Following the break-up of News Corp NWSA into 21st Century Fox FOX and the new News Corp in 2013, Murdoch's salary was reduced by $1 million from $8.1 million to $7.1 million. His annual cash bonus also went down from $12.5 million to $10.2 million. His stock awards, meanwhile, increased by around $1.2 million.

While the 83-year old’s pension grew by $5.4 million compared to an increase of $2.8 million in 2013, these figures have been excluded from his total pay figure because most boards claim they have no control over the amount of the increase year-on-year. So, Murdoch’s overall total compensation went from $26 million in 2013 to $23.9 million in 2014, a decrease of around 8%.

Such a decrease might be expected after the break-up of the Murdoch empire into two separate companies--21st Century Fox, which holds all the broadcast entities: Fox Broadcasting, Twentieth Century Fox Film, Twentieth Century Fox Television, Fox Sports, Fox News Channel, Fox Business Network, the National Geographic Channels, and BSkyB, among others; and News Corp, which holds all the print and related media: Dow Jones, The Wall Street Journal, Dow Jones Newswires, HarperCollins, The New York Post, as well as Australian and British newspapers such as The Australian, The Herald Sun, The Daily Telegraph, The Times, and The Sun.

21st Century Fox has a market capitalization of around $73.45 billion. News Corp has a market cap of around $9.44 billion. So News Corp represents just over 10% of the value of the two companies, thus the salary decrease seems appropriate given Murdoch’s slightly decreased responsibilities.

Except Murdoch is not just CEO of 21st Century Fox. He has other gigs. Yes, the empire was split in two and a new News Corp CEO--Robert Thomson, former managing editor of The Wall Street Journal, who is paid a lot less than Murdoch was as CEO--was installed. But that does not mean that Murdoch relinquished control, since he remains at News Corp as executive chairman. And what was his salary as executive chairman? $1 million. But, in addition to that, he received a cash bonus of $2.7 million and $5 million in stock awards.

Taking both jobs into consideration, Murdoch’s pay in 2014 comes to $32.6 million, an increase of more than 25% compared to the previous year.

And in 2014, Murdoch vested in $19.4 million of restricted stock in the two companies from prior year awards, compared to only $4.3 million from the combined companies in 2013. Yet another increase.

The News Corp demerger was supposed to unlock value for shareholders, since the print companies’ losses were affecting overall profits at the company. But the changes seem to have also unlocked a good deal of cash for Rupert Murdoch.

Under the terms of the deal, Rupert Murdoch’s News Corp. NWSA agreed to pay $21 per share for all outstanding shares of Move, a deal that is worth roughly $844 million based on the amount of shares Move had outstanding in July (News Corp.’s figure is net of Move’s existing cash balances). The price News Corp. is offering is a roughly 37% premium to Move’s MOVE closing price on Monday.

News Corp. Chief Executive Robert Thomson said the deal will bolster the company’s digital business, adding he expects News Corp. will use its media platforms and content to “turbo-charge traffic growth and create the most successful real estate website in the U.S.”

“In addition to boosting Move’s subscription, advertising and software services, this acquisition will give News Corp a significant marketing platform for our media assets, which will benefit from the high-quality geographic data generated by real estate searches,” said Thomson.

Move’s websites include realtor.com, move.com and seniorhousingnet.com. The company has more than 20 million monthly visitors, and has local and national advertising pacts with more than 400,000 real estate professionals. Move’s revenue for the first six months of 2014 climbed 6.8% to $119.3 million from the year-earlier period, though the company swung to a net loss due to higher sales and marketing spending.

Though fairly small, News Corp. sees a lot of growth potential for Move. It points out that more than five million homes in the U.S. are bought and sold each year, representing more than $1 trillion in annual transaction volume. Agents and brokers, meanwhile, are expected to spend about $14 billion this year on marketing homes, with an additional $11 billion to be spent by mortgage providers.

Today is the final trading day of the third quarter, and stocks look set to rally at the open amid continued volatility and unrest overseas. Here's what else you need to know today.

1. The iPhone 6 is (finally) a go in China

After delays for security concerns, Apple’s AAPL iPhone 6 and iPhone 6 Plus will be for sale in China on Oct. 17, according to Reuters reports. The sale date was approved after Apple was able to assure the Chinese government it wouldn’t be able to give user data to the Us government.

2. Microsoft pulls back the curtain

Windows 8 was, to put it lightly, a bit of a disaster. So when Microsoft MSFT previews part of the soon-to-be-released Windows 9 today, the company will likely be hoping it can start erasing users’ bad memories.

3. Ebay is saying goodbye to PayPal

Ebay EBAY has unveiled a plan to spin off PayPal in 2015 -- a separation that activist investor Carl Icahn called for earlier this year. The move essentially splits Ebay into two equal halves, as PayPal currently accounts for about half of its revenue.

4. News Corp is on the Move

Rupert Murdoch’s media giant has made an acquisition, buying real estate website Move for $950 million. Reuters notes that the move was made to expand the company’s presence in digital marketing.

5. Netflix is going after new releases

Netflix NFLX has already changed the TV world through its award-winning series “Orange is the New Black” and “House of Cards.” Now the streaming service wants to take on Hollywood. With the release of a sequel to “Crouching Tiger, Hidden Dragon” scheduled for next year, Netflix is announcing in a big way that it wants to change the way movie releases work.

In a statement, CEO Rupert Murdoch called the bid for Time Warner a “unique opportunity to bring together two great companies.” But he said that while his company’s approach “had always been friendly,” Time Warner management “refused to engage with us to explore an offer which was highly compelling.”

A deal would have made Fox, which is home to a vast array of television, cable and film properties, an even bigger player in the media world. Time Warner owns a huge paid television business including HBO, TNT and TBS.

Fox had offered nearly $80 billion for Time Warner. But Time Warner rejected that overture last month.

Murdoch also cited the reaction to Fox’s share price, which slumped as a result, as another reason to withdraw the offer. He said that such response “undervalues our stock and makes the transaction unattractive to Fox shareholders.”

Meanwhile, following Fox’s announcement that it was withdrawing its bid, Time Warner’s shares fell 11% in after-hours trading.

