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Murdoch: Ex-CEO arrested, fraud probe, London police chief quits. By Ray Moseley

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Just two days after she resigned as head of Rupert Murdoch’s media arm in Britain, Rebekah Brooks was arrested on Sunday by London police, and the head of London’s Metropolitan Police resigned after questions were raised about his relationship with another former editor arrested in the Murdoch phone-hacking scandal

In a day of bombshell developments, it was also reported that the government’s Serious Fraud Office has begun a preliminary investigation into possible violations of company law by the Murdoch newspapers.

Mrs. Brooks was arrested at a London police station on suspicion of conspiring to intercept communications (phone hacking) and of corruption (bribing police for information).

She is the 10th person so far arrested in the spreading investigation into the phone-hacking scandal that earlier forced Mr. Murdoch to close the News of the World, a newspaper that the 43-year-old Mrs. Brooks edited before she became chief executive of News International.

Several hours after her arrest Sir Paul Stephenson announced his resignation as commissioner of the London police. He has been under fire for the fact the police hired as an adviser a former deputy editor of the now defunct News of the World, Neil Wallis, who was arrested last Thursday over his alleged role in phone hacking at the newspaper.

The Murdoch-owned Sunday Times also reported that Sir Paul had accepted up to £12,000 in hospitality from one of the country’s leading health spas when he was recovering from surgery earlier this year. It said Mr. Wallis was the public relations representative of the spa at the time.

While denying any wrongdoing in regard both to Mr. Wallis and his stay at the spa, Sir Paul said: “I may wish we had done some things differently, but I will not lose sleep over my personal integrity.”

Beyond the arrest of Mrs. Brooks and Sir Paul’s resignation, a more serious development for the future of Mr. Murdoch’s News Corporation was a report by Channel 4 News that the Serious Fraud Office had begun looking into possible misuse of stockholder money. This relates to allegations that company money was used to pay off victims of phone hacking who had filed suit against News of the World, used to pay criminals who undertook the hacking and used to bribe police.

Tom Watson, a member of Parliament who has been a dogged critic of the Murdoch operations, requested the Serious Fraud Office to investigate. The office declined to confirm or deny it had adhered to the request but Channel 4 News said it had learned that a preliminary investigation is under way.

Mrs. Brooks admitted to a parliamentary committee in 2003 that the News of the World had made payments to police. Chris Bryant, another member of Parliament, said he was “delighted” she was under arrest and said it should have happened when she admitted to paying police, a criminal offense.

He said it was also “just a little bit convenient” that the arrest came at a time that might enable Mrs. Brooks to think she can evade testimony to the parliamentary committee. “I don’t think that will wash. I don’t think it will work,” he said.

It was reported that police contacted Mrs. Brooks on Friday night, a few hours after she resigned from News International, and asked her to appear at a police station on Sunday. She was said to have gone there without any expectation of being arrested.

She is scheduled to appear before a House of Commons committee on Tuesday to testify about the scandal, but her arrest puts that into question. Her spokesman said Sunday the arrest had “added a whole level of complexity” to her appearance, and she is expected to consult her lawyers on whether she can go ahead and testify.

If no charges have been filed against her by Tuesday, that may remove a bar to her testifying.

Les Hinton, chairman of Dow Jones and a close associate of Mr. Murdoch’s for 52 years, also resigned on Friday. He is suspected of having misled a parliamentary committee several years ago, when he was chief executive of News International, about what happened at the News of the World. Like Mrs. Brooks, he pleaded ignorance but her arrest raises the obvious question of whether he will also be called in by police.

James Murdoch, son of the media tycoon and head of its operations in Europe and Asia, may also find himself in police sights. He has admitted authorizing payments to victims of phone-hacking who had filed suit or threatened legal action against News of the World, payments that Murdoch critics regard as hush money and part of a possible attempt to obstruct police investigations.

The Sunday Times report that Sir Paul Stephenson accepted a free stay at a luxury spa, which implied that was arranged by Mr. Wallis, was denounced by Sir Paul as “cynical and disappointing.”

Earlier, the police said the commissioner’s stay at the spa had been arranged through its managing director, a family friend, and he was unaware that Mr. Wallis worked there.

In his resignation statement, Sir Paul did not go into details but said: “There has been no impropriety.” He said he used the spa’s facilities so as “to do everything possible to return to running the Met full time, significantly ahead of medical, family and friends’ advice.”

On the question of his relationship with Mr. Wallis, he said it was maintained “for professional purposes and an acquaintance,” and he had no reason to suspect Mr. Wallis had been involved in phne hacking. He also said he played no role in the Metropolitan Police’s contractual arrangement with Mr. Wallis to act as an adviser.

Sir Paul and other police officials have had numerous meals and meetings with News International executives in recent years, including Mr. Wallis.

Home Secretary Theresa May plans to address the House of Commons on Monday to outline her concerns about links between police and News International personnel.

Prime Minister David Cameron has been on the defensive since the phone-hacking scandal erupted because of his close friendship with Mrs. Brooks and with James Murdoch, and because he hired former News of the World Editor Andy Coulson as his communications director.

Mr. Coulson resigned in January when he became a center of reports about phone hacking, and it emerged only a few days ago that Mr. Cameron had entertained him at Chequers, the prime minister’s official country residence, two months after his resignation.

Mrs. Brooks’ arrest will again bring into focus Mr. Cameron’s relationship with Murdoch executives. His own records show he has held 26 meetings with these executives since he was elected in May 2010.

News International, which paid for “We Are Sorry” advertisements in national newspapers on Saturday, came back on Sunday with new full-page ads entitled “Putting right what’s gone wrong.” The ads promised there would be “no place to hide” for wrongdoers and said the company would cooperate in police investigations.

While Mr. Murdoch already has been forced to drop his $12 billion bid for full ownership of British Sky Broadcasting, he may be more concerned at this point about the effect of the scandal on his more lucrative U.S. holdings.

David Milliband, leader of the Labor Party and the politician who has most prominently led the attack on Mr. Murdoch, said Sunday the tycoon has “too much power” in Britain and his share of media ownership should be reduced.

“I think that we’ve got to look at the situation whereby one person can own more than 20 per cent of the newspaper market, the Sky platform and Sky News,” he told the Observer newspaper.

Deputy Prime Minister Nick Clegg, in an interview with the BBC, agreed there should be greater plurality in media ownership. “A healthy press is a diverse one, where you’ve got lots of different organizations competing, and that’s exactly what we need,” he said.

(Ray Moseley is a London-based former chief European correspondent of the Chicago Tribune. He can be reached at rnmoseley@aol.com.)