid nearly $1 million, a record, to former teen soprano sensation Charlotte Church and apologized for hacking her phone.
He remains chairman of BSkyB
The bribery allegations could come back to haunt News Corp. The U.S. Justice Department is investigating the company for possible violations of an American law that makes it a crime for a U.S.-based company to bribe foreign officials.
News Corp. spokesman Jack Horner declined comment.
James Murdoch remains chairman of News Corp.'s BSkyB satellite TV subsidiary and a senior executive based at New York headquarters. He will "continue to assume a variety of essential corporate leadership mandates, with particular focus on important pay-TV businesses and broader international operations," Rupert Murdoch said in a statement.
Although James Murdoch continues to hold a large stake in News Corp.'s voting shares, Murdoch family biographer Michael Wolff, author of The Man Who Owns the News, says the hacking scandal effectively sidelines him from ascending to CEO anytime soon. "His relationship with the company is by no means finished," Wolff says, "but he's still in incredible legal jeopardy, and it would seem unlikely that he gets out of this cleanly."