Fox also said that its Board of Directors authorized a $6 billion share buyback program to be completed in the next 12 months.

But despite Murdoch’s thoughts on the matter, it may not be the end of the road for a possible deal.

The deal would have merged two companies that spun off their publishing assets. While 21st Century Fox sold News Corp., which owns The Wall Street Journal, Time Warner spun off Time Inc., the owner of Fortune, People, Sports Illustrated and others.

In the summer of 1983, the company then called Warner Communications (WCI) was in big trouble. The problem was its Atari division, which made games. But that bubble had burst, and a cascade of losses--they would exceed $1 billion, which was actually a sizable number in 1983--had begun.

Worse, several Atari executives, having presciently foreseen the cataclysm that was about to overtake Atari financial results, sold their WCI stock at a time, and in a manner that one could argue was shrewd planning, but which the SEC preferred to see as insider trading. It was not a good time at Warner. In fact, it was a time when the inside joke at the headquarters at 75 Rock was that the next time someone heard a WCI executive say we were going to fund a transaction with a revolver, no one could be quite sure what that meant.

Enter Rupert Murdoch, who had a nose for blood in the water that most sharks would envy. Here some of the information gets anecdotal. Supposedly, Murdoch told Warner CEO and founder (sort of) Steve Ross that he was interested in buying WCI stock. Reportedly, Steve told Rupert something like "fine with me--wise investment."

Whether that feeling of good will and camaraderie lasted days, hours or minutes is a matter of some debate, but that is really unimportant. What is important is that Steve Ross quickly realized Rupert was coming after him at a time when all of Ross's resources, personal and financial, were at a low.

Arthur Liman, a highly regarded legal counsel and Ross eminence grise, brought in another client of his, Herb Siegel, CEO of Chris Craft and an aspiring entertainment mogul, to play White Knight. Liman, Siegel, and Ross constructed a so-called Stock Exchange Plan in which WCI would receive a 42.5 percent interest in BHC, the Chris Craft television subsidiary (yeah, I know, you thought they made boats) in exchange for 19 percent of the voting stock of WCI.

There were various ways to characterize this arrangement ranging from brilliant to a nefarious marriage of convenience. A disinterested third party, the Delaware Court, got involved in this semantic dispute, and it turned out the court was uninterested as well as disinterested. It said, in a manner of speaking, "Go away and leave us alone."

Meanwhile, the Court did not force WCI and Chris Craft to unwind the transaction. With the exchange of shares now firmly in place, an acquisition of WCI by Murdoch became close to impossible. The circumstances also created a marriage of Ross and Siegel that was destined for predictable disaster, but this was one of those not infrequent any-port-in-a-storm corporate marriages.

Despite these brilliant, or nefarious, machinations, Ross worried. (Steve was not given to needless worry, and often displayed his iron gut in business transactions. What I am saying is that if Steve was worried, and he was, there were good reasons.)

Accordingly, despite the counsel of many advisors, Steve pushed for, and, under the "What-Steve-wants-Steve-gets doctrine," secured the approval of the WCI board to buy out Murdoch's WCI shares at a very sizable premium. Let's just say it was a lot more than you would have gotten if you had sold your WCI shares on the stock exchange the same day.

Once again the world was left with a semantic puzzle: Was this greenmail or not? Greenmail is what I used to call "go-away money"--the kind I would try to get from my older teenage sister to leave her and her boyfriend alone, pretty much forever. Two years after the WCI buyback of its shares from Murdoch at a substantial premium, the Tax Reform Act of 1986 did its bit to make such go-away inducements, whatever you chose to call them, costly as well as unpopular.

That was thirty years ago, and now HE'S BACK. Makes you wonder if there were some sort of expiration date on the original go-away agreement, and whether Warner, miscalculating Rupert's longevity, should have asked for a longer deal.

Warren Christie is a former executive of Warner Communications and its successor, Time Warner.

“21st Century Fox can confirm that we made a formal proposal to Time Warner last month to combine the two companies,” said spokesman Nathaniel Brown in a prepared statement. “The Time Warner Board of Directors declined to pursue our proposal. We are not currently in any discussions with Time Warner.”

The cash-and-stock offer from 21st Century Fox was to acquire all outstanding Time Warner shares for a combination of 1.531 21st Century Fox Class A non-voting shares and $32.42 in cash per share.

More: The Fortune interview: Rupert Murdoch

The potential deal would merge two companies that have recently spun off their publishing assets to focus more on core television and film businesses. Twenty-First Century Fox FOXA spun off News Corp. NWSA , the owner of The Wall Street Journal and other print properties, roughly a year ago, while Time Warner recently unloaded Time Inc. TIME , which owns People, Entertainment Weekly, Fortune and other magazine properties.

Time Warner, meanwhile, later Wednesday morning confirmed it had rejected the 21st Century Fox proposal, saying there was “significant risk and uncertainty” to 21st Century Fox’s ability to govern and manage the combined company.

“There are considerable strategic, operational, and regulatory risks to executing a combination with Twenty-First Century Fox,” the company said in a statement.

Earlier this month, Time Warner Chief Executive Jeff Bewkes told Variety he didn’t know anything about reports that 21st Century Fox and potentially Google GOOG were eying a takeover of the media conglomerate.

At stake, if a takeover of Time Warner TWX were to occur, would be control of a media empire with a market capitalization of more than $63 billion. Time Warner’s current assets all focus on TV and film content. They are Turner Broadcasting, which includes CNN, HBO and Warner Bros. Twenty-First Century Fox, meanwhile, controls the namesake film studio, as well as Fox News, Fox Business and Fox Sports.

Murdoch is a well known media mogul who also has established a track record of getting his way when it comes to acquiring prized media assets. For example, his $5 billion offer to buy Dow Jones & Co. in 2007 was a surprise bid for one of the nation’s last family-controlled newspaper companies. Though the Bancroft family, which owned a controlling stake in the publisher of The Wall Street Journal, put up a small fight, the family eventually agreed to a slightly larger takeover. Those print assets are now controlled by News Corp.

