Rebekah Brooks

Can Murdoch’s Clan Survive?

As News Corp.'s annual shareholders meeting approaches, the question on everyone’s lips is whether the House of Murdoch will fall. Long-favored son (and heir apparent) James teeters on the edge, and Rupert is still trying to convince all comers he’s more gaga than gung-ho, reports Nicholas Wapshott.

10.19.11 10:40 PM ET

When will James Murdoch be arrested? Alone among those Rupert Murdoch claims to have let him down in the firestorm over journalistic ethics that is engulfing his media company, his son James has so far avoided the attention of Scotland Yard detectives.

Others close to the gnarled 80-year-old—his trusted lieutenant Les Hinton, his flame-haired editrix Rebekah Brooks, and Colin Myler, the editor of the scandal sheet News of the World whose criminal practices led to its closure after 168 years—have accepted some responsibility for the mess and find themselves rich but jobless. When the cheery Hinton arranged to meet a pal in an Upper East Side Starbuck’s, he quipped, “I’m the one who looks retired.”

The arrest of James Murdoch, until earlier this year his father’s favorite and the unrivaled heir apparent to the worldwide media empire, has moved sharply closer with the admission by a London-based attorney, whose company represents News Corp. and Queen Elizabeth, that Murdoch Jr. misled the parliamentary committee investigating the hacking. One committee member cheekily suggested a headline: “Queen’s solicitors knew News of the World was lying to Parliament—but did nothing about it.” James Murdoch will return next month to face more cross-examination from the peeved parliamentarians.

And it will be James Murdoch, too, who can expect the toughest ride when shareholders meet on Friday at the News Corp. AGM in Los Angeles. To be helpful, The New York Times, long the butt of Murdoch’s acerbic New York Post, reported that father and son are now at each others’ throats and spend days not talking. “You’re coming back to New York or you’re out,” Rupert is said to have snarled at James, whom he suspected of setting up a rival power base in Europe. “This is one company, not two. And it is run out of New York.”

News Corp AGMs are usually lame, ill-attended affairs, with a benign Rupert indulging shareholders who complain about Fox News or a new Fox movie. This time, though, the theft of private phone messages from celebrities and victims of crime, among them a murdered schoolgirl, promises to turn the snooze-fest into a circus. Angered by his rough treatment at the hands of the Brits, whose bobbies could not save him from having a plate of shaving foam pressed in his face, Murdoch has insisted there can be no repetition of what he described in July as “the most humble day of my life.”

To this end, the AGM, once held in the tranquil Asia Society on Park Avenue, has been switched to the safety of the Fox movie lot in Los Angeles. There is nothing like a media company in deep trouble for keeping journalists from doing their jobs. Reporters, just one per publication, armed with photo ID and credentials, must assemble at a parking garage to be bussed in to the studio, to dodge the protesters expected at the gates. The press may not ask questions at the meeting. The company that founded the Fox network, Fox News, and Fox Business insists that no TV cameras record the scene. As a concession to those unable to trek to the Coast, there will be an online audio stream.

Murdoch’s siege mentality is understandable, perhaps, in face of the unprecedented assaults on a company led by a man who is more used to dishing the dirt on his opponents than on ducking incoming flak. One set of shareholders is suing News Corp. because it is deemed to have overpaid for Shine, Rupert’s daughter Elizabeth’s London film company that gave her $214 million clear profit. Citing “rampant nepotism,” the writ says that “Murdoch has treated News Corp. like a family candy jar, which he raids whenever his appetite strikes.”

Four enormous pension funds who invest in News Corp. want to see the Murdochs turfed off the board. Corporate governance specialists agree, insisting the failure to prevent malfeasance shows the Murdochs cannot deliver the ethical leadership a public company deserves. Shareholders are also preparing to sue the company for actions—or failures to act—by the Murdochs that caused the share price to slump as the hacking scandal took hold.

For all the sound and fury from shareholders, there is little chance of change at the top. In News Corp’s two-class share structure, Murdoch controls 40 percent of the voting stock, which, with his ally Saudi Prince Alwaleed bin Talal’s 7 percent, will ensure he sees off all comers. But that does not mean Murdoch’s troubles are over. As well as Hinton’s return to the stand via video link next week, and Lachlan Murdoch’s next month, there is a long fuse to the likely explosion of the scandal in America.

Barbara Boxer and Jay Rockefeller’s Senate committee and a clutch of lawmakers on both sides of the aisle have already fired a shot across Murdoch’s bows and set off a federal inquiry into whether News employees bribed foreign officials, such as the London police, which is a crime under the Foreign Corrupt Practices Act. “Rupert Murdoch wanted to become an American citizen,” said Boxer. “He needs to obey American law.” You may expect the inquiry to make progress here as the presidential election approaches. Nor will Murdoch appease the clamor in Britain by selling his London papers. As a lifelong Murdoch friend explained: “I don’t think he has ever thought about it. They are not for sale.”

What perennial Murdoch observers will be looking for at the AGM, however, is whether he continues to portray himself as a crumpled old man, a medicated Murdoch, more gaga than gung-ho, misunderstood by his enemies and betrayed by his minions, who pays so little attention to the day-by-day running of his papers that the source of the stolen scoops that splashed across his front pages came as a surprise to him. It is a fiction few who work closely with him have been able to swallow and even fewer believe he can sustain.