LONDON, July 15 (Reuters) - Rupert Murdoch said sorry on Friday to victims of criminal phone hacking by one of his tabloids after confidante Rebekah Brooks quit as head of the British newspaper arm of his News Corp media empire.
Moving to get ahead of a scandal washing over his global business, the U.S.-based magnate made a personal apology to the parents of a murdered schoolgirl in what appeared to be an admission that the News of the World, then edited by Brooks, had in 2002 hacked into the voicemails of their missing daughter.
It was that damning allegation, in a rival newspaper 10 days ago, which reignited a five-year-old scandal that has forced Murdoch to close the News of the World, Britain's best-selling Sunday paper, and drop a $12 billion plan to buy full control of highly profitable pay-TV operator BSkyB.
The crisis has broken the spell that Murdoch, 80, has held over British politics for three decades as leaders from Margaret Thatcher, through Labour's Tony Blair to current Conservative Prime Minister David Cameron sought his support.
It has also raised questions from shareholders over his family's management of the business. And, following the arrest of nine journalists so far since police relaunched inquiries in January, it raised the possibility of legal action against yet more senior executives of the multinational corporation.
A direct apology from Murdoch, who has been summoned to answer questions before a parliamentary committee, will be carried in all national newspapers this weekend under the headline "We are sorry." The text was released by News International.
"The News of the World was in the business of holding others to account. It failed when it came to itself," Murdoch wrote in the article, which was signed off "Sincerely, Rupert Murdoch."
"We are sorry for the serious wrongdoing that occurred. We are deeply sorry for the hurt suffered by the individuals affected," he added.
"In the coming days, as we take further concrete steps to resolve these issues and make amends for the damage they have caused, you will hear more from us."
He also met parents of Milly Dowler, a 13-year-old abducted in 2002 and found murdered six months later. Police are investigating whether someone engaged by the News of the World not only listened in to the missing teenager's cellphone mailbox but deleted some messages to make room for more.
That misled police hunting for her and gave her parents false hope that their daughter might still be alive. Brooks, now 43, was then editor of the News of the World and has denied knowing of any such practices at the time.
"He apologised many times," said Mark Lewis, the Dowler family lawyer. "I don't think somebody could have held their head in their hands so many times to say that they were sorry."
BRITISH PM UNDER FIRE
Brooks, who had resisted pressure to quit, resigned on Friday as chief executive of News International -- hours after Prince Alwaleed bin Talal, who says his Kingdom Holding is the second biggest shareholder in News Corp, said she had to go.
The former editor of the News of the World and of flagship daily tabloid The Sun, was a favorite of Rupert Murdoch, who described her as his first priority when he flew in to London this week to manage the crisis.
In her place, he named a trusted News Corp veteran, New Zealander Tom Mockridge, who has spent the past eight years running the group's Sky Italia television interests in Italy.
Speaking before Brooks's resignation to the Wall Street Journal, which he owns, Murdoch had defended the way his managers had handled the crisis.
He spoke of "minor mistakes" and dismissed suggestions, floated by some shareholders, that he should sell off the troubled newspaper businesses on which his empire was founded but which bring in only limited profits.
Yet within a day of what sounded like an effort to play down the scandal, his abrupt change of tack into a hand-wringing mea culpa appeared aimed at shoring up the wider company.
The scandal has shaken Prime Minister Cameron, who is under fire for his personal relationship with Brooks and for hiring another ex-editor of the News of the World as his spokesman.
Cameron suffered another blow Friday when an aide said he had hosted a visit from his former spokesman Andy Coulson in March this year -- two months after Coulson quit his job.
He has now launched a judicial inquiry into the phone-hacking affair, which also includes allegations of corrupt payments to police by journalists.
Murdoch, a U.S. citizen, has been courted for decades by Britain's political elite as a kingmaker who could influence voters to shift left or right.