One notable takeover target slipped through Murdoch’s fingers, however. In 2011, News Corp. in its old form dropped a plan to take full ownership of satellite broadcaster BSkyB. That bid was sidelined as the company fended bad press in the United Kingdom due to a phone hacking scandal at a UK newspaper that has since been closed.

The New York Times, which cited people briefed on the matter for its report, said Fox indicated it would sell CNN to appease regulators -- as Fox News and CNN directly compete. That could potentially lead to a bidding war for the well-known news channel.

Media stocks rose Wednesday on news of the rebuffed Time Warner offer.

Rupert Murdoch's decision to demote his own son is a perfect example of why he's endlessly interesting. Sometimes he makes business decisions purely with his head, canny and shrewd, occasionally ruthless. That's what he did this time. But sometimes he makes giant decisions with his heart, appearing misguided or just nuts; for example, he runs the New York Post and the Times of London at deep losses that will apparently continue forever, and he just doesn't care.

Overall, the Murdoch method has worked well for him. For investors in his News Corp. NWS , it has not worked nearly as well as it should have. Recent events show the problem clearly. Amazingly, amid the U.K. phone hacking scandal that led to James Murdoch's downfall — a mushrooming story that a member of Parliament yesterday called "the single largest corporate corruption case in this country for more than 250 years" — the Murdoch method is still working, at least for him.

James was, among other things, chief of News International, the News Corp. division that owns the company's British newspapers. When the phone hacking scandal erupted at one of them, the News of the World, Rupert made one of his famously tough-minded decisions, abruptly closing the 168-year-old paper. News Corp.'s value dropped by billions of dollars as investors feared more revelations would follow.

They have followed. An inquiry still underway yields worse disclosures every day. Witnesses have reported that phone hacking was conducted at "industrial scale," that News International employees bribed the police so widely that Scotland Yard became in effect "a subsidiary of News International," that employees destroyed evidence massively, and that all of this was approved at "the highest levels." The highest levels would seem to include James Murdoch. As this mess gets bigger and uglier, Rupert concluded that James had to go. He's out as News International's boss and will work in New York City on the international TV business and other vaguely defined tasks.

Here's the surprise: The stock isn't going down anymore. As the scandal gets worse, the stock rises higher. It fell to $14 last summer; it was over $20 when James got the shove. Investors figure this historic scandal won't hurt profits much; it won't make people stop watching The Simpsons or refuse to go see the next Avatar.

At the same time, Rupert keeps making heart decisions. When he showed up in London last week with elder son Lachlan in tow, News Corp. kremlinologists sensed that a new heir apparent was displacing James. Rupert's determination to have one of his sons eventually run the company makes no economic sense; it discourages other ambitious managers from working there. He just doesn't care.

But hey, the stock's up - what's the problem? The answer is it's a much bigger problem that afflicts News Corp.'s shareholders, namely the penalty they pay for investing at all in a company with terrible governance. Through dual-class stock — always a warning sign for investors — Murdoch's 12% economic interest in News Corp. translates into effective control of the board, because he controls 39% of the voting shares and his business partner Prince Alwaleed bin Talal controls another 7%. Thus the 88% owners know they don't run the show. Murdoch, with his unpredictable head-and-heart method, can do whatever he wants.

The result is that when Wall Street analysts add up the value of News Corp.'s pieces, they get a total that's almost twice as great as the company's actual stock market value. Investors impose a "Murdoch discount" because they know the company isn't being managed for them.

The outlook isn't bright. Yes, the market is telling Murdoch that if he gave up some control — and with it, the ability to make those heart decisions whenever he wants too — he could be twice as rich as he is. But when you're worth more than $6 billion, how much do you care?

The bottom line for Murdoch is that he's over $1 billion richer today than he was when the scandal broke last summer. It's hard to see why he would conclude that he should change his ways one bit.

With the U.S. Justice Department, SEC, and FBI having acknowledged that they are all making preliminary inquiries into the News Corp.'s phone-hacking and police-bribery scandal, and with the company having retained one of America's leading experts on the U.S. Foreign Corrupt Practices Act, many are wondering how much Rupert Murdoch's company has to fear from that law's provisions. (News Corp. has hired FCPA expert Mark Mendelsohn of Paul, Weiss, Rifkind, Wharton & Garrison, as well as famed criminal defense attorney Brendan Sullivan of Williams & Connolly to represent it in the inquires. In addition, News Corp’s independent directors have hired former U.S. Attorney General Michael Mukasey and former Manhattan U.S. Attorney Mary Jo White, both of Debevoise & Plimpton, to assist them in their investigation.)

On Tuesday, two former Justice Department attorneys argued in the Wall Street Journal that applying the FCPA "to news-gathering raises very significant First Amendment concerns for all U.S. media." The FCPA was really intended "to clean up government contracting," they contend, which is not implicated at all in the current scandals. The payments that News of the World and, perhaps, other papers are suspected of having made to London police officials are thought to have been made to obtain story leads, and not to obtain government contracts from the police or other English governmental bodies, they argue.

Though the authors, David Rivkin and Lee Casey, are very well-credentialed, their arguments are undercut in the eyes of some by the fact that they are noted political conservatives, that they were political appointees during the Ronald Reagan and George H.W. Bush administrations, and that their commentary was appearing in a News Corp. NWS publication.

Fortune contacted Dan Newcomb, who founded the anti-corruption practice at Shearman & Sterling, and Daniel Slifkin, a securities litigation partner at Cravath, Swaine & Moore, to obtain a second- and third-opinion on the applicability of the FCPA to the conduct that is now under scrutiny.

Is the FCPA targeted only at government contracting, and therefore inapplicable to alleged payments to police for leaking information?

The law has two main parts. With respect to one part--the anti-corruption provisions--there is real ambiguity about whether the law applies and, if it does, whether it was intended to, according to the experts we contacted. The other part of the law, on the other hand--which requires keeping accurate books and records--seems likely to encompass the conduct being alleged.

The anti-corruption provisions forbid an American corporation from making payments to a foreign official in order to help the company "in obtaining or retaining business for or with . . . any person."

