London — In a stunning setback after days of building scandal surrounding its British newspaper operations, Rupert Murdoch’s News Corporation announced on Wednesday that it was withdrawing a $12 billion bid to take over the shares it does not already own in Britain’s main satellite television broadcaster.
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Rupert Murdoch left his home in London on Wednesday.
The withdrawal from the bid for complete control of British Sky Broadcasting, also known as BSkyB, represented the most severe damage inflicted so far on Mr. Murdoch’s corporate ambitions by the scandal. Only a week ago, Mr. Murdoch hoped to contain the damage by shutting down his 168-year-old tabloid, The News of the World, which had admitted to ordering the hacking of the voice mail of Milly Dowler, a 13-year-old girl abducted and murdered in 2002.
Since then, virtually every day has brought dizzying new disclosure and developments, culminating in News Corporation’s announcement on Wednesday.
In a statement, Chase Carey, the company’s deputy chairman, president and chief operating officer, said, “We believed that the proposed acquisition of BSkyB by News Corporation would benefit both companies but it has become clear that it is too difficult to progress in this climate.”
As the announcement was made, Prime Minister David Cameron was meeting with Milly Dowler’s parents at 10 Downing Street.
After the meeting, the Dowlers’ lawyer, Mark Lewis, spoke for them to a media throng on the street outside. He said that after what had been “an earth shattering week for everybody,” the family was pleased with the withdrawal of the BSkyB takeover bid because it demonstrated that “however big an organization is,” it could be held to account in a society under law.
It was unclear whether the withdrawal would mute the outcry against Mr. Murdoch’s operations in Britain. Within minutes of News Corporation’s announcement, politicians from the Labour opposition and the Liberal Democrat junior coalition partner said competition authorities should investigate whether to challenge the Murdoch family’s existing 39 percent stake in BSkyB.
Ofcom, the media regulator, said it would continue its scrutiny of BSkyB’s ownership structure.
According to British law, News Corporation would be allowed to make another bid for the BSkyB shares it does not already own in six months. Some analysts said another bid is indeed likely, but that the company would probably have to wait until all investigations into the phone hacking and bribery allegations were completed, a process that is expected to take far longer than six months.
As the announcement was made, the chief lawyer for News International, the British subsidiary of the News Corporation, confirmed reports that he was quitting after 26 years with the company. Officials at the firm said that the lawyer, Tom Crone, had been chiefly responsible for clearing controversial stories published in The News of the World and another paper in the Murdoch stable, The Sun. His resignation made him the first senior executive of News International to quit in the scandal.
In Washington, Senator Jay D. Rockefeller IV, a West Virginia Democrat and the chairman of the Senate Commerce Committee, said he had asked officials to investigate whether any News Corporation entities in the United States had employed illegal methods in their news gathering operations.
The Daily Mirror newspaper had reported that journalists had sought to secure phone data concerning Sept. 11 victims from a private investigator in the United States.
“The reported hacking by News Corporation newspapers against a range of individuals — including children — is offensive and a serious breach of journalistic ethics,” he said in a statement. “This raises serious questions about whether the company has broken U.S. law.
The senator voiced particular concern for the victims of the 9/11 attacks and their families. If the phone hacking did extend to them, he said, “the consequences will be severe.”
This image taken from television shows Prime Minister David Cameron of Britain speaking at the House of Commons on Wednesday.
Only hours before News Corporation’s announcement, Mr. Cameron made what amounted with his final break with Mr. Murdoch by joining in the common front in Parliament in urging him to drop the bid for BSkyB, reversing his previous support. The announcement came just before Parliament was set to approve the cross-party call for Mr. Murdoch to abandon his long-cherished desire to take full control of the lucrative satellite broadcaster — a deal regarded as the cornerstone of his strategy for corporate expansion.
Mr. Cameron said Murdoch executives should “stop the business of mergers and get on with cleaning the stables.”
The scandal has also convulsed British politics, the press and the police, forcing them to contemplate unheard-of scrutiny of their sometimes incestuous ties. A criminal investigation and two separate government inquiries spawned as a direct result of the allegations against journalists from Murdoch newspapers, which now extend to hacking the phones of families of soldiers killed in Iraq and Afghanistan and making illicit payments to corrupt police officers.
On Wednesday, though, Mr. Cameron said that after subsequent discussions, the two inquiries he had proposed would be drawn into one broad inquiry into the relationships between political and corporate leaders and senior police officers. He named a senior judge, Lord Justice Brian Leveson, to head the panel. Mr. Cameron told Parliament that it would have the power to summon witnesses to testify under oath.
He said that the inquiry would examine the ethics and culture of the British media as well as the accusations of phone hacking at The News of the World, and that it would also investigate why an initial police inquiry failed to uncover the extent of the scandal. It will also explore allegations that journalists paid corrupt police officers.
