Rupert Murdoch’s Belated PR Offensive Sunk by Phone-Hacking Scandal

Rupert Murdoch finally seemed to be getting out ahead of the greatest crisis in his company’s history.

News Corp. executives believe it took the company too long to make crucial decisions at the outset, in part because the waves of evidence about the phone-hacking scandal were overwhelming, say people briefed on the company’s deliberations. “It was shock and awe,” one says.

But after hiring new advisers from Edelman, the world’s largest PR powerhouse, and conferring with two top New York aides, Murdoch charted a humbler course. He authorized full-page ads of apology in rival British papers. He met with the family of a murdered teenage girl whose phone had been hacked. And on Friday he accepted the resignation of two top lieutenants, Rebekah Brooks, who ran his British newspapers, and Les Hinton, the chief executive of Dow Jones.

But his efforts were overwhelmed by the sheer velocity of the scandal he was trying to neutralize. London police arrested Brooks on Sunday, making her resignation look as though she got out one step ahead of the sheriff. London’s police commissioner, Paul Stephenson, resigned hours later, with Scotland Yard having been badly tarnished by allegations of payoffs and its botched investigation of the News of the World scandal.

Many News Corp. officials had wanted Brooks pushed out immediately, but Murdoch remained intensely loyal to her. Company executives had no clue her arrest was imminent, the sources say.

There is still disagreement within the company over whether Murdoch’s quick decision to close News of the World, the tabloid at the center of the hacking scandal, was a sensible move—especially since most of its 200 staffers had nothing to do with the illegal conduct that took place years earlier.

Now News Corp. is developing a plan to insulate its American media outlets from the fallout as the FBI launches a preliminary investigation of whether laws were broken on this side of the Atlantic. The company expects to hire another outside public-relations firm to help spearhead that effort and field inquiries involving Fox News, local Fox stations, and the New York Post.

Two high-level American advisers quickly flew to Murdoch’s side in London. One is Joel Klein, the former New York City schools chancellor, who is in charge of the overall effort. The other is Steven Rubenstein, who represents the New York Post as president of the firm chaired by his father, Howard Rubenstein.

But there is another public-relations professional playing a behind-the-scenes role—Murdoch’s son-in-law Matthew Freud.

Freud’s marriage to Murdoch’s daughter Elisabeth has made him a key voice in News Corp. affairs. Several people who know Freud, a close friend of Brooks, say he recommended closing News of the World. Michael Wolff, a Murdoch biographer, says Freud insisted on bringing in an outside firm. “They apparently shopped it around and everyone said the same thing: we won’t take this unless you fire Rebekah and follow the playbook.’”

Freud, whose firm once represented Murdoch’s company, says by email that he “stopped having any involvement” in News Corp.’s communications in December 2009.

But surely he continues to informally advise his father-in-law? “Rupert doesn’t really take PR advice,” Freud added with a digital smile.

Mike Sitrick, whose Los Angeles firm specializes in damage control, says Murdoch should launch a probe headed by an outsider. “An apology is one thing,” he says. “With an internal investigation, there’s always a suspicion of a whitewash. So you need a third party with an independent reputation, like a former attorney general or Justice Department official.”