11/10/2011 12:14 pm ET | Updated Jan 10, 2012

James Murdoch Won't Rule Out Closing Second British Paper

NEW YORK -- News Corp. deputy chief operating officer James Murdoch shook up the British media world on Thursday by telling members of Parliament that he wouldn't rule out closing the Sun newspaper if ongoing investigations reveal evidence of phone hacking.

Murdoch's revelation about the Sun's future came after two and a half hours of questions, mostly dealing with what he knew -- or supposedly didn't know -- about the widespread hacking of phones by employees of News of the World, the best-selling Sunday paper that News Corp. shuttered in July. New revelations in the scandal have led to over a dozen arrests of journalists and top-level resignations within the Metropolitan Police.

Last week, Sun reporter Jamie Pyatt was arrested as part of a probe delving into journalist payments to the police, the first such arrest from the country's highest-circulation daily newspaper and a publication that the Murdoch family has used to wield power in British politics for decades.

"Did employees working at the Sun newspaper commission phone hacks?" Labour MP Steve Rotheram asked Murdoch, who last appeared before the the Culture, Media and Sport Committee in July, along with his father, News Corp. chairman and chief executive Rupert Murdoch.

Murdoch initially said it "would be inappropriate" to comment. Rotherman then asked specifically if he's "aware that the words 'the Sun' appeared in the evidence file of convicted private investigator Glenn Mulcaire." Murdoch said he was not aware of that, leading to Rotherman's pointed question about the tabloid's future.

"If this particular publication is implicated in phone hacking and if its revealed that the Sun does appear in the Mulcaire file, will you close this paper like you did with the News of the World?" he asked.

Murdoch said it's "important to not prejudge the outcome of any investigations, nor is it, I think, appropriate to prejudge what actions the company might take to deal with those." However, Murdoch wouldn't rule out the idea of closing the Sun, too.

"I don't think we can rule, and I shouldn't rule, any corporate reaction to behavior of wrongdoing out," Murdoch said. "That'll be a decision taken at the time, given whatever is out there."

BBC business editor Robert Peston called Murdoch's response "quite extraordinary" on Twitter, and Guardian deputy editor-in-chief Ian Katz noted how Murdoch's lawyers looked "[very] anxious" when he said it.

One wonders what Rupert Murdoch thought watching at home. The Australian-born media mogul purchased the Sun in 1969, a year after buying the News of the World and inserting himself as a major player into British media. He later bought the Times (of London) and Sunday Times, while expanding his newspaper holdings in the U.S. with the New York Post and Wall Street Journal -- the latter acquired in a $5 billion dollar deal for Dow Jones four years ago that didn't please News Corp. investors who are more concerned about the conglomerate's future in television, movies and on the Internet.

James Murdoch, too, doesn't share his father's love of newsprint and perhaps might begin divesting from newspapers if put in charge. But the younger Murdoch is no longer expected to immediately take over the company when his father relinquishes the CEO title. That's because his reputation has been tarnished in the scandal, especially since the $13 billion merger of satellite company BSkyB collapsed in July under his watch.

Needless to say, Murdoch's second appearance before Parliament isn't likely to build confidence among News Corp. investors. At best, he appeared clueless; at worst, misleading. Throughout his testimony, Murdoch repeatedly claimed not to have been informed about rampant hacking while running News International in May 2008, thereby contradicting the recent testimonies of former legal chief Tom Crone and News of the World editor Colin Myler about a hefty settlement to phone hacking victim and football executive Gordon Taylor.

Several members of Parliament expressed skepticism over Murdoch's claims, noting how "incurious" he would have been and "cavalier" in overseeing payments without seemingly consequential information at hand. (Both HuffPost's Jack Mirkinson and HuffPost UK's Stephen Hull have the blow-by-blow).

Labour MP Paul Farrelly questioned how in July 2009 -- as the Guardian presented evidence before Parliament showing widespread hacking -- Murdoch could have been "the only person in London" still under the impression that there was one rogue reporter involved in the wrongdoing.

But it was Tom Watson, who has doggedly pursued phone hacking over the year and has become an outspoken critic of News Corp., taking the prize for the harshest skepticism of Murdoch's claim.

"You must be the first mafia boss in history who didn’t know he was running a criminal enterprise," Watson said.