News of the World scandal: Why the next to go may be a Murdoch

IT WAS as graphic an illustration as possible that it is indeed money that talks. For ten days Rebekah Brooks had clung on, despite calls for her resignation from across the political spectrum, and in spite of the shocking stories of phone hacking at the News of the World which had gone on during her watch.

But none of them had hurt her prospects quite as much as Prince Al-Waleed bin Talal did on Thursday night.

The Saudi-Lebanese billionaire was on his vast yacht Kingdom 5KR, sailing on the French Riviera. The founder of Kingdom Holding Company, the prince is estimated to be the world's 26th richest person, with assets of nearly $20 billion. Known as the "Arabian Warren Buffett", his huge wealth - which now includes ownership of London's Savoy Hotel - is the result of his canny eye for investments. Over the years, that had led to him owning 7 per cent of News Corp. The only other person who owned more was Rupert Murdoch himself.

Al-Waleed invited TV crews on to the yacht on Thursday to discuss the crisis enveloping the firm. In the previous week and a half he had watched while as much as $5bn had been wiped off the value of Murdoch's company. No investor is going to sit back and take that. Murdoch senior and junior continued to have his confidence, he asserted. But what about Brooks, the former News of the World editor, now chief executive of News International? The prince's diplomatic tone slipped. If it was clear that she was at fault, he said, "for sure she has to go, you bet she has to go. Ethics to me is very important. I would not tolerate a company that has a lady or man who has a sliver of doubt to her integrity." The clip was broadcast just before 11pm. At 10am the following morning, a week after her previous attempt to resign had been knocked back by the News Corp board, Brooks announced she was going.

She may have been, in Murdoch's words at the start of the week, his top priority, but that was then. By Friday afternoon, as Brooks left News International's building in Wapping, east London, a story which had rocked the British establishment to its core was now beginning to rumble right across the world. In Australia, premier Julia Gillard said she was mulling over whether to open an inquiry into media ethics herself, as the country's Murdoch-owned papers said they would be examining their own books for any evidence of illegal practices. Far more importantly, the US was waking up too. The US - in which News Corp owns huge assets in cable TV (such as Fox News), in film (including 20th Century Fox) and in broadcast television - is where the majority of its cash flow comes from.

The big question is whether the same political and legal backlash seen in the UK over the last week crosses the Atlantic and hits Murdoch's empire at its heart. Al-Waleed's decision to speak out will - appropriately for an interview on a boat - be seen as a clear shot across the bows. The firm's stockholders are getting nervy. Murdoch's British dominoes have tumbled this week. Could they start pushing over the bigger ones across the pond too? Could they even topple the 80-year-old mogul himself?

That such a question can even be asked of one of the dominant business figures of the last 50 years would have been unthinkable two weeks ago. On the verge of winning his bid to take complete ownership of BSkyB, Murdoch's News Corp empire was preparing to expand further into Europe. Instead, on Friday, in a London hotel, he was faced with the family of murdered schoolgirl Milly Dowler and offering what was described as a "humble and sincere apology" for the fact that News of the World journalists had sought to hack into her phone while she was missing. Murdoch cited his father Sir Keith Murdoch, whose newspaper business Murdoch inherited at the age of 22. Such behaviour was not the standard he had set, Murdoch told the Dowlers.

Despite a 50-year career at the sharp end, the events of last week were unsurpassed for the 80-year-old. He had arrived in London on a private jet last Sunday. As the week progressed and the crisis deepened, the News Corp aristocracy joined him: his children James, Lachlan and Elizabeth, News Corp board member Joel Klein and other senior advisers. The Murdoch clan's wagons were circling. There were claims that Elizabeth was furious both at Brooks' handling of the crisis, and at her own brother James. Reports yesterday suggested she may take over from him in Wapping. But the patriarch did what was his instinct: under attack, he refused to give ground. Michael Wolff, Vanity Fair journalist and author of The Man Who Owns The News: Inside The Secret World Of Rupert Murdoch, noted: "Anybody who knows this organisation knows that it is a very, very tight-knit group."

First, on Sunday, Brooks got public backing from her mentor. There was no way News Corp would be offering her up as a public sacrifice, insiders at the firm declared. On Thursday, after one of his papers, the Wall Street Journal, inquired about the status of James Murdoch following some suggestions that he was considering stepping down, Rupert rang back to rebut the claims. "I think he acted as fast as he could, the moment he could," he declared. James's position was unchanged. This was the obstinate, loyal Murdoch of old, hitting back against the forces of the Establishment who were out to get him once again. It was also the actions of a man who knew that, with any more resignations, the dominoes were getting too close for comfort.

