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Is this the end of Rupert? For decades the billionaire media baron relentlessly amassed power on three continents. As recently as July 4 only a fool would have bet against that process continuing. In New York, shares of News Corporation were trading at $18.54; having bought out his daughter Elisabeth’s production company, Shine, for £415 million ($673 million), Murdoch also arranged for his son James, who had been running British Sky Broadcasting (BSkyB), to move to New York—apparently securing family control over the company for the next generation. In London the government of David Cameron, elected with the backing of Murdoch’s newspapers, was expected to wave through a deal that would let the 80-year-old tycoon buy the 61 percent of BSkyB he doesn’t already own, giving him even greater influence over British politics. A week later, the deal was off. Ad Policy

The House of Murdoch has been shaken to its foundations. The political firestorm began with a report in the Guardian that journalists from the News of the World, Murdoch’s Sunday tabloid, had hacked into the mobile phone messages of Milly Dowler, a murdered 13-year-old girl, setting off a wave of public revulsion that in turn sparked an advertising boycott. Prime Minister Cameron condemned the hacking as “dreadful”; Labour Party leader Ed Miliband called for Rebekah Brooks, a Murdoch executive who’d been editor of the News of the World when the hacking occurred, to resign. When it emerged that the paper had also hacked into the voicemail accounts of British soldiers killed in Afghanistan and Iraq, the Royal British Legion, the country’s largest veterans’ organization, announced it was cutting its ties with the paper. Just when it seemed the paper’s reputation could sink no lower, it was reported that victims of the July 7, 2005, London bombing had also had their voicemail accounts hacked. Even Rupert Murdoch described the mounting scandal as “deplorable and unacceptable.” Related Article Slide Show: Rupert Murdoch’s ‘News of the World’ Scandal in Pictures The Nation

In a desperate attempt to limit the damage James Murdoch announced that the 168-year-old tabloid would be shut down. Miliband, who’d made an obligatory appearance at a Murdoch garden party in June, suddenly seemed to discover his backbone (or another portion of his anatomy starting with “b”), moving to force Parliament to debate the BSkyB merger. As the Labour motion opposing the merger gathered support from across the political spectrum, Culture Secretary Jeremy Hunt announced that he was referring the bid to the Competition Commission as well as the media regulator Ofcom, delaying a decision for at least three months. Speculators who had bought BSkyB shares in anticipation of the merger began to bail out—which, in turn, knocked a whopping 15 percent ($7 billion) off the value of News Corporation. Then on July 13, in a stunning reversal, James and Rupert Murdoch withdrew their bid, saying “it is too difficult to progress in this climate.” Long accustomed to making the political weather, the Murdochs were battered by the storm.

Both Murdochs had been “invited” to appear before a parliamentary select committee—an offer their surprise move may have been designed to refuse. But the family firm’s troubles are far from over. Some shareholders, aggrieved at the way Rupert Murdoch “habitually uses News Corp to enrich himself and his family members at the Company’s…expense,” filed a lawsuit challenging the acquisition of Shine—but really aimed at the way the whole corporation has been run for the past four decades. (For connoisseurs of irony, one of the lead plaintiffs in the suit is Amalgamated, the union bank.) There is even a chance Murdoch or his lieutenants could face prosecution in the United States under the Foreign Corrupt Practices Act.

Still, it’s probably worth remembering that Murdoch has been counted out before. Back in 1969 he was very much the dark horse in the race to buy the News of the World, whose owners had agreed to sell to Robert Maxwell. Maxwell’s fraudulent dealings were still unsuspected, but his Czech Jewish origins were held against him by the paper’s editor, who remarked that the News of the World “was—and should remain—as British as roast beef and Yorkshire pudding.” Snatching the title from Maxwell was Murdoch’s first move out of his native Australia—and out from under the shadow of his father, newspaper magnate Sir Keith Murdoch. Though in considerable decline from its heyday in the 1950s, when it sold more than 8 million copies a week, the News of the World was still the top-selling English-language paper anywhere; with its weekday stablemate, the Sun, which Murdoch acquired a year later, it supplied the steady profits that enabled him to build his British empire. (In 2010, a terrible year in the newspaper business, the two titles reported a profit of £86 million.)

In the 1990s Murdoch’s single-minded push into broadcasting, building the Fox network in the United States and BSkyB in Britain, burdened the company with so much debt it would have collapsed if bankers hadn’t been too terrified to call in his loans.

Indeed, it is precisely the possibility that he will no longer be quite so feared that makes the current crisis potentially so dangerous for Murdoch. When News of the World reporter Clive Goodman and private investigator Glenn Mulcaire first pleaded guilty to hacking into the mobile phone accounts of members of the royal family in 2007, the story initially died a death that, in retrospect, can only be viewed as unnatural. Scotland Yard declared the case closed, and despite dogged reporting by the Guardian and the New York Times, the rest of the media showed little interest. The recent revelation that Murdoch’s reporters routinely made illegal payments to corrupt police officers for confidential information explains some official failures. Reporters aware of similar arrangements at their own shops may also have been reluctant to pursue the story. (Reader, have you changed your access code lately?)

And the treatment meted out to former Prime Minister Gordon Brown, who had his voicemail hacked by Mulcaire, his bank accounts viewed by the Sunday Times and his infant son’s medical records stolen by the Sun, illustrates why so few politicians have been willing to challenge Murdoch. Guardian reporter Nick Davies’s account of how Rebekah Brooks, at the time the Sun’s editor, told the Browns the paper was about to publish a story revealing their 4-month-old son, Fraser, had just been diagnosed with cystic fibrosis is a chilling study in the abuse of press power. Brown wasn’t a sworn foe—the Browns had even invited a Sun columnist to their wedding!

Parliament’s success in forcing Murdoch’s hand suggests that the puppets may have turned on the puppet master—at least in Britain. Can Americans dare hope that Murdoch’s political influence in the United States is also on the wane? A world without Fox News would be a fairer (if not more balanced) world in every sense. But as the widening revelations of the phone-hacking scandal show, News Corporation is not an ordinary commercial enterprise. Through his journalists and gossip columnists and the network of former and current police officers and law enforcement officials on his payroll, Rupert Murdoch has been operating what amounts to a private intelligence service. And the threat of personal exposure—on the front page of the Sun or Page Six in the Post—gives News Corporation a kind of leverage over inquisitive regulators or troublesome politicians wielded by no other company on earth.

English already has the expression “para-state” to describe the kind of shadowy forces that operate beneath and behind legitimate authority. Is it really unreasonable to suggest that in News Corporation, Fox, News International, Sky and the rest of Murdoch’s empire, we are witnessing the exposure of the para-corporation?