Ex-aide arrested in British phone scandal

LONDON -- A voice mail hacking and police bribery scandal cut closer than ever to Rupert Murdoch and Scotland Yard on Sunday with the arrest of the media magnate's former British newspaper chief and the resignation of London's police commissioner.

Though the former executive, Rebekah Brooks, and the police chief, Paul Stephenson, have denied wrongdoing, both developments are ominous not only for Murdoch's News Corp. but for a British power structure that nurtured a cozy relationship with his papers for years.

Brooks, a social and political insider, dined at Christmas with Prime Minister David Cameron. His Conservative-led government is now facing increasing questions about its relationship with Murdoch's media empire.

The arrest of the 43-year-old Brooks, often described as a surrogate daughter to the 80-year-old Murdoch, brought the British police investigations into the media baron's inner circle for the first time. It raises the possibility that Murdoch's old friend Les Hinton, who resigned Friday as publisher of The Wall Street Journal, or his 38-year-old son and heir apparent, James, could be next.

Until her resignation Friday, Brooks was the defiant chief executive of News International, Murdoch's British newspaper arm, whose News of the World tabloid stands accused of hacking into the phones of celebrities, politicians, other journalists and even murder victims. In the last two weeks, she had kept her job even as Murdoch shut down the 168-year-old News of the World and tossed 200 other journalists out of work.

On Sunday she showed up for a prearranged meeting with London police investigating the hacking and was arrested. She was being questioned on suspicion of conspiring to intercept communications -- phone hacking -- and on suspicion of corruption, which relates to bribing police for information.

Brooks' spokesman, David Wilson, said police contacted her Friday to arrange a meeting and she went "to assist with their ongoing investigation." He said Brooks did not know she was going to be arrested.

Hours after the arrest, Stephenson said he was resigning as commissioner of London's force because of "speculation and accusations" about his links to Neil Wallis, a former News of the World executive editor who was arrested last week.

Wallis worked for the London police as a part-time PR consultant for a year until September 2010.

Stephenson said he did not make the decision to hire Wallis and had no knowledge of allegations that he was linked to phone hacking, but he wanted his police force to focus on preparing for the 2012 London Olympics instead of wondering about a possible leadership change.

"I had no knowledge of the extent of this disgraceful practice and the repugnant nature of the selection of victims that is now emerging," Stephenson said. "I will not lose any sleep over my personal integrity."

Brooks' arrest was the latest blow for Murdoch, the once all-powerful figure courted by British politicians of all stripes. Now Murdoch is struggling to tame a scandal that has already destroyed News of the World, cost the jobs of Brooks and Hinton and sunk the media baron's dream of taking full control of a lucrative satellite broadcaster, British Sky Broadcasting.

Deputy Prime Minister Nick Clegg said Murdoch "needs to come absolutely clean about what he knew, about what his senior executives knew, and why this culture of industrial-scale corruption -- so it is alleged -- appeared to have grown up without anyone higher up in the food chain taking any real responsibility for it."

Rupert and James Murdoch are to be grilled by U.K. lawmakers Tuesday over the scandal. Brooks also had agreed to be questioned before a parliamentary committee, but her arrest throws that appearance into doubt.

"Obviously this complicates matter greatly," said Wilson, her spokesman. "Her legal team will have to have discussions with the committee to see whether it would still be appropriate for her to attend."

Lawmaker Adrian Sanders said if Brooks did not appear, "that is not going to go down very well with my fellow committee members."

When Brooks stepped down Friday, she said she was going to "concentrate on correcting the distortions and rebutting the allegations about my record."

She was editor of News of the World between 2000 and 2003, when some of the phone hacking took place, but has always said she did not know it was going on, a claim greeted with skepticism by many who worked there.

At an appearance before U.K. lawmakers in 2003, Brooks admitted that News International had paid police for information. That admission of possible illegal activity went largely unchallenged at the time and lawmakers are keen to ask her about it again.

Police previously arrested nine other people, including several former News of the World reporters and editors, over allegations of hacking and bribery. Those include Andy Coulson, a former News of the World editor who became Cameron's communications chief before resigning in January. No one has yet been charged.

Even more senior figures could face arrest, including James Murdoch, chairman of BSkyB and chief executive of his father's European and Asian operations. James Murdoch did not directly oversee the News of the World, but he approved payments to some of the paper's most prominent hacking victims, including 700,000 pounds ($1.1 million) to Professional Footballers' Association chief Gordon Taylor.

James Murdoch said last week that he "did not have a complete picture" when he approved the payouts.

Hinton, too, could face questioning over wrongdoing at the News of the World during his 12 years as executive chairman of News International. But Hinton is an American citizen living in the U.S., so British authorities would have to seek his extradition if he refused to come willingly.

Chandrashekhar Krishnan, executive director of Transparency International UK, said British prosecutors seeking to prove that bribes that were approved at a high level would have to uncover strong evidence such as memos or minutes of a meeting.

"That usually proves to be very, very difficult," he said.

Rupert Murdoch is eager to stop the crisis from spreading to the United States, home of many of his most lucrative assets -- including the Fox TV network, 20th Century Fox film studio, The Wall Street Journal and the New York Post. The FBI has already opened an inquiry into whether 9/11 victims or their families were also hacking targets of News Corp. journalists.

On Sunday, Murdoch took out full-page ads in British newspapers promising that News Corp. would make amends for the phone hacking scandal, with the title "Putting right what's gone wrong." News Corp. vowed there would "be no place to hide" for wrongdoers.

That followed a full-page Murdoch ad Saturday declaring, "We are sorry."

Murdoch's critics say that is not enough. Labour Party leader Ed Miliband said Sunday that Murdoch has "too much power" in Britain and his share of media ownership should be reduced.

Murdoch still owns three national British newspapers -- The Sun, The Times and The Sunday Times -- and a 39-percent share of BSkyB.

At Tuesday's committee hearing, which will be televised, politicians will seek answers about the scale of criminality at the News of the World. The Murdochs will try to avoid incriminating themselves or doing more harm to their business without misleading Parliament, which is a crime.

Police, meanwhile, are under pressure to explain why their original hacking investigation several years ago failed to find enough evidence to prosecute anyone other than News of the World royal reporter Clive Goodman and private investigator Glenn Mulcaire. Detectives reopened the investigation earlier this year and now say they have the names of 3,700 potential victims.

Records show that senior officers had numerous meals and meetings with News International executives in the past few years.

Stephenson, who became police chief in 2009, said he had "no knowledge of, or involvement in, the original investigation into phone hacking in 2006." He said he was "unaware that there were any other documents in our possession of the nature that have now emerged."

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Christopher Torchia in London contributed to this report.