Murdoch: The damning verdict

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MPs' ferocious report says mogul 'not fit' to lead empire, as new evidence puts BSkyB licence in fresh doubt

Rupert Murdoch's grip on the global media empire he founded was under direct threat last night as the first moves began in America to oust him as chairman of News Corp.

The 81-year-old's company faces investigations for corporate negligence after a devastating report by the Commons Culture, Media and Sport Select Committee declared the mogul "unfit" to run an international business and described him as overseeing a culture of "wilful blindness".

The ability of the crisis engulfing News Corp to go to the heart of British politics was further underlined when Downing Street said yesterday evening that it was prepared to hand over ministers' emails to the Leveson Inquiry.

The unexpectedly damning verdict also increased the pressure on News Corp's 39 per cent shareholding in the British broadcaster BSkyB, with the media regulator Ofcom saying that it will take the MPs' findings into consideration as part of its ongoing review into whether the conglomerate is a "fit and proper" body to hold a broadcasting licence.

The select committee accused Mr Murdoch's closest lieutenant for the past 50 years of misleading Parliament.

Rupert Murdoch was "not a fit person to exercise the stewardship of a major international company", the report concluded, in a judgment that divided the MPs on the committee. He had "turned a blind eye and exhibited wilful blindness", they said. The wrongdoing at News International was the symptom of a "culture [that] permeated from the top", and "speaks volumes about lack of effective corporate governance", MPs said.

Mr Murdoch's "self-portrayal" to Parliament as a hands-off proprietor was a "misleading account of his involvement and influence with his newspapers".

His son James, who resigned earlier this year from control of the company's European operations, was guilty of "wilful ignorance" about what had been going on at News International, the MPs said, and his decision to sign off £700,000 to a hacking victim without asking to see a legal opinion "clearly raises questions of competence", they said.

The repeated allegations from the MPs of "wilful blindness" and "wilful ignorance" against the the Murdochs and unnamed directors of News International appeared carefully crafted to raise alarm in America by echoing legal terms that suggest criminal liability for corporate wrongdoing.

Three of the Murdochs' once-loyal lieutenants – the News of the World lawyer Tom Crone, the paper's former editor Colin Myler and Les Hinton, often referred to as Murdoch Snr's "consigliere", were singled out in the report as having been complicit in a cover-up.

The committee's report leaves the door open for investigators on both sides of the Atlantic to launch new inquiries into whether those at the helm of the global media company can be held responsible for its failings.

Responding to the renewed pressure on the board in New York that has followed the publication of the report, News Corp said last night that "hard truths" had emerged. The company said it regretted the committee's analysis and branded some findings "unjustified and highly partisan".

News Corp issued a statement claiming to have already "confronted and acted on" the failings in the report, adding: "We have conducted internal reviews of operations at newspapers in the UK and around the world, far beyond anything asked of us by the Metropolitan Police; we have volunteered any evidence of apparent wrongdoing to the authorities; and we have instituted sweeping changes in our internal controls and our compliance programmes to help ensure nothing like this ever happens again."

In an email sent to staff at News International yesterday evening, Mr Murdoch said his company "should have acted more quickly and aggressively to uncover wrongdoing." He added that the report "affords us a unique opportunity to reflect upon the mistakes we have made and further the course we have already completed to correct them."

The Murdoch empire already faces legal problems in the US, including a potential investigation under the Foreign Corrupt Practices Act arising from the actions of journalists and executives in its UK newspaper arm. Change to Win, a union advisory group for US pension funds, joined calls from shareholders for Mr Murdoch to step down and formulate a succession policy, declaring, "this is a company in crisis".

Julie Tanner, at the Christian Brothers Investment Services – which holds shares in News Corp – said: "News Corp now exemplifies the risks associated with poor corporate governance. The committee findings support our resolution to appoint an independent chair at News Corp, and demonstrate the far-reaching impact of News Corp's corporate governance failures."

In a statement, the MPs said: "Corporately, the News of the World and NI misled the committee about the true nature and extent of the internal investigations they professed to have carried out in relation to phone hacking."

The company was found to have made false statements, to have failed to disclose documents and to have shown an instinct to cover up rather than deal with wrongdoing after the private investigator Glenn Mulcaire and former NOTW royal editor Clive Goodman were jailed for eavesdropping on voicemails in 2007.

Mr Myler, in a statement from New York, said the conclusions of the committee had been affected by the "fragmented picture" which had emerged from evidence given by witnesses and by constraints within which the committee had operated.

Ofcom said it was "reading with interest". The regulator said: "Ofcom has a duty under the Broadcasting Acts to be satisfied that any person holding a broadcast licence is, and remains, fit and proper to do so. Ofcom is continuing to assess the evidence that may assist it in discharging these duties. As part of this we are considering the committee report."

Parliament's powers: What MPs can do

Parliamentary clerks were locked in a meeting for several hours last night, grappling with the dilemma of what to do about the three former News International executives accused of misleading the Culture select committee. It is the first time a committee has accused witnesses of giving misleading evidence.

The clerks were deciding what powers the Commons has to punish the alleged offenders – the former News Group lawyer Tom Crone, former News International executive Les Hinton, and former News of the World editor Colin Myler.

There is an offence of contempt of Parliament, which is untested in recent times – the last time the Commons used the power was 1666.

In 1957, the journalist John Junor was called to the House and made to apologise for inaccuracies in an article. By 1978, the Commons resolved to use its penal jurisdiction "as sparingly as possible". Since then, no outsider has been disciplined.

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