LONDON (Reuters) - Allegations that former prime British minister Gordon Brown was a target of illegal data gathering by Rupert Murdoch’s newspapers have piled pressure on the media baron as he tries to prevent investors pulling out of his News Corp empire.
Murdoch and the British government tried to draw the financial and political sting from a newspaper phone-hacking scandal by referring his $14-billion bid for the profitable pay-tv operator BSkyB to a lengthy commission inquiry.
Nevertheless, News Corp shares closed down about 7.58 percent at $15.48 in U.S. trading on Monday, for a fall of almost 15 percent in four days.
U.S. News Corp shareholders suing over the purchase of a business run by Murdoch’s daughter filed a revised complaint, saying the British phone hacking scandal reflected how the company’s board failed to do its job.
But several major shareholders told Reuters they continue to have confidence in the company and one major investor in the company said the share selloff was overdone.
Donald Yacktman, chief investment officer of Yacktman Asset Management Co of Austin, Texas, the ninth-largest shareholder in News Corp, said the hacking furor “does slightly reduce the predictability of the cash flows, but the impact on the cash flows is minimal at best”.
By referring News Corp’s bid for the 61 percent of BSkyB it does not already own to the competition regulator, the British government hoped to shield it from a tide of outrage over allegations that reporters for Murdoch’s News of the World accessed the voicemails of murder and bomb victims and others.
But the stream of allegations continued.
Tuesday’s Guardian newspaper quoted a letter from the Abbey National bank to another Murdoch paper, the Sunday Times, which said there was evidence that “someone from the Sunday Times or acting on its behalf has masqueraded as Mr Brown for the purpose of obtaining information from Abbey National by deception”.
News International “noted” the allegation and requested more information.
The Guardian also said Murdoch’s mass-selling Sun had obtained details from Brown’s infant son’s medical records.
The Sun revealed in 2006 that Brown’s son Fraser had cystic fibrosis. Murdoch’s Times quoted a source at News International saying the story had been obtained from a “legitimate source”.
Police confirmed to Brown, who was finance minister and prime minister between 1997 and 2010, that his name had been on a list of targets compiled by Glenn Mulcaire, the private investigator at the center of the voicemail hacking allegations against the News of the World.
“The family has been shocked by the level of criminality and the unethical means by which personal details have been obtained,” Brown’s spokeswoman said in a statement.
Murdoch, who had already taken a shock decision last week to shut the News of the World, Britain’s biggest-selling Sunday paper, and has flown to Britain, had tried to seize the initiative again by withdrawing News Corp’s offer to spin off BSkyB’s Sky News channel.
The withdrawal of the offer, made to get the deal approved, opened the way for the government to refer the matter to the Competition Commission, whose investigation is likely to take a year or more.
“It’s a smart tactical move,” said Ian Whittaker, media analyst at Liberum Capital, noting that it also freed the government from a politically unacceptable but apparently unavoidable decision to approve the deal in the current climate.
“It gets the government off the hook. But there’s still a very strong chance that in the end it will not go through in the short term or medium term. There are enough players out there that are opposed,” he told Reuters.
Murdoch’s News Corp wields influence from Hollywood to Hong Kong and owns the U.S. cable network Fox and the Wall Street Journal as well as the Sun, Britain’s biggest selling paper.
Conservative Prime Minister David Cameron has come under fire for his closeness to Murdoch’s media empire; he is a friend of Rebekah Brooks, the News International chief executive who was editor at the News of the World during much of the alleged hacking; and he chose another former News of the World editor, Andy Coulson, as his communications chief.
Coulson, who quit in January over the scandal, was arrested last week for questioning in connection with phone-hacking and allegations that his reporters illegally paid police for information.
Cameron has defended his choice of Coulson and noted that Brown’s Labour party also courted Murdoch when it was in power.
But on Monday he fired a warning shot at Murdoch, saying that News Corp needed to focus on “clearing up this mess” before thinking about the next corporate move.
The referral of the bid may ease the political pressure on Cameron as it meets a main demand of the opposition Labour Party, which had been threatening to drive a wedge into the coalition by forcing a vote in parliament on Wednesday.
Labour leader Ed Miliband said the government had moved reluctantly. “They are doing it not because they want to, but because they have been forced to,” he said, urging Murdoch to “drop the bid for BSkyB”.
Cameron’s deputy Nick Clegg, from his Liberal Democrat coalition partners, also urged Murdoch to reconsider the bid for the 61 percent of BSkyB that it does not already own.
Other allegations emerged on Monday that News of the World had bought contact details for the British royal family from a policeman and tried to buy private phone records of victims of the September 11, 2001, attacks in the United States. Police declined comment.
“Do the decent thing, and reconsider, think again about your bid for BSkyB,” Clegg told BBC News, addressing Murdoch, after meeting relatives of one of the victims of phone-hacking, a murdered schoolgirl.
Eight people, almost all journalists, have been arrested so far in a police inquiry into the allegations, which include one that a company executive may have destroyed evidence. News Corp’s British newspaper arm denies any obstruction of justice.
A referral to the Competition Commission means the deal could be blocked on grounds of media plurality. But that would be better for Murdoch than if he and his team were found to be not “fit and proper” to run the broadcaster by the broadcasting regulator OfCom -- which has also been asked for a ruling -- as that could see him lose his existing 39 percent of the company.
Additional reporting by Paul Sandle, Keith Weir, Tim Castle, Sudip Kar-Gupta, Sinead Cruise, Chris Vellacott and Michael Holden; writing by Philippa Fletcher and Kevin Liffey; editing by Michael Roddy