Pressure mounts on Murdoch over phone hacking: Advertisers flee News of the World; government launches inquiry; more allegations surface

The phone hacking scandal that has enveloped the British press for more than three years took a damaging--and expensive--turn this week for Rupert Murdoch.

The News Corp. chairman now is tasked with trying to lead the News of the World, his high-circulation Sunday tabloid, out of harm's way. The long-simmering scandal over the paper's hacking into voicemails of private citizens took a gruesome turn over the past week, when new reports indicated that staffers with the tabloid accessed the voicemail of a murdered teenage girl and families of the July 7, 2005 subway and bus bombings in London.

Several advertisers, including the Ford Motor Company, have pulled their advertising from News of the World in the wake of reports that its employees hacked more than just the phones of celebrities.

The UK Guardian reported Tuesday that News reporters targeted Milly Dowler, the 13-year-old who went missing in 2002 and was later found dead. (According to the Guardian, News of the World reporters deleted messages on Dowler's phone to "free up space," giving her family the false hope she might still be alive.)

"I can't think of any jam that Murdoch has gotten into that's tighter than this one," Slate's Jack Shafer wrote. "As long as the victims of the phone-hacking were rich people and big shots, Murdoch didn't have to worry too much about public opinion dragging him and his newspapers down. But Dowler's parents are neither rich nor big shots. "

But the news has gotten even worse for Murdoch--with reports that the paper may have engineered payoffs to police authorities. Vanity Fair reported that Andy Coulson, the paper's editor from 2003 to 2006, admitted that "he condoned payments from members of his staff at the News of the World to Scotland Yard," according to e-mails the company has handed over to the police.

The paper acknowledged that "new information" was turned over to police, but would not comment further. The police acknowledged receiving the e-mails.

Coulson's predecessor, Rebekah Brooks--editor at the time of the alleged Dowler hack and now chief executive of News International--wrote in an e-mail to employees on Tuesday that "it is inconceivable" she knew about the hacking, "or worse, sanctioned these appalling allegations."

"I have to tell you that I am sickened that these events are alleged to have happened," Brooks wrote. "Not just because I was editor of the News of the World at the time, but if the accusations are true, the devastating effect on Milly Dowler's family is unforgivable."

There is mounting pressure on Murdoch to fire Brooks, or for her to resign. Meanwhile, pressure has also built on advertisers and readers to follow Ford's lead in boycotting News of the World.

After a report in London's Telegraph that Scotland Yard is investigating the paper may have hacked into the phones of the families of the 7/7 victims, Virgin and several other advertisers pulled their ads, while heavy hitters such as Procter & Gamble and Coca-Cola are mulling the same.

Meanwhile, both the Guardian and Daily Mirror are calling for News Corp.'s takeover of BSkyB should to be put on hold, pending the outcome of the hacking investigations. And shares for both companies fell markedly in the wake of the hacking news.

If Murdoch was dismissive of the allegations before, he certainly isn't now.

Prime Minister David Cameron said on Wednesday that there would be a government inquiry into the alleged hacking. In fact, as the Guardian noted, there will be two: "one covering the media, and one covering the failure of the police to investigate this matter properly."

"Everyone at News International has got to ask themselves some pretty searching questions," Cameron said.

For now, though, it appears Murdoch is sticking by Brooks. "I have made clear that our company must fully and proactively co-operate with the police in all investigations," Murdoch said in a statement issued from Sun Valley, Idaho, where he is attending the annual Allen Co. mogul retreat. "That is exactly what News International has been doing and will continue to do under Rebekah Brooks' leadership."