Arrests at Murdoch Empire Further Rattle Dynasty

The latest arrests at Rupert Murdoch’s British newspaper empire have sparked renewed concerns about whether News Corp will continue to back the papers.

Getty Images News Corp. Chairman Rupert Murdoch looks down as he leaves the One Aldwych Hotel surrounded by his personal security team to speak with reporters after meeting with the family of murdered school girl Milly Dowler on July 15, 2011 in London, England.

The weekend’s arrests of journalists at tabloid the Sun - the best-selling newspaper in the UK and one of Murdoch’s favorite parts of his business - over allegations of bribery has renewed speculation that it may have to be sold.

The general public is unlikely to be as repulsed by reporters slipping police and prison officers money for tipoffs as they were by them hacking into the voicemail of murdered schoolgirl Milly Dowler.

Still, bribery allegations could land News Corp

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[NWSA  Loading...      ()   ] in hot water in the US under the Foreign Corrupt Practices Act, which holds US-based companies to account for bribery and corruption abroad. A preliminary investigation into bribery allegations was launched by the US attorney general last July, as the storm unfolded.

News Corp took on Mark Mendelsohn, an FCPA expert and the deputy chief of the fraud section in the criminal division of the US Department of Justice, last year and have hired plenty of legal muscle to ensure their backs are covered.

The latest arrests came after News International’s Management and Standards Committee passed information to the police investigation, demonstrating that News International is committed to co-operation with the police.

Murdoch is due to fly into London this week in a show of solidarity with the paper, one of his first major purchases back in the 1970s. News International insist this is one of the several scheduled visits he makes to his London division every year – and he was in the News International offices around this time in 2011 – yet the timing is an interesting coincidence.

Sources at the Sun and The Times speak of a demoralized staff facing further scandal and cuts at a dangerous time for the newspaper industry. Murdoch inspires fierce loyalty in his employees, who see him as one of the last of the old-fashioned newspaper owners, and the News International stable contains many – including John Kay, one of the Sun reporters arrested at the weekend – who have been with the company for decades.

Threat to Press Freedom?

Times editor James Harding admitted in front of the Leveson inquiry – set up last July to investigate the role of the press and police in the phone-hacking scandal and chaired by Lord Justice Leveson- that a junior reporter hacked into a blogger’s email account, which could be extremely serious for the newspaper.

Trevor Kavanagh, the legendary former Sun political editor, issued an impassioned defence of the paper in Monday’s edition.

He warned: “A huge operation driven by politicians threatens the very foundations of a free Press.”

“It is also important our parent company, News Corp, protects its reputation in the United States and the interests of its shareholders. But some of the greatest legends in Fleet Street have been held, at least on the basis of evidence so far revealed, for simply doing their jobs as journalists on behalf of the company,” he added.

No matter what Murdoch’s emotional commitment to the Sun, it is still a very small cog in the News Corp machine. All the UK newspapers combined still account for just 3 percent of News Corp’s operating profit, and with $104 million incurred in just six months last year from legal fees and payouts related to phone hacking, it seems increasingly troublesome.

And it would be much easier to sell at a profit than the loss-making Times or Sunday Times. Rival tycoon Richard Desmond, owner of television station Channel 5 and the Daily Express, has already publicly stated his interest in owning the newspaper.