But the pressure over Murdoch's handling of the vast News Corp empire has been growing for months now. Back in March, a lawsuit was filed in Delaware - where News Corp is incorporated - by shareholders over what they claimed was the News Corp board's inability to tackle Murdoch's dynastic ambitions. Originally the complaint centred on Murdoch's decision to buy TV production company Shine - owned by a certain Elizabeth Murdoch - for a walloping $615 million, thereby handing his daughter an almighty pay cheque and a seat on the self-same News Corp board. The decision, the shareholders claimed, owed everything to "blatant nepotism". Last week the complaint was updated in the light of the new revelations, accusing the board of ignoring the "unlawful and reprehensible activity" going on in London. Counsel to the shareholders Jay Eisenhofer claimed: "News Corp's behaviour has become an egregious collection of nepotism and corporate governance failures, with a board completely unwilling to provide even the slightest level of adult supervision." Too many on the News Corp board are Murdoch cronies, they allege. Stock analyst Alan Gould claims that many outside shareholders, who collectively own 62 per cent of News Corp, would like to see power stripped from the family and handed to president Chase Carey.

News Corp had dismissed the complaint as a "transparent attempt to create provocative, media-worthy soundbites". Other shareholders, on top of Al-Waleed, have given Murdoch their support, such as investor Donald Yacktman, the ninth-largest shareholder in the firm. Analysts say the idea that the man who brought to life and dominated the firm for half a century is going to be forced out is fanciful.

Hence, the conclusion would have to be that Murdoch is not going to be bumped off the firm by anybody for now. But then, as last week went on, so the trouble continued. As Westminster played host to a political scramble to pull the rug from under the tainted firm, the same process began in Washington. On Thursday, senior Democrat senator John Rockefeller wrote to the Department of Justice to ask that they probe whether journalists working for Murdoch's empire targeted US citizens, breaching privacy laws. At the same time, senator Frank Lautenberg called on the FBI to investigate whether the company had violated the 1977 Foreign Corrupt Practices Act, which bars US firms from bribing foreign officials (such as, for example, Met police officers). The FBI has now confirmed inquiries have begun. Democrat senator Barbara Boxer declared: "Rupert Murdoch decided to become an American citizen and his corporation is American and he needs to obey American law. The stories coming out about bribing police, that is not allowed."

Such an inquiry brings James Murdoch into play if the inquiry focuses on News International, of which he is chairman. The worry for the Murdochs must be that this comes as America begins presidential election season - when the potential for controversies to be exploited and enlarged for whoever it suits goes up by a factor of 50. Ominously, it was not just Democrat senators leading the charge on Thursday; the condemnation included at least one Republican. Murdoch had funded the Republicans in recent years, while his Fox News network has effectively become the voice of the party - but that may count for nothing if his political pariah status on this side of the Atlantic transfers over there too. Murdoch's allies know all too well this is exactly what could happen. "I hope this matter doesn't get over-politicised," said Al-Waleed. "Clearly, some politicians in the UK and US would like to set the record straight and take revenge on his conglomerate."

So, by Friday, Murdoch would have known he was in a fight for survival. That day will surely go down as the worst in his career. First Brooks - his so-called "other daughter" - went. Then there was the humble apology to the Dowlers. And then, to cap it off, there was the sight of his oldest company ally of all, Dow Jones chief executive Les Hinton, also taking the fall. Hinton had been chief executive of News International during the hacking scandal, although he denied knowing about it. In a statement on Friday, Murdoch noted how, as a 15-year-old back in Australia, one of Hinton's first jobs was to fetch a lunchtime sandwich for him. The oldest member of the Murdoch inner circle, a man who had seen it all alongside Murdoch, had fallen.

The big question for the coming week is whether that will be it. On Tuesday, in what promises to be one of the most eagerly awaited parliamentary occasions ever, Murdoch, his son James, and Brooks will face questions from the House of Commons Culture, Media and Sport Committee. The pressure is firmly on James who, when previously questioned about hacking at the News of the World by MPs, dismissed it as the actions of a rogue reporter. There will also be questions about his decision to secretly spend nearly 1m on settlements to one of the phone-hacking victims. Both actions, he admitted last week, were wrong.

The instinct of Murdoch senior, confronted by a collection of junior politicians hoping to make their names in a media circus, will be to fight back on Tuesday. He told the Wall Street Journal last week that he wants to set the record straight, particularly over the allegations last week that his papers had stolen the medical records of Gordon Brown's son. But he will surely know that contrition for the genuine wrongs, not indignation at inaccurate slurs, is now his best chance of redemption. This is now all about stemming the flow of blood from the dynasty. Analysts say the events of the last two weeks may have marked the beginnings of evolutionary change at News Corp. "The Murdoch influence, despite their basic control, is going to be diminished," says Porter Bibb of Mediatech Capital Partners.

Murdoch may well survive to fight again. The dominoes should soon stop falling. But his patriarchal dream of handing on a business to his children, as his father did to him, is now shrouded in doubt.