Spiralling phone hacking crisis threatened Murdoch's empire

Coulson was Cameron's media chief until his resignation in January A phone hacking scandal which brought down Britain's mass-circulation News of the World tabloid threatened to ensnare Prime Minister David Cameron with Friday's expected arrest of his former press chief. Media mogul Rupert Murdoch killed off the 168-year-old tabloid in a stunning move Thursday as the spiralling phone hacking crisis threatened to infect the rest of his empire and taint the country's leader.
Andy Coulson, who was editor of the paper when hacking was proven to have occurred, was told by police that he was to be arrested on Friday over claims that he knew about the hacking or was directly involved, the Guardian said.
Coulson -- who was Cameron's media chief until his resignation in January -- was expected to be released on bail, it added.
In a fittingly sensational finale, the paper will print its last edition on Sunday after claims that it hacked the phones of a murdered girl and the families of dead soldiers, and that it paid police for stories. Facts: News Corp -- Murdoch's multi-media empire
"Having consulted senior colleagues, I have decided that we must take further decisive action with respect to the paper," said Murdoch's son James, chairman of News International, the British newspaper wing of Rupert Murdoch's News Corp.
"This Sunday will be the last issue of the News of the World," he added.
The final edition would be free of advertising and proceeds would go "to causes and charities that wish to expose their good works to our millions of readers", he said in a statement.
One devastated staff member said the announcement went off like a "nuclear bomb" in the offices of Britain's second biggest selling newspaper, whose diet of kiss-and-tell stories sold 2.7 million copies a week.
Its closure sparked immediate speculation that Rupert Murdoch was offering the paper as a sacrificial victim to save his bid for control of pay-TV giant BSkyB, which is the subject of an upcoming government decision.
The BBC quoted sources as saying Murdoch would replace it with a Sunday version of The Sun, his daily tabloid, which is Britain's biggest selling newspaper.
Cameron said the closure of the News of the World should not distract from an ongoing police investigation into the hacking.
"What matters is that all wrongdoing is exposed and those responsible for these appalling acts are brought to justice," Cameron's Downing Street office said in a statement.
He repeated his pledge to hold public inquiries into practices at the News of the World and into an earlier botched police probe into the issue.
James Murdoch repeated his father's earlier defence of News International chief executive Rebekah Brooks, saying he was confident she was not aware of hacking during her own stint as editor.
"I am satisfied that Rebekah, her leadership of this business and her standard of ethics and her standard of conduct throughout her career, are very good," Murdoch said in a television interview.
Two hundred staff will lose their jobs at the paper and they have been told they can apply for other jobs within News International.
News of the World associate editor David Wooding described the atmosphere in the newsroom when the closure was announced. "Everyone was standing around looking dazed. Everyone kept saying -- how could it get any worse?" he told the BBC.
In his statement, James Murdoch admitted that the paper had lied to parliament and to the public in its earlier statements on the long-running scandal.
He said that if allegations that a private investigator working for the tabloid hacked the voicemail of Milly Dowler, a 13-year-old girl who was later found murdered, were true, they were "inhuman".
"The News of the World is in the business of holding others to account. But it failed when it came to itself," he added. "Wrongdoers turned a good newsroom bad and this was not fully understood or adequately pursued."
Former home secretary Alan Johnson said Wednesday that James Murdoch himself could be prosecuted over his admission that he personally approved out-of-court settlements to victims of hacking.
The death blow for the News of the World came on Thursday when veterans' charity the Royal British Legion dropped its campaign partnership with the paper over claims in the Daily Telegraph that an investigator hired by the tabloid may have accessed the voicemails of relatives of dead soldiers.
British newspapers Friday mourned the tabloid's demise.
News International stable mate The Times said: "Yesterday a little bit of England died .... " adding that the paper had "produced great stories, and sometimes exposed great wrongs."