"The point is," Newcomb says, "that the statute is not a general foreign bribery statute," but is aimed, rather, at the problem of "American companies buying business overseas." Certainly, the classic FCPA bribery prosecution does involve a payment to a government official so that a company can land a business contract of some kind. "So I have to question whether obtaining newspaper information and stuff to publish is for that purpose."

Slifkin, on the other hand, thinks bribing a police officer for leads or leaks "would probably be covered" even by this prong of the FCPA. While he does agree that most FCPA prosecutions involve "bribing the government to get business from the government," he thinks the purpose that would have motivated the tabloids' conduct here--to get scoops in order to sell more newspapers--still satisfies the literal requirements of the this section of the law.

What about the other part of the FCPA--the provisions requiring accurate books and record-keeping?

Here there appears to be no easy out for News Corp. if its employees are, in fact, found to have been bribing police officers, according to both Newcomb and Slifkin. Whether the bribes had a "business purpose" is irrelevant to a charge brought under the books and records provisions, they say, which contain no such limiting language. Newcomb adds that there is precedent for prosecutors aggressively using the books-and-records provisions of the FCPA when it would have been difficult or impossible for them to prosecute a bribe under the law's anti-corruption provisions.

The books-and-records section was aimed at forbidding "slush funds," Newcomb says, because, "bribes are usually paid with cash siphoned off the books illegally." Under this section of the law, if it turns out that payments were in fact made to the police, the company would have a problem unless its books and records described those payments as "bribes for Scotland Yard" or something else "about that explicit."

Furthermore, these provisions require not just keeping accurate books and records but also instituting "proper internal controls" to ensure accurate record keeping, Cravath's Slifkin notes. If there were widespread paying of bribes to police officers, this provision might also have been violated.

Suppose it were eventually shown that some News tabloid had paid officers of Scotland Yard, say, $100,000 a year in bribes. Would that be enough to implicate the FCPA, or would that be considered small potatoes?

"That's plenty," says Newcomb, who notes that he's seen FCPA prosecutions for a bribe as small as $400. The statute applies to payments of "anything of value."

Slifkin agrees. "In some countries, it doesn't take a lot" to bribe a foreign official, he says, and those are the "same places where most of this stuff goes on."

As a matter of prosecutorial discretion, do you really think U.S. prosecutors would pursue a FCPA prosecution against News Corp.?

Newscomb doubts it. "Unless we find domestic violations," he says--for instance, that News Corp. reporters bribed New York City police officers to provide information about 9/11 victims--Newcomb thinks U.S. prosecutors will leave these matters to the British authorities. While there will be some "thumping around" by U.S. authorities, he predicts--in order to placate U.S. politicians--"as long as the British don't fall down" in their own inquiries, "I'm not sure what the U.S. adds to the process--to prosecute conduct that occurred in England."

In fact, one of the factors that would make a FCPA prosecution in this situation so unusual, Slifkin notes, is that the FCPA "tends to be used in less developed countries that don't have rigorous antibribery statutes" of their own. "What you don't often see is the FCPA being used for conduct in countries like the U.K., where the world doesn't work this way and it's obviously illegal to bribe police officers. So there may be a little bit of getting in on the act."

By Betsy Feldman, contributor

FORTUNE — Bill Clinton once said, “It depends on what the meaning of the word ‘is’ is.” For News America Marketing, the $1.2 billion newspaper-insert subsidiary of News Corp., it may also depend on the tense of a word. In 2007, News Corp. NWSA sued Robert Emmel — an employee alleging anticompetitive behavior who sent documents to Senate investigators the day before signing a nondisclosure agreement — for breaching the agreement. Although his information appeared in three different lawsuits against News America alleging unfair practices — all of which were settled, for a total of $654.5 million — Emmel lost his own case in 2009. On June 8 an appellate court reversed the decision, ruling that because the agreement was written in the future tense, it didn’t retroactively apply to past deeds. The lesson, says Mark Nagle, partner at Troutman Sanders, is that language does matter. On the same day, News Corp.’s EVP and general counsel, Lawrence Jacobs, resigned unexpectedly. Published reports linked his resignation to the phone-hacking scandal at News of the World that continues to engulf Rupert Murdoch’s media empire. But the Emmel decision may have been the last straw. News Corp. wouldn’t comment.

Some people aren't at all surprised by the unending scandal at Rupert Murdoch's News Corp. They are the investors, insurers, lawyers, and others who had read the "Governance Analysis" report on the company from The Corporate Library, a research firm. The firm grades companies' governance from A to F, and for the past six years News Corp. has received an F — "only because there is no lower grade," says Nell Minow, who co-founded The Corporate Library in 1999 on the premise that governance "can be rated like bonds, from triple-A to junk." News Corp.'s overall risk, says the prophetic report: "very high." Risk of class-action securities litigation: "very high." Scandal-related lawsuits are already piling up.

For those who think corporate governance is the concern of prissy do-gooders who don't understand real-world business, News Corp. NWS is the latest example that the truth is just the opposite: Governance is the foundation of real-world business. If it isn't solid, trouble is inevitable. For News Corp., it's the reason the trouble is far from over.

See also: News Corp.: Murdoch still in charge

News Corp.'s variety of lousy governance is simple — one man exerts control wildly out of proportion to his stake in the business. As at many companies with bad governance, the mechanism is dual-class stock. News Corp.'s class A shares account for about 70% of the company's market cap (recently $41 billion total) but have no voting power. Only class B shares, which account for the other 30% of the market cap, get to vote, and Rupert Murdoch has almost 40% of the class B shares. Economically he owns just 12% of the company, but he wields total control because he can elect all the directors. While the other class B shareholders (about 1,300 of them) could in theory gang up on him and vote against his wishes, in practice that doesn't happen. It's especially unlikely since long-time Murdoch supporter Prince Alwaleed bin Talal of Saudi Arabia owns 7% of the class B shares.