The senior judge said in a statement that parts of his investigation would begin soon.
Mr. Cameron said he wanted the inquiry to be “as robust as possible, one that can get to the truth fastest and get to work the quickest, and one that commands the full confidence of the public.”
Mr. Cameron said it should complete a report on the future regulation of the press within a year, but he acknowledged that inquiries into allegations of criminal wrongdoing — which the police are also investigating — would take longer.
The announcement came as Mr. Cameron fought to recover the initiative in a scandal that has turned into potentially the most damaging crisis of his time in office, partly because of his own close relationship with senior figures in News International.
The opposition Labour leader, Ed Miliband, said the withdrawal of the BSkyB bid was “a victory for people up and down this country who have been appalled by the revelations of the phone hacking scandal” and the failure of News International over the years to take responsibility. “The country wanted this. It wanted its voice to be heard. Today, it has been.”
“People thought it was beyond belief that Mr. Murdoch could continue with his takeover after these revelations,” he said in a statement carried by the Press Association news agency. “It is these people who won this victory. They told Mr. Murdoch: ‘This far and no further.’ ”
Nick Clegg, the leader of the Liberal Democrats, who is also the deputy prime minister and nominal ally of Mr. Cameron, also praised the News Corporation’s decision. “This is the decent and sensible thing to do. Now that the bid has been called off and a proper inquiry set up, we have a once-in-a-generation chance to clean up the murky underworld and the corrupted relationship between the police, politics and the press.”
In a rancorous session at the weekly encounter in Parliament known as prime minister’s questions, Mr. Cameron came under renewed pressure from Mr. Miliband to explain his relationship with his former director of communications, Andy Coulson, a former editor of The News of the World who was taken in for questioning last week on suspicion of conspiracy in the phone hacking and making payments to police officers to gain confidential information.
Mr. Cameron soon departed, but the debate in Parliament remained heated. One of the most angriest speeches came from the former prime minister, Gordon Brown, making one of his rare appearances in the chamber since his election defeat 14 months ago,. He suspects — despite the papers’ denials — that the Sun and the Sunday Times, both Murdoch properties, may have resorted to illegal or unethical means to gain access to the medical records of his son, James Fraser Brown, who suffers from cystic fibrosis.
Mr. Brown rebuked Mr. Cameron for not participating in the debate, and accused the governing Conservatives of having acquiesced in a pattern of “lawbreaking on an industrial scale” by the Murdoch papers and the ”criminals” they consorted with in the abuses in return for Mr. Murdoch throwing his political backing in last year’s election to Mr. Cameron.
Pandemonium broke out in the Commons as Conservatives tried to shout down Mr. Brown, with people shouting “shut up!” and “sit down!” Undeterred, he unleashed what many considered the most damning diatribe against Mr. Murdoch ever heard from a prominent British politician.
He said Mr. Murdoch and his papers had “descended from the gutter into the sewers” and “let the rats out” against public figures like himself and ordinary people who could not defend themselves. He said they had created “a criminal-media nexus,” and if action was not taken against them now “our friends across the world who admire our liberties will ask what kind of a country we have become.”
During the parliamentary debate, a lawmaker also asked if there was evidence that journalists at News International had tried to hack into the voice mail of victims of the Sept. 11, 2001, attacks in the United States, as they are accused of doing in Britain after the London subway and bus bombings in July 2005.
A parliamentary committee said that it would continue to press Mr. Murdoch, his son James and Rebekah Brooks, the chief executive of News International, to testify on Tuesday about accusations of phone hacking and corruption at the News International papers.
John Whittingdale, chairman of Parliament’s Culture, Media and Sport Committee, said that depending on the response he receives from the three executives, he would decide no later than Friday whether he would issue a subpoena compelling Ms. Brooks to testify. Under British law, Mr. Murdoch and his son, as United States citizens, cannot be compelled to appear.
Among those hailing the withdrawal of the BSkyB was Vince Cable, business secretary in the Cameron cabinet, a post that gives him wide powers over Britain’s corporate life. Earlier this year, Mr. Cable, narrowly avoided losing his job after he told two reporters posing as supporters in his parliamentary constituency that he had “declared war” on Mr. Murdoch.
The sting, by the Daily Telegraph newspaper, prompted Mr. Cameron to remove his oversight powers in the Murdoch-BSkyB bid, which passed to a more junior minister, Jeremy Hunt, who adopted a friendlier stand. On Wednesday, Mr. Cable said that “people who have been very badly hurt by the News of the World and other publications have been vindicated.”
John F. Burns reported from London, and Alan Cowell from Paris. Reporting was contributed by Ravi Somaiya and Julia Werdigier from London.
© 2011nytimes.com
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