Report questions Rupert Murdoch’s fitness to lead News Corp.

LONDON — Over 60 years, Rupert Murdoch built a media empire using his properties and their profits not just to break down the doors to the British establishment, but also to control it.

So Tuesday’s scathing declaration by a British parliamentary committee that Murdoch is “not a fit person to exercise the stewardship of a major international company” may mark the moment when the once-tamed establishment lost its fear of the country’s most powerful media titan.

The report was Parliament’s response to the illegal phone-hacking scandal that began at the Murdoch-owned tabloid News of the World and led to the arrests of several senior lieutenants across the global sprawl of his News Corp.

The committee said Murdoch “turned a blind eye and exhibited willful blindness” to the phone hacking that was rampant at his newspapers, shredding the defense mounted by the company that its senior executives were unaware of the possibly criminal shenanigans of reporters.

It alleged that Murdoch’s son James showed poor leadership in failing to get to the bottom of the hacking. And it accused three senior executives at News Corp. and the now-defunct News of the World, including Les Hinton, one of Murdoch’s closest associates, of misleading Parliament about the pervasiveness of snooping into cellphones.

The damning assessment of corporate character was a blow to Murdoch, who is seeing his closest lieutenants discredited and his family control of News Corp assailed.

“Just think of it as part of a tide, an ever-increasing, unstoppable, inevitable tidal wave,” said Murdoch biographer Michael Wolff. “It just accrues. Every piece of news is worse than the last piece of news. It’s something that they can’t get out from under. They can’t stop it. And it has their name on it.”

In addition to tarnishing Murdoch’s reputation, the committee’s findings may have implications for his business interests.

Questioning his fitness to lead a company could have bearing on his almost 40% controlling stake in British Sky Broadcasting. British regulatory authorities are charged with determining whether major stakeholders such as Murdoch are “fit and proper” owners of mass media in Britain, and the agency overseeing BSkyB said it would take the parliamentary committee’s findings into consideration in its review of Murdoch’s ownership.

And the report swiftly added to pressure on Murdoch’s U.S. properties. A Washington-based ethics group called on the Federal Communications Commission to revoke 27 Murdoch-owned television licenses, citing the British parliamentary report as evidence the Murdochs fall short of the necessary good character standards to be entrusted with a broadcast license.

In a message to his employees, Murdoch struck a partly chastened tone, expressing regret for the company’s failures.

“I recognize that for all of us — myself in particular — it is difficult to read many of the report’s findings,” Murdoch said. “But we have done the most difficult part, which has been to take a long, hard and honest look at our past mistakes.”

The company acknowledged “hard truths” that emerged from the committee’s investigation, that it had been “too slow and too defensive; and that some of our employees misled the Select Committee in 2009" that was investigating phone hacking.

But News Corp. took sharp issue with the finding that Murdoch was unfit to run a company. It called that characterization “unjustified and highly partisan,” pointing out that the committee’s four Conservative members dissented from the six-person majority on the basis that they had not been asked to judge Murdoch’s fitness to run a company.

“The report’s conclusions have been hijacked by extremely short-term political concerns by members of the committee,” said Claire Enders, a media analyst who has covered News Corp. for more than 20 years. She said the partisan divisions could help the Murdochs, because British media regulators and the U.S. Department of Justice “might see this report as the settling of old political scores.”

“It was really a missed opportunity on the committee’s part not to focus more on corporate governance issues,” Enders said. “Valid points about the lack of good governance might have gotten lost in this attempt to use legally inflammatory language about James and Rupert Murdoch.”

Cowen and Co. media analyst Doug Creutz said the blistering criticism of Murdoch did little to unsettle investors. News Corp.'s stock rose in trading Tuesday, largely, analysts said, because the value of the media conglomerate is derived from its U.S. assets, and the scandal appears to be isolated to Britain.

“Part of the reason the language is harsh is that’s all they have — harsh language,” Creutz said. “The politicians can get to look good by censuring Murdoch’s stewardship of the company, but they didn’t say they felt the Murdochs intentionally misled Parliament, which would have been much more serious.

“This is another black mark,” Creutz said. “But they’re covered in black marks now.”

Nor were the Murdochs accused of misleading Parliament in their testimony before the committee. But committee members were in agreement that three of Murdoch’s senior executives lied about phone hacking, which the company had insisted for years was confined to one “rogue reporter.”

It is uncertain what effect the charges against Hinton, former News of the World editor Colin Myler and Tom Crone, who stepped down as the tabloid’s senior legal officer, will carry, if any. The offense of misleading Parliament dates back centuries. But punishment is in the hands of lawmakers, and the last time someone was found in contempt was in 1957, when a British journalist was hauled into the House of Commons and forced to apologize for an article that lawmakers felt impugned their honor.

Few believe it likely that Parliament would — or could — do that now, especially considering that Hinton and Myler live in the U.S.

Both men issued statements rejecting the committee’s finding that they had lied. Hinton described the report as “unfounded, unfair and erroneous.”

But the committee called it “astonishing” that Rupert and James Murdoch took so long to find out that phone hacking went far beyond a lone reporter, Clive Goodman, who was briefly jailed in 2007 for hacking into the cellphones of aides to the royal family. Police say the cellphones of thousands of people — celebrities, athletes, politicians, even the relatives of fallen soldiers — may have been hacked by the News of the World in its pursuit of sensational stories.

“Their instinct throughout, until it was too late, was to cover up rather than seek out wrongdoing and discipline the perpetrators,” the report says.

Chu reported from London and Chmielewski from Los Angeles. Staff writer Meg James in Los Angeles contributed to this report.