Ultimate responsibility for protecting News Corp.'s 48,000 total shareholders thus
rests with a board comprising
three directors named Murdoch (Rupert plus sons James and Lachlan; daughter Elisabeth is scheduled to join next year), four additional News Corp. employees (COO Chase Carey, CFO David DeVoe, executive VP Joel Klein, and senior adviser Arthur Siskind), two former News Corp. employees, and seven other directors, including a 31-year-old opera singer, Natalie Bancroft, from the family that owned Dow Jones, which News Corp. bought in 2007. News Corp. says her "youth" and "female perspective" bring value to the board. Under such guardianship, it's unsurprising the stock has disappointed investors; it has underperformed the S&P 500 over the past five and 10 years.

This board meets the independence requirements of the Sarbanes-Oxley Act and Nasdaq, where the stock trades, but if it doesn't seem very independent to you, that's understandable. In any case, it doesn't matter. While legally the board can fire Rupert Murdoch, practically he can fire the board, and the board knows it. Truly the company has earned its F in governance.

The effects are insidious and more far reaching than you might imagine. "It creates a culture with no accountability," says Charles Elson, director of the University of Delaware's John L. Weinberg Center for Corporate Governance. In companies where directors are genuinely subject to the shareholders' will, CEOs get fired; BP's bp board fired Tony Hayward last year, for example, and Hewlett-Packard's hpq board fired Mark Hurd. The message cascades down through the organization: Bad behavior gets you fired here. But at companies where the CEO can fire the board, a different message cascades down: We don't answer to the shareholders, we answer to just one person. It's the rule of man, not the rule of law.

To see the results, consider the most infamous scandal companies of the past several years - Enron, Worldcom, Healthsouth, Adelphia, Parmalat. Like News Corp., each had risen from nothing to huge success under one man, and through various means he had maintained total effective control. Employees felt they were beholden to a person who was beyond outside governance. The results were devastating to shareholders, employees, customers, suppliers, and communities.

Based only on what has been confirmed, the scandal's potential damage to News Corp. is already considerable, beyond the closure of the highly profitable News of the World. Confiscated notebooks name thousands of people whose phones may have been hacked — a staggering docket of lawsuits if hacking is confirmed. Payments to police officers, which, News Corp. has admitted, seems a clear violation of the U.S. Foreign Corrupt Practices Act, as several senators have observed. If News Corp. is guilty, the FCC licenses of its 27 U.S. television stations could be in peril. That's not a theoretical danger; RKO General had to give up all its broadcast licenses some 20 years ago after it was found to have bribed foreign officials and committed other unsavory acts.

See also: Murdoch’s Sun newspaper hit by hackers

A large question for News Corp. now is how much further the scandal will extend. Company officials first maintained it ended with one rogue reporter at The News of the World. Then they acknowledged it was several but involved only phone hacking and only at that paper. Then the scandal spread to the Sun and to police bribery. With 10 employees or former employees arrested so far, it would seem foolish to assume now that all other employees have been behaving like Boy Scouts.

With that in mind, recent events cast a new light on the company's News America Marketing Group, which produces free-standing ad inserts for newspapers and magazines and for years has been sued by competitors alleging grossly unfair practices. One of the suits went to trial in 2009; after two days of proceedings, News Corp. settled out of court for the stunning sum of $500 million. Another suit went to trial earlier this year, and after one day, News Corp. settled for $125 million.

Now, investigators in at least three countries — the U.K., the U.S., and Australia — are combing carefully and widely through the company's affairs. What they might find seems to worry investors, who have clipped News Corp.'s market value by $6.6 billion since the scandal broke in early July, reflecting far more than the immediate economic damage. For example, if the FBI finds that News Corp. employees hacked the phones of 9/11 victims or their families, the American public's fury will know no bounds. That could be bad news for Murdoch's treasured Wall Street Journal plus his U.S. movie studios (Twentieth Century Fox and others), U.S. cable networks (Fox News, FX, and others), and U.S. TV stations and broadcast network (Fox), which together earn most of News Corp.'s profit.

See also: Poof! News Corp. loses $8 billion market cap

What's next? Suddenly under intense scrutiny and in the crosshairs of lawsuits, the directors may remember they have a legal duty to represent the interests of all shareholders (See also: What’s next for Murdoch?). They could finally defy Murdoch, firing him or kicking him upstairs to non-executive chairman or otherwise rehabbing the company's tattered governance. With the world watching, Murdoch may feel that the one time he needs to exercise his power to fire the directors, he can't. Or, since the class B voting shares are publicly (though thinly) traded, someone could mount an old-fashioned proxy fight to reform the board.

Murdoch has long argued that News Corp.'s governance is public information, and investors who don't like it needn't buy the stock. That's obviously true and perhaps explains why sophisticated institutional investors don't buy shares of companies with dual-class stock nearly as heavily as they invest in the overall market, according to research. News Corp.'s shareholders, says Charles Elson, "have no one to blame but themselves for buying this stock."

The scandal is further evidence that governance disasters are like earthquakes: You can never predict when they'll happen, but you can predict pretty confidently where they'll happen. The trembling under News Corp. has only begun.

Though News Corp. CEO Rupert Murdoch, deputy COO James Murdoch, and former News NWS executive Rebekah Brooks have all agreed to testify before a select committee of the House of Commons tomorrow about allegations of phone-hacking and police-bribery by the company's newspapers, there are some strings attached.

In a letter to the committee Thursday, the Murdochs advised the committee of their attorneys' position that answering questions would "carry the risk of prejudicing other judicial proceedings and in particular the ongoing police investigations and any subsequent prosecutions" — a warning that the committee should avoid exploring certain areas and an implicit signal that, push come to shove, the witnesses might decline to answer certain questions. In statements, the Murdochs have condemned wrongdoing at their papers, apologized for it, and have pledged to "put things right"; they have not addressed precisely what they knew when.

Although Brooks was arrested yesterday — and later released without formal charges being brought — she will attend and answer questions at the committee's public hearing, according to a prepared statement issued by her lawyer, Stephen Parkinson. Nevertheless, even before her arrest she had advised the committee that her desire not to "prejudice" police investigations would "prevent [her] from discussing these matters in detail." (Parkinson's statement also asserts that Brooks "is not guilty of any criminal offence.")

