UPDATE 4-News of the World admits phone hacking liability

* News International admits phone hacking

* Says to pay compensation in some cases

* Says will contest some others, does not give details
(Adds link to Breakingviews column)

By Jodie Ginsberg and Kate Holton

LONDON, April 8 (Reuters) – Rupert Murdoch’s powerful UK
news arm reversed course and admitted its role in a
long-running phone hacking scandal that had thrown into
question the Prime Minister’s judgment and threatened Murdoch’s
biggest ever deal.

News International, parent company of Britain’s top-selling
News of the World tabloid, had always vigorously denied it knew
journalists were hacking the phones of members of the royal
family, politicians, celebrities and sports stars, and blamed a
handful of “rogue reporters” for the scandal.

But in a major turnaround for the company, part of
Murdoch’s global media empire News Corp (NWSA.O: Quote, Profile, Research), News
International said on Friday it would admit liability and pay
compensation in eight cases — although many more believe they
were targeted.

Those who will receive an “unreserved apology” from the
group include actress Sienna Miller and politician Tessa
Jowell.

The scandal threw into question the judgment of Prime
Minister David Cameron, who appointed former News of the World
editor Andy Coulson as his head of communications.

Coulson ran the paper at the time of the hacking scandal.
Although he has always denied knowledge of it, he was forced to
resign as Cameron’s media manager earlier this year, saying the
focus on the hacking scandal was too great a distraction
.

For a Breakingviews column on News Corp’s mea culpa click
on [ID:nN08229045].

MAJOR DEAL

Analysts said the move was an attempt to draw a line under
the case and limit potential financial costs as News Corp tries
to push ahead with its planned $14 billion purchase of BSkyB
(BSY.L: Quote, Profile, Research), a deal that has angered other British news operators
who fear the group’s growing influence over Britain’s media.

“Following an extensive internal investigation and
disclosures through civil legal cases, News International has
decided to approach some civil litigants with an unreserved
apology and an admission of liability,” it said in a
statement.

“We have also asked our lawyers to establish a compensation
scheme with a view to dealing with justifiable claims fairly
and efficiently …. We will, however, continue to contest
cases that we believe are without merit or where we are not
responsible.”

Lawyer Mark Lewis of Taylor Hampton Solicitors, who
represents four individuals currently suing the News of the
World including horse jockey Kieren Fallon, said he had yet to
receive any settlement offers but welcomed the development.

“This is a good stab in the right direction but it is a
long way from being over,” he told Reuters. “There are people
who don’t even know at this stage that they are victims.”

Some media reports suggested the settlement could reach 20
million pounds.

“This is being driven by business considerations because
clearly the reputational damage is just mounting,” media
consultant Steve Hewlett told Reuters. “The price that they
will pay for admitting liability is way lower than the
consequences of fighting on all fronts.”

A spokesman for Britain’s Department of Media said the
admission would not affect News Corp’s planned takeover of
pay-TV operator BSkyB, which is set to be given the green light
by Culture Secretary Jeremy Hunt in the next few weeks.

“The two issues aren’t connected,” the spokesman said. “The
issue with BSkyB is simply about media plurality. If something
happens to affect that, then he can take that into account.”

But former Home Secretary John Prescott, who believes his
phone was hacked by the paper, said the deal should not
proceed.

“The NOTW (News of the World) has now admitted mass
criminality. The Gvt should NOT approve Murdoch’s bid for BSkyB
until all investigations are complete,” he wrote on short
message service Twitter.

Earlier this week, two reporters were arrested as part of
the investigation into the scandal. The men, including former
senior News of the World editor Ian Edmondson, were held on
suspicion of conspiring to intercept communications and
unlawful interception of voicemail messages.

Edmondson was sacked at the start of this year after an
internal inquiry into his conduct. The other man was identified
as Neville Thurlbeck, currently the paper’s chief reporter.

The scandal dates back to 2005/6, when the News of the
World’s royal reporter and a private detective were arrested
and jailed for snooping on the voicemail messages of royal
aides.

A new police inquiry was launched last January after being
severely criticised by politicians and celebrities who
suspected they too had had their voicemail intercepted.

Critics argued the original police probe had not gone far
enough, and some have suggested detectives were too close to
the News of the World. Police have denied this.

(Additional reporting by Paul Sandle, Olesya Dmitracova,
Kate Holton, Tim Castle and Georgina Prodhan; Editing by
Georgina Prodhan/Ruth Pitchford)

UPDATE 4-News of the World admits phone hacking liability