News Corp on the back foot as calls grow for a federal inquiry into bribery claims

ANGER over the phone- hacking scandal escalated in the United States yesterday when one of President Barak Obama's leading allies warned that the Murdoch empire was "exploding and unravelling".

John Podesta, an influential Democrat figure, added his voice to the chorus of criticism emanating from the US, where Rupert Murdoch is based and where he has his most lucrative business interests.

Podesta, who oversaw Obama's transition to the presidency after his 2008 victory, spoke out on an issue that has so far been met with a wall of silence from the White House.

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Obama has yet to comment on the scandal, despite Democrat antipathy towards the Murdochs, who own the right-wing Fox News cable channel, the Wall Street Journal and the best-selling tabloid the New York Post. Podesta suggested the dubious tactics used by the News of the World was not limited to the newspaper that was the UK's biggest selling tabloid until it was closed last week.

"This is not one rogue editor," said Podesta. "This is an empire that was built on a set of journalistic ethics that's beginning to explode and unravel. They were routinely bribing public officials. We've called attention to the fact that this story is going to go on for a while, this is not a two-week story, I don't think."

Podesta founded the think-tank the Centre for American Progress, one of several left-leaning organisations that have petitioned for a federal investigation into News Corp under the Foreign Corrupt Practices Act, which forbids bribery of foreign officials by any US company or its overseas subsidiaries.

In public, the White House has kept its distance from the crisis, but e-mails released under a freedom of information request last week strongly suggested that its press office had excluded Fox from interviewing senior administration officials.

In one e-mail, a senior press officer referred to a Fox presenter as a "lunatic". The president's team has had an ongoing dispute with Fox, only granting an interview with Obama months after other networks.

Podesta's comments were further evidence that Murdoch's troubles have spread across the Atlantic. Last night, News Corp was bracing itself for more embarrassing revelations. Murdoch's biographer Michael Wolff tweeted that the New York Times was about to publish something "juicy" about the scandal. Wolff speculated it might be about possible links to 9/11. The FBI is looking into claims that a Murdoch tabloid attempted to access phone records of September 11 victims.

High-profile resignations have not been limited to the UK arm of the Murdoch empire. Les Hinton resigned as chief executive of News Corp's flagship US title the Wall Street Journal. The two had worked together for over 50 years. His resignation was related to his time as the head of News International when the phone-hacking allegations surfaced.

Last week Eric Holder, the attorney general, became the first senior administration official to comment publicly on the issue when he confirmed that the US government was investigating News Corp.

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"There have been serious allegations raised in that regard in Great Britain, there is an ongoing investigation," he said in Sydney, where he was attending a meeting of his counterparts from Britain, Australia, New Zealand and Canada.

"There have been members of Congress in the US who have asked us to investigate those same allegations. And we are progressing in the regard using the appropriate federal agencies in the United States."

Murdoch also faces pressure from American shareholders, including pension funds and banks, who have taken legal action saying it is "inconceivable" that the News Corp's board was unaware of the hacking and other illicit practices, and accusing him of using the company for "personal and political objectives".

Senator Frank Lautenberg has asked the securities and exchange commission and the justice department to investigate whether US laws against the payment of bribes abroad were broken by Murdoch's parent company.

Another senator, Jay Rockefeller – chairman of the commerce, science and transportation committee – has described the activities of Murdoch's newspapers in Britain as "offensive" and called for an investigation into whether Americans had had their privacy invaded. "If they did, the consequences will be severe," he said.

Democrats sense a political opportunity with the November 2012 elections for president and Congress already gearing up. People are questioning whether Murdoch's US media operations have been guilty of similar crimes to the News of the World.

The Democratic Senate Campaign Committee has launched a petition and online advertisement calling on supporters to "Stand With Democrats & Demand that Murdoch Come Clean on Spying".

"Murdoch's empire often unfairly target Democrats and progressives, but this recent scandal goes so much further and is only growing by the day," it said. "It's time for Rupert Murdoch to come clean and immediately tell the American people whether his company targeted any

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Americans here at home. Sign our petition to demand the truth."

Senator Barbara Boxer of California, a leading liberal, has questioned whether Murdoch's media licences could be revoked under regulations requiring licence-holders to be of "good character".

Though such an outcome is regarded as unlikely by industry experts, some observers believe that once Murdoch returns to the US, he might face a summons to appear before a congressional hearing, a spectacle that could further weaken his reputation and his companies' prowess.

Murdoch's News Corp empire includes Fox News, the 20th Century Fox movie studio, the Wall Street Journal and the New York Post as well as its three British newspapers – the Sun, the Times and Sunday Times.

Newspaper analyst Ken Doctor said Friday's departures of Rebekah Brooks and Hinton show Murdoch is "trying to build a firewall between the past and future of News Corp".

Murdoch's crisis management strategy also suggests that he is trying to protect the Wall Street Journal, one of the world's most respected newspapers, from the fall out of the News of the World scandal.

Protecting the Journal's reputation has become more important to Murdoch now that his political influence in Britain has been diminished, Doctor suggested, adding it was likely that News Corp will eventually sell its British newspapers. "He has lost his power in Britain and he is never going to get it back in this lifetime, so there is no longer a reason for him to own News International," Doctor said. "The movie studio and cable TV is what's really important to protect now."

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