Under Parliament's "sub judice rule," instituted in the 1960s, the body generally avoids questioning witnesses about matters that are the subject of active criminal cases, according to Dan Lavender, a solicitor in the litigation department at London's Macfarlanes law firm. While a mere arrest does not trigger the sub judice rule, it does make MPs wary of violating the integrity of later judicial proceedings. "I understand that Members of Parliament (MPs) are taking legal advice as to whether to continue to compel her attendance," Lavender says.

What, then, is the English law concerning a witness's right to refuse to answer questions posed by a select committee of the House of Commons? Does he have a right to remain silent, the way a witness before a U.S. Congressional committee can invoke the U.S. Constitution's Fifth Amendment privilege against coerced self-incrimination? And if a witness refuses to answer Parliament's questions for any reason, can any adverse inference be drawn against him or her in later civil proceedings — like, say, a regulatory hearing before British licensing or competition authorities about whether that individual should control a major British satellite television company? (While the Murdochs have cancelled for now their plan to buy the 61% of British Sky Broadcasting they do not already own, they can renew their bid in six months.)

To answer these questions, Fortune contacted three experts: Lavender, of Macfarlanes; Charles B?ar, a Queen's Counsel in London (a member of the senior rank of English barristers); and Josh Chafetz, an associate professor of law at Cornell Law School who is an expert on privilege issues.

Do witnesses have a right to remain silent in England?

No, not before a Select Committee of Parliament. While people being questioned by the police or in judicial proceedings in England do have some rights to remain silent (the contours of which are not always identical with those afforded by our Fifth Amendment), none of those privileges are available before Parliament. In fact, no evidentiary privileges — not even the attorney-client privilege — are supposed to apply there, according to B?ar.

At the same time, any testimony a witness gives before Parliament is automatically protected by an absolute privilege against being introduced as evidence against the witness in any later civil or criminal proceeding.

So the Murdochs will have to answer every single question or face punishment for contempt?

In theory, yes. And in theory, Parliament can punish a witness who refuses to answer its questions with imprisonment — possibly in a cell beneath Big Ben, according to this recent article in The Guardian.

Why only "in theory"?

Because the last time any non-Member of Parliament was actually imprisoned for contempt of Parliament was 1880.

"Basically, it never happens," says B?ar. In 1999, he continues, a House of Commons committee recommended that Parliament abolish its power to imprison non-MPs and replace it with the power to fine them — a sanction that the body might feel more comfortable exercising. But the recommendation was never acted upon, so Parliament's only power to enforce a contempt order — other than by symbolic reprimand — remains the one that, in modern times, it never resorts to. (The last major stand-off of this type, according to Lavender and B?ar, involved, ironically, the sons of Murdoch's late rival publisher, Robert Maxwell, who ran the Mirror Group of newspapers. Ian and Kevin Maxwell refused to answer a select committee's questions in 1992 about alleged misappropriation of company pension funds, but they suffered no real punishment other than public humiliation.)

"There is a convention that Parliament respects the judiciary," says B?ar. "MPs accept in theory that they shouldn't encroach unnecessarily on the workings of the judicial and criminal justice system." There is also recognition that law enforcement officials leading criminal investigations would prefer that politicians butt-out to the extent possible, so that matters can proceed logically and methodically, rather than being subject to tactically unwise decisions motivated by emotion, impulse, politics, or grandstanding.

Finally, there is some real danger that Parliament's questions could legally derail later cases that might be brought, even against defendants other than these witnesses.

"There is a risk," says B?ar, "that somebody would be compelled to answer a question which they couldn't have been compelled to answer at a police inquiry or in a court of law" because of Parliament's power to override evidentiary privileges. That fact "might later be relied upon as a basis for having the criminal trial stopped," he continues, on the theory that the charges were "unfairly brought," or that they involved an "abuse of process." Even though Parliamentary testimony can't later be admitted into evidence, it can lead investigators to other evidence, which defense lawyers might later argue was tainted by the extrajudicial means used to unearth it.

A very rough analogy for U.S. readers might be what happened to the prosecution of Colonel Oliver North, who was forced, under a grant of immunity, to testify in Congressional hearings concerning the Iran/Contra affair in 1987. Later, North was convicted of criminal charges stemming from the affair, but his conviction was thrown out on appeal in 1990, in part because his trial might have been indirectly tainted by the forced testimony he gave before Congress, even though the testimony itself was never introduced against him.

What's the bottom line then? What should we expect Tuesday?

Nobody is apt to end up in shackles under Big Ben. Expect, rather, a "loose and unsatisfying discussion," B?ar predicts, at which the witnesses will "take a cautious line on what information could undermine other investigations."

The committee, in turn, will probably raucously condemn the witnesses' vague and oblique responses but, in the end, acquiesce in them.

FORTUNE — When it comes to crises, most of us are hard-wired to either fight or flee. This is useful during, say, hand-to-hand combat, but it often spells trouble during a corporate crisis.

Make no mistake about it, Rupert Murdoch's News Corps. NWSA is in crisis. And the phone-hacking scandal surrounding the recently-shuttered News of the World grows more complicated by the minute. Some of the decisions Rupert Murdoch has made in the melee look like knee-jerk reactions, says Steven Fink, president and CEO of crisis management firm Lexicon Communications Corp.

Murdoch closed the British tabloid, which printed its final issue on July 10, and is now in the UK trying to salvage a delayed deal to take over the remainder of British broadcasting company BSkyB, which is facing new scrutiny in light of the scandal.

Murdoch and his son James have prioritized protecting Rebekah Brooks, editor of News of the World at the time of the hacks and currently the chief executive of News International, News Corp.’s UK arm.

It's a strange move, Fink says: “It just doesn't smell right. You don’t rush out to defend somebody like that who is so close to the fire.”

The quick decision to close the 168-year-old tabloid was another curious move. News of the World was doing well. It had a weekly circulation of about 2.6 million and it was profitable. Instead of shedding it, Fink says, “They should have purged the miscreants from the News of the World and brought in a credible and respectable team of journalists to right the ship.”

Shuttering the paper abruptly might not rid the company of the problems it's trying to solve. “They’re trying to bury the body along with the smoking gun, and you just don’t do that if you’re managing a crisis properly,” Fink says.