He now faces a showdown with parliament Tuesday when lawmakers on the media committee grill him, his son James and Brooks. During an angry debate this week, one legislator called him a "cancer on the body politic."
"ROGUE REPORTER" DEFENSE DROPPED
Brooks, whose youth, mane of red hair and former marriage to a soap opera star have given her a high public profile in Britain, said in a message to staff:
"My desire to remain on the bridge has made me a focal point of the debate. This is now detracting attention from all our honest endeavours to fix the problems of the past.
"Therefore I have given Rupert and James Murdoch my resignation. While it has been a subject of discussion, this time my resignation has been accepted."
She said she felt "a deep sense of responsibility for the people we have hurt."
"I want to reiterate how sorry I am for what we now know to have taken place," she added.
That appeared an acknowledgement that the News of the World's invasions of private voicemails went well beyond those of the royal aides whose complaints led to the jailing of a reporter and an investigator in 2007. Police say they are now probing whether another 4,000 people -- including victims of crimes, bombings and war -- were targeted.
Former motor-racing boss Max Mosley told Reuters Friday he had agreed to underwrite lawsuits that victims of alleged intrusive reporting may bring against News International.
Mosley, who won damages from the News of the World after it published revelations about his sex life, said he would cover the potentially large costs if people rejected settlement offers and pressed forward with litigation.
Tom Watson, a Labor MP who has led the campaign against the News International papers, said Brooks' departure could put James Murdoch, his father's heir apparent, in the spotlight.
"Because she has taken so long to go I think the focus will very swiftly move on to James Murdoch now and what he knew and what he was involved in," Watson told Sky News.
Professor Martin Innes, a leading criminologist based at Cardiff University, said Brooks would certainly be questioned by police.
"In terms of managing the whole furor around it, if you actually went to an arrest phase, that will ramp up the story yet again and increases the pressure on the investigation," he told Reuters.
"So I would imagine the next step she will be viewed as a witness and they will want to go and talk to some other people as well to try and look at how does her account relate to things that other people say."
A week ago, Brooks had told News of the World staff, who were sacked with the paper's closure, that she would remain to try and resolve the company's problems -- causing anger among many of the 200 being laid off. Some accused Murdoch of sacrificing their jobs to save hers.
Brooks could receive a seven-figure payoff but that is likely to come with a strict agreement she keeps her silence, legal experts and a former executive said Friday.
Mockridge, who will replace Brooks, has spent two decades in News Corp. Analysts may be pleased at the New Zealander's background in television, an area in which News Corp is keen to expand, as well as his lack of direct involvement in the scandal-hit British newspaper business during the past decade.
As well as its published apology this weekend, the company would also write to its commercial partners to update them on its actions, James Murdoch said. Many advertisers had said they would boycott the News of the World before the company killed it off and refused paid advertising in last Sunday's final edition.
Some advertisers had also questioned their spending in other titles, notably the Sun, Britain's best-selling newspaper.
"The Company has made mistakes," James Murdoch wrote to staff. "It is not only receiving appropriate scrutiny, but is also responding to unfair attacks by setting the record straight."
Analysts welcomed the tone.
"It is obvious that the company is finally listening fully to the political noise around it and is finally taking seriously the issues that have emerged around alleged offences at News International," said Claire Enders, head of Enders Analysis Media Consultancy.
"Finally the company recognizes that whatever the underlying evidence in fact may well be, there has to be a new approach," she added.
Rupert Murdoch said his media empire would recover from the scandal and an FBI inquiry into similar allegations in the United States. He has denied that News Corp was drawing up plans to separate its newspaper holdings, which are at the heart of the controversy, from the rest of the company. (Additional reporting by Stefano Ambrogi, Michael Holden, Matt Falloon, Mark Hosenball, Tim Castle and Karolina Tagaris in London, Paul Thomasch, Basil Katz, Carlyn Kolker and Yinka Adegoke in New York; Writing by Keith Weir; Editing by Alastair Macdonald and Myra MacDonald)
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