Giant dent in James Murdoch's reputation

Even for a father not known for his sentimentality, Rupert Murdoch must have had mixed feelings.

Yesterday, he got the result he craved: official recognition from regulator Ofcom that BSkyB, the satellite TV company 39pc-owned by his News Corporation, is a "fit and proper" broadcaster. But for the 81-year-old media mogul, Ofcom's ruling packed a nasty punch. It trashed his younger son James Murdoch - a man tainted by the phone-hacking scandal that forced the News of the World's closure in July 2011.

Murdoch junior, Ofcom declared, "repeatedly fell short of the conduct to be expected of him as a chief executive officer and chairman" when he was running the tabloid's owner, News Group Newspapers (NGN).

The scandal at the red-top triggered Ofcom's inquiry. The regulator asked whether the ties between News Corp's discredited newspaper empire and Sky effectively made the TV company unfit to hold a broadcasting licence.

The inquiry, which pretty much halted News Corp's ambitions to buy the 61pc of Sky it doesn't already own, coalesced around James - a man with a foot in both camps. Having been chief executive of Sky from November 2003 to December 2007, he switched from TV to newspapers to become executive chairman of NGN's parent, News International. But he remained on the Sky board, stepping up to chairman.

It was a post he clung to until April this year. He remains a BSkyB non-exec.

His resignation was widely interpreted as belated recognition that looming reports from both the Culture committee and Ofcom were about to make his position untenable. Patrick Yau, a Peel Hunt analyst, said yesterday: "His stepping down helped the process. It cut the most obvious link between News Corp and the family and Sky."

The upshot is that, with yesterday's Ofcom ruling out of the way, an exonerated Murdoch senior might again look at snaffling the remaining 61pc of BSkyB. But what of James, pasted by Ofcom for failings on four occasions?

The Taylor settlement

James Murdoch took over at News International almost a year after former NOTW royal reporter Clive Goodman and private investigator Glenn Mulcaire were jailed for phone hacking.

Ofcom accepts there is no "evidence to contradict his [James Murdoch's] account" to the Culture committee that he failed to read an email chain all the way to the end that might have alerted him to concerns that more than one rogue reporter was involved.

However, in June 2008 he authorised a payment of at least pounds 425,000 for Gordon Taylor, chief executive of the Professional Footballer's Association to settle hacking claims. Murdoch admitted "the sum represented a very significant proportion of the annual budget for such settlements".

Yet, Ofcom found that "he did not ask to see the opinion from leading counsel or to have sight of?.?.?. the evidence on which the advice to settle was based". As such, his "exercise of responsibility was less than we would expect to see exhibited by a competent chief executive officer".

Response to Guardian article

In July 2009, The Guardian alleged that Mulcaire had provided a recording of the messages on Taylor's phone to a NOTW journalist who transcribed them and emailed them to a senior reporter.

Ofcom found that, within two days, News International issued a statement saying it had carried out "a thorough investigation" and that The Guardian had made "irresponsible and unsubstantiated allegations".

Ofcom related that Murdoch's own evidence to the Culture committee admitted he had received a copy of the article and subsequently read the famous "for Neville" email - sent to reporter Neville Thurlbeck, that is alleged to contain transcripts of 35 voicemails. But he added that he was overseas at the time and the response to the article was handled by Rebekah Brooks, who later took over as chief executive of News International.

Ofcom found "no evidence" that he had taken "the necessary steps to apprise himself of the information he needed to carry out his duties responsibly".

Response to Culture Committee

In February 2010, the Culture committee accused News International of "collective amnesia", saying its internal inquiries had been far from "rigorous". News International hit back, claiming the committee was pursuing "a party political agenda".

Ofcom said that Murdoch admitted to reading the committee report but "did not regard the response" to it as "his direct responsibility and therefore relied on what he was told about it". It found his "lack of action to be both difficult to comprehend and ill-judged".

Sienna Miller

Ofcom also criticised Murdoch's response to a legal claim in November 2010 by actress Sienna Miller.

The regulator contrasted what he said he did this year to the Leveson inquiry into the newspaper industry and what actually happened in practice. Ofcom found the only step he took was the "suspension of a journalist". "We find it difficult to comprehend James Murdoch's lack of action, given his responsibility as chairman," Ofcom said.

The overall upshot is that, while Ofcom discovered no evidence to date that "James Murdoch knew of widespread wrongdoing or criminality at NOTW", it found "his failure to initiate action on his own account on a number of occasions both difficult to comprehend and ill-judged".

It's a stance rejected by News Corp, which said the regulator's criticisms were "not at all substantiated by evidence".

How crucial the Ofcom decision is for what happens next is a moot point. With criminal investigations under way, Murdoch's tenure even as a BSkyB non-exec is not assured. Not least if News Corp resurrects its bid for BSkyB.

Lorna Tilbian, a Numis analyst, said that Murdoch's decision to demerge News Corp, splitting its TV businesses from the newspapers, makes a bid easier. "It's unfinished business. If Rupert comes back with a pure entertainment company people won't be able to jump up and down and say the company's tainted by phone hacking."

The same cannot be said of Murdoch junior, whatever Ofcom's acknowledgement that during his "tenure Sky continued to be a successful company".