Executives often respond to crises with quick action, says Harlan Loeb, a director at public relations firm Edelman. Powerful employees often get to where they are largely because of their ability to make solid decisions while under the gun during day-to-day business. But crises require a different skill set. In extreme circumstances, he says, following your gut can actually lead you down the wrong path.

Not that dropping News of the World is necessarily the wrong move, Loeb says, but dramatic actions stir up questions such as, "What did that decision solve? And how is the company better because of it?" If there are good answers, the decision will ultimately be justified.

On the other hand, dramatic action can be emotionally satisfying, especially in a time of crisis. “I will tell you this,” Loeb says, “if you rely on emotion and instinct in the face of crisis, you will almost always get it wrong.”

This happens often, says Fink. In 1984, then-CEO of Union Carbide Warren Anderson immediately hopped on a plane to India after a poison gas leak at one of the company's plants in Bhopal. He was arrested upon landing, and rendered far less capable of managing the company's crisis.

Former U.S. congressman Anthony Weiner's recent scandal is another example of the same pitfall. Weiner's decision to cover up his inappropriate tweeting habit ultimately buried him, much more than any crotch-shot ever could.

The best response a person or a company in crisis can take is to quickly pinpoint the problem and then control the conversation about it. Take the recent issue with some of Boeing's BA 737 jets, flown by Southwest luv , that suffered tears. Boeing traced the issue to a specific manufacturing incident, and "two days later, no one was talking about it," Loeb says.

Companies that can't locate the problem maintain tension and mystery in the story, which keeps it alive in the media.

A bad decision made early in a time of crisis lives on, says Fink, because a leader is often put in the unenviable position of defending it. "The decision to shutter News of the World was designed to say, 'We’ve solved to the problem, let’s move on.' But the question is: have they solved the problem?"

Rupert Murdoch's News Corp. NWS just purchased Wireless Generation for $360 million. Technically it's $360 million for 90% of the company, but either way it's a lot of money.

When a company in your general space gets bought for a huge amount by an unnatural acquirer, it merits some attention. But before I go on, I want to congratulate the Wireless Generation team on the acquisition. Good for all of you!

As Audrey notes, this is on the heels of News Corp appointing NYC Schools Chancellor Joel Klein. So with that hire, and the WG acquisition, it looks like News Corp is getting into education technology in a big way.

But so much of the above just doesn't make sense. Here's why:

• A high revenue multiple for a business with tough sales cycles: As of this summer, Wireless Generation was on a $60 million revenue run rate. Given that the News Corp purchase essentially values the company around $400 million, that means News Corp bought the company at a +6.5x revenue multiple. That's crazy. Just one more point of context, Wireless Generation has been around roughly 10 years.
• Where are the profits? Wireless Generation isn't a wildly profitable company. In 2007, the last year I have detailed financial data on them, they were not profitable and they had about 250 employees. Now they are up to about 400 folks, and perhaps they might be investing in people ahead of growth, but even then I'm not sure that a wildly profitable business will ever be there.
• Was anyone else at the altar? I had to get on the phone and chat with a private equity guy about this. He agrees with my arguments in this post, and was actually at one of the shops that looked at their business at one point. Let's just say he choked when he saw the purchase price.
• No unique advantages for News Corp: when an acquirer is looking to make a deal of this size, usually they enjoy some unique advantage. For example, if you are Google and you purchase DoubleClick or YouTube, it fits in very nicely with your core business model. News Corp is a media company. That's film, cable programming, TV, satellite broadcasting, newspapers, magazines, and a small publishing business. Actually, if you dig into their annual reports, education or anything related to education is not one of their core eight operating segments. So where does Wireless Generation fit within their core competencies?

I'm very happy for the Wireless Generation team -- they pulled a rabbit out of their hat and were a ~10 year overnight success. They sold a non-attractive business at a high revenue multiple. But they just got bought by a company, News Corp, that likely has no clue what to do with them. And just because News Corp has Joel Klein now, it doesn't mean they will know how to manage this kind of business, let alone figure out a way to justify the purchase price.

It's going to be a tough road ahead for the new Wireless Generation entity.

Rafael Corrales is founder and CEO of LearnBoost, a venture-backed creator of online gradebooks for teachers. This post first appeared on the company’s blog.

In a move that should help News Corp.'s efforts to optimize and sell online advertising across its global network of Web sites, the media giant announced Tuesday that it has acquired a majority stake in Utarget, a U.K.-based company that offers advertisers and Web sites technology and ad sales services.

Utarget has a network of more than 630 client Web sites, where the company helps advertisers place commercial video clips. Based in London, Utarget focuses on Europe Web sites, but generates the majority of its revenues in the U.K. The News Corp. unit that orchestrated the acquisition, .Fox Networks, is an advertising placement firm that helps advertisers position their come-ons on News Corp.'s Web sites in more than 20 countries, including the U.S. For the time being, Utarget will continue to concentrate on opportunities outside of the U.S.

News Corp.'s investment comes at a time when advertisers are flocking to the Web in search of better returns on their ad spending. At the same time, an increasing number of consumers are viewing video content on the Web, the kind of content Utarget seeks to adorn with ads.

With its undisclosed investment in Utarget, says Hernan Lopez, president of .Fox Networks, "we are internationalizing ad sales opportunities." Lopez explains that Utarget can, for instance, help a Web site based in Spain sell ad space to advertisers in Argentina or Mexico, where they might have a large number of viewers, but no salesforce to sell ads. Utarget can also, then, offer its technology to help advertisers create targeted advertisements.

Lopez says the .Fox Network is in preliminary talks with News Corp.'s Fox Interactive Media division to use Utarget's services to facilitate ad sales on News Corp.'s U.S.-based Web sites. In recent weeks, reports surfaced that the Fox Interactive division, whose crown jewel is MySpace, is likely to miss its 2008 revenue target of $1 billion. That news prompted the company to reorganize the division last week.

Here’s the problem. Or, rather, the problems. It’s going to be tricky to value MySpace, which will be the linchpin of the value of what News Corp. is contributing. If whatever News and Yahoo were to assemble didn’t add up to Microsoft’s current offer ($31), or counter-offer, the board of directors at Yahoo would be in a pickle.

