Former News International chief executive Rebekah Brooks, who resigned on Friday following allegations over her role in the UK's phone hacking scandal, has been arrested by police.
Several sources familiar with the situation said Ms Brooks (43) was being questioned as part of an investigation into allegations of illegal voicemail interception and police bribery at the News of the World tabloid she once edited.
Ms Brooks quit as head of News International, the British unit of Murdoch's News Corporation last Friday, but has denied she knew of the alleged hacking of thousands of phones, including that of a murdered schoolgirl.
The revelations have shocked the public and raised concerns not only about unethical media practice but about the influence Mr Murdoch has wielded over successive British leaders and allegations of cosy relationships between some of his journalists and the police.
With politicians from Australia to the United States demanding to know if similar abuses occurred elsewhere in Mr Murdoch's global media business, the 80-year-old has been forced on the defensive and the position of his son James as heir-apparent has been called into question.
In Britain, prime minister David Cameron has come under fire for his friendship with Brooks and for employing another former News of the World editor, Andy Coulson, as his press secretary even after Mr Coulson had quit the paper in 2007 following the jailing of a reporter for phone hacking.
"The waters are very definitely lapping around the Murdochs' own ankles," Chris Bryant, a member of parliament for Britain's opposition Labour Party, said.
Tim Bale, politics professor at the University of Sussex, said: "I think this was pretty uncomfortable for Cameron already and it will get more uncomfortable now over the next week."
Ms Brooks, Mr Murdoch and his son James will be questioned in Britain's parliament on Tuesday, including over reports that News International misled parliament during earlier hearings.
"It brings the whole thing closer to him (Cameron)," Prof Bale said. If one believes all the talk of a Chipping Norton set, it reinforces this impression of a cosy elite at the top of the media/political complex," he added, referring to a town in Mr Cameron's affluent countryside constituency where Ms Brooks also has a home.
Ms Brooks became the focus of widespread anger over the phone-hacking scandal but was initially protected by Mr Murdoch, who guided her rise through the male-dominated world of UK tabloid journalism to become editor of the News of the World in 2000 and the Sun's first female editor in 2003.
Flying into London a week ago to take charge of the crisis, Mr Murdoch appeared before journalists with his arm around her. Asked what was his first priority, he gestured at her and replied: "This one."
Ms Brooks' lawyer Dave Wilson said that Ms Brooks went to a London police station of her own volition by pre-arranged appointment. He said she was assisting police with their inquiries and declined to comment further.
A senior News International source said the company was surprised by the arrest and had had no indication it was coming.
The News of the World, which published its final edition a week ago, is alleged to have hacked thousands of phones, including that of murdered 13-year-old Milly Dowler, sparking a furore that forced Mr Murdoch to close the paper and drop a $12 billion plan to buy all of highly profitable broadcaster BSkyB .
Mr Murdoch, who some media commentators say at first misjudged the strength of public anger, broke his silence at the weekend by publishing apologies in several British newspapers.
He lost another loyal executive on Friday when Les Hinton resigned as chief executive of Mr Murdoch's Dow Jones & Coompany which publishes The Wall Street Journal.
"There are no excuses and should be no place to hide ... We will continue to cooperate fully and actively with the Metropolitan Police Service," News International said in an announcement today.
Unlike apologies published yesterday, these were not signed by Mr Murdoch. Leading British politicians renewed calls for greater media plurality and press regulation - a direct threat to Mr Murdoch's empire, which includes The Sun, The Times and Sunday Times broadsheets, and 39 per cent of BSkyB.
The Sunday Telegraph reported that members of the board of BSkyB, where James Murdoch serves as chairman, are due to meet in a special session on July 28th to discuss his future.
The scandal has also embroiled Britain's police, who are accused of being too close to News Corp, of accepting cash from the now defunct News of the World and other newspapers, and of not doing enough to investigate the phone-hacking allegations that surfaced as far as back as 2005.
In 2003 Ms Brooks admitted that the News of the World had made payments to police in the past but could not remember any specific examples.
Britain's senior police chief Paul Stephenson came under renewed pressure late yesterday after it emerged he had stayed at a luxury spa at which Neil Wallis, a former News of the World deputy editor, was a public relations adviser.
A police statement said Mr Stephenson did not know of Mr Wallis's connection with the spa, and his stay was paid for by the spa's managing director, a family friend with no links to his professional life.
Mr Stephenson already had come under fire after his force said Mr Wallis, who has been arrested over the phone-hacking scandal and is free on bail, had been hired as a consultant by the police.
The Observer newspaper published an interview with British opposition leader Ed Miliband, in which the Labour party chief called for the break-up of Murdoch's empire.
"I think it's unhealthy because that amount of power in one person's hands has clearly led to abuses of power within his organisation," Mr Miliband was quoted as saying.
Reuters
