U-Turn: Murdochs to be questioned by UK parliament

LONDON (AP) - Rupert Murdoch and his son James first refused, then agreed Thursday to appear before U.K. lawmakers investigating phone hacking and police bribery, while in the U.S., the FBI opened an investigation into allegations the Murdoch media empire sought to hack into the phones of Sept. 11 victims.

Those two developments _ and the arrest of another former editor of a Murdoch tabloid _ deepened the crisis for News Corp., which has seen its stock price sink as investors ask whether the scandal could drag down the whole company.

Murdoch defended News Corp.’s handling of the scandal, saying it will recover from any damage caused by the phone-hacking and police bribery allegations. The 80-year-old told The Wall Street Journal _ which is owned by News Corp. _ that he is “just getting annoyed” at all the recent negative press.

He also dismissed reports he would sell his U.K. newspapers to stem the scandal, calling the suggestion “total rubbish.”

A law enforcement official in New York said the FBI was investigating allegations that employees of News Corp. tried to hack into the telephones of victims of the Sept. 11, 2001, terrorist attacks in the United States.

The official spoke on condition of anonymity because he was not authorized to speak publicly.

The FBI’s New York office hasn’t commented, and there was no immediate response Thursday from News Corp. or the U.S. attorney’s office in Manhattan. News Corp. stock fell more than 3 percent on the news.

News Corp. executives could be at risk of being found criminally or civilly liable under federal wiretapping and state privacy laws if investigators find that American citizens were targeted, analysts said. The company could also face sanctions in the U.S. for phone hacking that originated in Britain under the 1977 Foreign Corrupt Practices Act.

Still, experts said they doubt such actions could jeopardize News Corp.’s U.S. newspaper holdings such as The Wall Street Journal or result in the revocation of the license it needs to own Fox TV stations in America.

“I think we’re a long way from that,” said Philip Raible, a partner at New York law firm Rayner Rowe LLP, which specializes in corporate law affecting media companies.

News Corp. has been in crisis mode in the U.K. since a rival newspaper reported last week that its News of the World tabloid hacked into the phone of teenage murder victim Milly Dowler in 2002 and may have impeded a police investigation into the 13-year-old’s disappearance.

The company closed the 168-year-old News of the World and abandoned a bid for control of the lucrative British Sky Broadcasting network in a so far fruitless attempt to halt the crisis.

U.S.-based media industry analyst Richard MacDonald said the scandal was undermining Murdoch’s 30-year bid to convince investors that News Corp. was “a blue chip diversified media company.”

“Without question, the revelations and subsequent penalties either criminal, civil or strategic will impair earnings performance, earnings multiples and asset value for who knows how long,” he said.

British lawmakers took the dramatic step Thursday of issuing a summons to the once all-powerful Murdochs after the father and son said they would not appear before Parliament’s Culture, Media and Sport Committee on Tuesday.

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