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Britain's phone-hacking scandal sizzles on
Britain's phone-hacking scandal slowly corrodes authority of Cameron and Murdoch
By The Associated Press

LONDON (AP) ' It's the crisis that just won't go away.

Britain's phone hacking scandal, where journalists at the News of the World tabloid eavesdropped on the voice mails of royals, celebrities, politicians and even a teenage murder victim, has shaken Rupert Murdoch's News Corp and the highest levels of government.

Top people in Murdoch's empire and the police have been forced out. Prime Minister David Cameron's judgment has been called into question for hiring an ex-News of the World editor implicated in the scandal.

With the arrests of 15 people and extra police officers drafted in to work the developing case, the details just keep on unraveling ' slowly and painfully ' miring top players in a morass of bad publicity.

In the latest twist, the BBC reported that the former editor of the tabloid at the heart of the scandal received payments and benefits from the paper while working as a Cameron aide.

Andy Coulson continued to receive severance pay amounting to several hundred thousand dollars from the now-defunct News of the World for months after he was hired by Cameron, and also kept his health care plan and company car, according to BBC, which did not cite sources.

Coulson resigned from the tabloid early in 2007 after a reporter and a private investigator were jailed for hacking into the voicemails of royal staff. Six months later he was hired as communications chief to Cameron, then Britain's opposition leader. Cameron became prime minister in May 2010.

Recently published documents also point the finger higher up in the Murdoch empire, with letters released last week that seemed to indicate his son and heir apparent James misrepresented what he knew about phone hacking in his testimony to lawmakers.

Adding to the Murdoch woes, a private investigator at the heart of the hacking scandal sued the media baron's company for breach of contract after News Corp. stopped paying his legal bills.

And the misery continues for the police as well, with an officer arrested last week for allegedly leaking details of the investigation to the media.

"This isn't going to go away," said Ivor Gaber, professor of media and politics at Britain's University of Bedfordshire. "This is a huge story."

Though London's riots briefly wiped the scandal off the nation's front pages, the persistent drip from the investigation and relentless media coverage threaten to undermine both Cameron's authority as prime minister and for Murdoch's media empire.

Britons have been fascinated by the sordid soap opera behind the scenes, while expressing fundamental concerns about a toxic relationship between media, politicians and police. That has been an equation that has kept the story in the headlines.

When the crisis exploded in early July with revelations News of the World had hacked into the phone of 13-year-old murder victim Milly Dowler, fresh allegations of phone hacking, police corruption and even political impropriety hit the press at a breakneck pace.

Summer has lent the appearance of a lull, with British lawmakers on recess and more than 50 police officers sifting through hundreds of pages of evidence. Graber said the scandal is just getting ready to kick into gear once people return from vacations.

"Any sense that the momentum slowed down is purely because this is summer," Graber said. "But there is sufficient machinery running so that this will pick up again."

Two different committees of lawmakers are investigating separate aspects of the scandal and will reconvene in the fall. One is expected to recall James Murdoch, whose initial testimony in July has been called into question.

The 15 suspects who have been arrested have been bailed until further appointments with police, most of which won't take place before the fall. In addition to boxes of evidence, police are still working their way through a list of about 4,000 possible phone-hacking victims.

Even as news continues to trickle out, Cameron's hold on power appears to be safe despite a continuous barrage of criticism related to Coulson.

Cameron's judgment has repeatedly been called into question, and his leadership credentials took a further knock when riots swept Britain this month and he was criticized for a feeble initial response. But some analysts say the short-term threat to his leadership is low.

"It's obviously tarnished Cameron's image and reputation, which may come back to haunt him when it comes to an election, but right now most people think the most important thing is to get the economy fixed," said Steven Fielding, professor of political history at the University of Nottingham.

For the Murdoch empire, however, the heat may rise in the place where it matters most ' the bottom line.

Laura Martin, senior media analyst at Needham & Company downgraded News Corp. stock from "buy" to "hold" on Monday because of uncertainty over the phone hacking scandal. It is one of the first major equities houses to try to put a pricetag on the scandal.

"The risk of owning the shares is rising," she told The Associated Press. "I don't think it will be resolved over a year or anything like that. This type of investigation tends to ramp up ' investigators find something, then they look at it again. We have government agencies involved here and there is a class action lawsuit."

She said the most damaging thing for News Corp is the uncertainty.

"New investigations will start, new headlines will come out," she said. "A lot of this is out of their control."

But Ellis Cashmore, professor of culture, media and sport at Staffordshire University does not believe the scandal will have a lasting impact on Rupert Murdoch or News Corp.

"Murdoch's whole career has been an odyssey of crises. He's never been a popular man. He's well used to dealing with crisis," Cashmore pointed out, adding that Murdoch had acquitted himself reasonably well at parliamentary hearings.

"He was blunt and direct in his answers. Even those who suspected he may not be telling the truth felt he looked perturbed by what had happened at this empire he had built."


Danica Kirka contributed to this report.

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