Shock Waves of News Corp.’s Scandal Hit New York’s Shores (UPDATED)

| July 15, 2011 3:38 PM | Updated: July 22, 2011 1:00 PM

Rupert Murdoch's media empire is beginning to crumble as a result of the phone hacking scandal. It's uncertain how this will affect the News Corp.-owned Wall Street Journal and New York Post. Flickr/World Economic Forum.

News Corp. is bringing in the big legal guns in the form of former Manhattan U.S. Attorney Mary Jo White and former Attorney General Michael Mukasey — “a possible sign the firm fears its scandal will spread to America,” the Daily News reported Thursday.

Word of the legal hires came on the heels of the news that the FBI has been reaching out to its own victims’ assistance office and the NYPD as it began an investigation into whether News Corp. journalists attempted to hack the phones of 9/11 victims, the Wall Street Journal reported Wednesday.

On the same day, the New York Post buried its coverage of Rupert Murdoch’s testimony before British Parliament — a top story for virtually every major news publication — on page 35. The Post is owned by Murdoch, and both its journalistic and financial capital could be damaged by the hacking scandal. The Post is generally quick to put scandals on its front page, but has shied away from the  News Corp. debacle since it began.

Vanity Fair pointed out the irony on Tuesday by running a humorous story speculating on how the Post would cover Murdoch’s testimony if the newspaper wasn’t implicated in the case. The headline “Rupe in the Soup” accompanied by a depiction of Murdoch’s head sticking out from a boiling cauldron was one of the faux covers Vanity Fair featured.

Murdoch’s News of the World tabloid printed its last issue on July 10, after journalists who worked for the paper were charged with illegally hacking into the phone records of a murdered British teen and her acquaintances.

The scandal has since grown larger and more complex.

A media empire falters: Murdoch entered the media world in 1986, when he created Fox Broadcasting Company. Today, Murdoch’s empire is estimated at $33 billion and includes the Wall Street Journal, the New York Post, the Sun, the Sunday Times and more. But Murdoch is now watching the shock waves of the phone hacking scandal ripple around the world, reported USA Today.

News Corp’s stocks plummeted, the tabloid industry is being forced to rethink its practices and News Corp was forced to drop its plans for a $12.4 billion acquisition of BSkyB, the U.K.’s largest pay-television company. Michael Wolff, author of “The Man who Owns the News,” told News International this week, ”there’s no way for the company to come out of this in a way that doesn’t leave it hopelessly diminished.”

Wolff’s predictions seem to be coming true. Last Friday, Dow Jones’ CEO and Wall Street Journal publisher Les Hinton — a Murdoch employee for the past 50 years — stepped down.

The Wall Street Journal published a piece in its opinion section on Monday, stating that Hinton knew nothing of the scandal and accused other journalists of “schadenfreude so thick you can’t cut it with a chainsaw.”

On Monday morning, various news sources began speculating about whether or not more resignations or firings would take place. The Post and Fox News will probably survive the scandal relatively unscathed, reported Crain’s.  However, Bloomberg.com reported that amid fears from the News Corp board and plunging stocks, Murdoch is struggling to maintain control of the company.

On Monday afternoon, Sean Hoare, the whistleblower who originally brought the hacking scandal to light, was found dead. Hoare, a former Sun and News of the World reporter, had struggled with alcohol and drug abuse for many years and was injured last week at a party. Police are currently treating his death as “unexplained” but not “suspicious,” reported the Guardian.

On Tuesday, Murdoch testified before British Parliament that he had no knowledge of News Corp. journalists ever hacking into the phones of 9/11 victims. He was promptly pied in the face by an assailant, who, in turn, was smacked in the face by Murdoch’s wife, Wendi Dang, reported DNAinfo. Click here to see a video of the pie toss and swift retaliation.

The New York Post, generally quick to skewer those involved in scandals, has shied away from covering News Corp. due to its implication in the case. On Tuesday, Vanity Fair ran a hilarious story speculating how the Post would cover Murdoch’s testimony before Parliament if the paper didn’t stand to be hurt by the scandal.

On Wednesday, the Wall Street Journal reported that the FBI is currently speaking to the NYPD and its own victims’ assistance office as part of its investigation.

On Thursday, the Daily News reported that News Corp. had hired top legal guns former Manhattan U.S. Attorney Mary Jo White and former Attorney General Michael Mukasey.

How it all began…After reading a story in the Daily Mirror — a News of the World competitor — alleging that News of the World reporters had tried to hire a private investigator to hack into the phone records of 9/11 victims, Long Island Rep. Peter King wrote a letter to the F.B.I. urging an investigation. The F.B.I. probe is in its early stages and it is not yet clear how many other government agencies are involved or whether the private investigator was a New York police officer when he was approached by News of the World reporters, as was alleged.

In wake of scandal, New Yorkers wary of education technology bid from Murdoch’s Wireless Generation: The no-bid contract would give Wireless Generation, News Corp.’s education arm, access to school children’s private information, which led some New Yorkers to sign a petition demanding that the state and city comptroller reject the $27 million dealThe contract, which calls for Wireless Generation to create a new system for tracking school test scores, was already under fire for cronyism since Wireless Generation head Joel Klein is the former New York City schools chancellor.

If the contract — awarded on June 9 by the state Education Department and the New York City Department of Education — is approved, Wireless Generation would be able to access the personal records of all New York public schoolchildren. This recent development supports what many media critics have been saying since the scandal first broke in London: any affiliate of parent-company News Corp is now deeply infected by the charges against News of the World.

Klein is Murdoch’s “secret weapon.” On Thursday, the Daily Beast reported that former New York City Schools Chancellor Joel Klein — hired by Murdoch to head Wireless Generation — is now the key player in preventing News Corp.’s destruction.  Over the course of his career, Klein has been instrumental in managing many complicated organizational debacles. The Daily Beast used the following examples to highlight Klein’s skill and experience:

  • Klein was the lead prosecutor in the 1998 antitrust case against Microsoft.
  • As schools chancellor, Klein was a “powerful” negotiator with the teachers’ unions.
  • Klein served in the White House Counsel’s office under Clinton, where he handled several “mini-scandals.”

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