Murdoch: Unsavory doings, troubling questions, uncertain future. By Ray Moseley

Two close friends tossed overboard. An apology to a grieving family. A full-page newspaper apology with only a trace of mea culpa to the entire British nation. All that in the space of just two days.

So where does Rupert Murdoch take his campaign for public rehabilitation from here? And where will he find friends to lift his News Corporation out of the quagmire in which it is deeply embedded?

There is considerable speculation on both sides of the Atlantic that the 80-year-old media tycoon may reach into his own family and remove his son James from News Corporation in his desperation to keep the business firmly in family hands.

That is by no means certain. But Rupert Murdoch pushed another son, Lachlan, out of News Corporation in 2005 and he has shown little disinclination to take any step he deems necessary in the broader interest of preserving his multibillion-dollar empire.

Rebekah Brooks resigned on Friday as chief executive of News International, the British arm of News Corporation. She was editor of the now defunct News of the World when the newspaper hacked into phone messages of murdered schoolgirl Millie Dowler and erased some of them, giving her family hope that she might still be alive. Rupert Murdoch followed up Mrs. Brooks’ resignation by apologizing—quite belatedly—in person to the Dowler family.

Les Hinton, after 52 years in the Murdoch service, resigned as chairman of Dow Jones, publishers of the Wall Street Journal. He was head of News International when the phone-hacking scandal began, and either deliberately misled Parliament about the affair or was, as he now claims, ignorant of what was happening at the News of the World. And, apparently, not overly anxious to overcome his ignorance by demanding the facts, if his claim is true.

A principal rap against James Murdoch, 38, is that he authorized large payments to victims of News of the World hacking in a blatant maneuver to buy their silence. Regarding these settlements, he says: “I know now that I did not have a complete picture when I did so. This was wrong and is a matter of serious regret.”

In short, we are all asked to believe that he gave away a large chunk of company money without questioning anyone as to why he was asked to do so.

Questions also remain as to whether he knew of, and approved, News of the World payments to police in return for phone numbers and other private information of the newspaper’s victims.

If James loses his jobs as head of News Corporation operations in Europe and Asia and chairman of British Sky Broadcasting, there are two Murdoch children waiting in the wings who could take his place: son Lachlan and daughter Elisabeth. Neither has been touched by the phone-hacking scandal.

There is also Rupert Murdoch’s Chinese wife Wendi Deng, who could conceivably inherit the mantle of overall leadership when he dies.

On Saturday, seven leading newspapers in London carried a full-page advertisement signed by Rupert Murdoch that began in large type: “We Are Sorry.”

Sorry for the failings of News of the World, sorry for its wrongdoing, sorry for the hurt suffered by its victims, so the ad went on. Then this one brief touch of mea culpa: “We regret not acting faster to sort things out.”

Not, you will note, regret for actually having tried either to cover up or minimize the wrongdoing, claiming at one time that the newspaper’s own internal investigation had demonstrated a single rogue reporter was responsible for initiating hacking and everybody else was clean.

The toll of the scandal so far adds up to this: One newspaper shut down and its several hundred employees thrown out of work. Two highly paid executives out on their ears. Nine people arrested and more arrests in prospect. London police and politicians up to and including Prime Minister David Cameron locked in a cosy and questionable embrace with the Murdoch Empire even when evidence of criminality had surfaced.

Rupert and James Murdoch and Mrs. Brooks will testify before a House of Commons committee on Tuesday. More apologetic advertisements are promised in coming days.

But the larger question in all this is what happens to News Corporation. Already it has been forced to abandon its $12 billion bid for full ownership of British Sky Broadcasting and faces the threat of being stripped of its 39 percent holding. BSkyB was to have been the linchpin of its British operations, helping to sustain its loss-making newspapers.

Rupert Murdoch has rejected speculation that he will sell off his remaining British titles—the Times, Sunday Times and tabloid Sun. No doubt he wants to keep them because he began his career in newspapers and loves them.

Whether in the long run he will find it worthwhile to keep them, in purely business terms, is another matter. Some have lost readership and advertising since the scandal broke.

Some investors in News Corporation may wish to see control of the firm wrested from the grip of the Murdoch family. The family controls 40 percent of the shares of the publicly traded company.

A columnist for Forbes magazine noted that, in the last decade, News Corporation stock has lost 15 percent of its value, while the Dow Jones Industrial average has gone up 21 per cent. Part of this can be explained by the fact Rupert Murdoch paid over the market value for The Wall Street Journal, resulting in a $2 billion write-off.

James Murdoch told a media conference in Cannes last month, before the scandal mushroomed dramatically: “The real issue (is that) we aren’t big enough.” He suggested News Corporation aspired to the giant status of Google and Apple and would focus on expansion in the next 10 years.

Dreams of expansion are now out of the window. Shrinkage is the reality. News Corporation and BSkyB stock have dropped in value in the last two weeks, and there is a long line of phone-hacking victims who may be inclined to sue the company.

In the United States, the FBI is investigating whether News Corporation employees hacked into phone messages of 9/11 victims and their families, and leading members of Congress are threatening dire retribution if that proves to be the case.

There is also the possibility that News Corporation can be sued under US law if it is proved that it bribed London police to obtain phone numbers and other private information of its victims. Mrs. Brooks told a Commons committee last year that the News of the World had made payments to police.

Another Forbes columnist has suggested the Murdoch strategy now may be to take News Corporation private to safeguard it from investor attempts to dislodge the family. The corporation has announced it plans to undertake a $5 billion repurchase of stock, which would give the family more than 50 percent of the vote in company decisions.

But holding onto News Corporation is not the same thing as restoring it to health. A British government inquiry into the scandal may go on for the next two years, with further damaging revelations to come.

As some commentators have said, Rupert Murdoch is facing his Watergate moment. He may thrive on controversy but this is one, at a late stage of his life, he undoubtedly would wish away if he could.

(Ray Moseley is a London-based former chief European correspondent of the Chicago Tribune. He can be reached at [email protected].)