Couldn’t they just accept a lower bid with the argument that Yahoo is worth more independent than selling out? Sure. Then they’d get sued. They’ve got to be able to best Microsoft’s offer in a reasonable timeframe, or they’re not doing their fiduciary duty.

There’s more. In a note to clients Wednesday, UBS analyst Ben Schachter (who had a buy rating on Yahoo at $19, when many of his competitors had lost faith, because he figured Yahoo’s falling price would provoke a sale, or at least a bid) reasons that the only way for a YahooSpace to achieve necessary profits would be do a search outsourcing deal with Google (GOOG). That’d bring the companies back to the same regulatory conundrum they’ve already been grappling with: Google’s search share is too big. There’s also the question of whether Yahoo needs MySpace. After all, “Yahoo’s problem has not been a lack of inventory, ” writes Schacter, meaning that it already has a huge audience. It’s problem, he writes is “its poor execution on optimizing monetization.” That means Yahoo isn’t so good at making money from its 500-million-plus audience. Schacter has a $34 price target on Yahoo because he thinks Microsoft will raise its bid.

So is Yahoo wasting its time talking to News Corp.? Of course not. Its stock traded over $30 Wednesday, closing at $29.88. To the point of my earlier post, that’s a sign investors expect a higher bid from Microsoft, not that it’s overly impressed with a News Corp.-Yahoo tie-up.

The buyout gossip began with an item last week in the UK version of TechCrunch. Never mind that LinkedIn founder Reid Hoffman (a made man in the PayPal mafia and a buddy of mine) categorically denied the rumor in the Daily Telegraph. Anything that suggests that Rupert Murdoch would expand his social-networking empire is sure to set tongues wagging. Breakingviews.com wrote an intelligent summary of why a LinkedIn acquisition would make sense, largely because of the opportunities to leverage LinkedIn’s tools with the Wall Street Journal readership.

Not surprisingly, Nye didn’t deny that News Corp. made an offer for his company. Instead, he said that when he joined the company he told the board — comprised of Hoffman, Sequoia’s Mark Kvamme and Greylock’s David Sze — that he was only interested in taking the job if the goal was to “go long.” But is he selling out anyway? “We’re excited about building this company,” said Nye. “It would take a helluva lot to get us off that path.” Does that mean $1 billion? “A lot more than that,” said Nye, who worked at Procter & Gamble (PG), Intuit (INTU) and Advent Software (ADVS) before joining LinkedIn.

LinkedIn clearly is playing to win. The company has mushroomed from 60 employees when Nye joined in February to almost 200 today. At the time, LinkedIn had 9 million members; today it has nearly 17 million. Nye predicted revenues will range from $75 million to $100 million next year.

LinkedIn has the virtue of having survived adversity. Before Facebook and MySpace existed — back when Friendster was hot — LinkedIn was just getting going. It’s still going. Independent or part of News Corp., it’s fun watching this plucky company succeed.

When I first got out of law school and was clerking for a federal judge in Texas, I did see a few comparable pleadings, though those were usually filed “pro se” — i.e., by the plaintiff himself, without the assistance of a lawyer. One, I remember, was a civil rights suit naming as defendants the President of the United States, all nine justices of the U.S. Supreme Court, the plaintiff’s ex-wife, and a local Pizza Hut.

Like that complaint, Regan’s reads like one of those humor pieces in The New Yorker, where it not-so-gradually dawns on the reader that the narrator is out of his gourd. Even though you’re hearing only one side of the story, that’s enough to make up your mind against the griper.

You’ll recall that Regan, who headed the ReganBooks imprint at HarperCollins, was fired in December 2006 for allegedly using anti-Semitic language in a telephone call with company lawyers, which Regan denied. The call occurred not long after the twin publicity fiascos surrounding Regan’s plans to publish O.J. Simpson’s quasi-confessional If I Did It book and, shortly thereafter, a first-person novel about Mickey Mantle in which the author assumed Mantle’s voice and described, inter alia, a tryst with teammate Joe DiMaggio’s wife, Marilyn Monroe.

Regan’s 70-page, 345-paragraph, 24-count complaint was filed in state court in Manhattan on Tuesday, and is available here. It mainly alleges defamation and breach of contract, but, almost in passing, it throws in a couple counts of sex discrimination, too. “Under Jane Friedman’s direction,” she alleges, “there is . . . a pattern within HarperCollins of firing high-level women in order to surround herself with men.” (She gives no examples besides herself.)

The complaint is signed by attorney Brian Kerr, of New York’s 175-lawyer Dreier firm, but it has an astoundingly unfiltered quality to it. Regan is also represented by famed Los Angeles entertainment lawyer Bert Fields, but the complaint doesn’t list him as counsel. (Through Regan’s spokesperson, both attorneys declined comment.)

Regan’s complaint boasts that she built a “publishing and media juggernaut,” whose recent publications have included, inter alia, “no fewer than three books related to the Scott Peterson case.” It quotes an article describing how Regan’s “early experience as a reporter for the National Enquirer was great training in the art of the popular,” and how her winter 2006 catalog featured a “cover illustration of Regan stretched across a pile of books,” prompting an “unprecedented” article in The New York Times. (The Times‘s headline was, “She’s Not Just the Publisher, She’s the Cover Model, Too.”)

But what’s remarkable about the complaint is how far it ventures beyond merely disputing that she said anything anti-Semitic in that fateful phone call — a seemingly winnable, he-said-she-said squabble had her lawyers stopped her there.

Instead, they’ve allowed her to allege that News Corp. had actually been plotting her demise for at least five years before the Simpson debacle. “This smear campaign was necessary to advance News Corp.’s political agenda, which has long centered on protecting Rudy Giuliani’s presidential ambitions,” they write in paragraph 1 of the complaint. “Defendants knew they would be protecting Giuliani if they could preemptively discredit her,” the complaint continues.

As I understand it, Regan’s saying that News Corp. has been undermining her credibility for years because it feared she knew about unspecified skeletons in Giuliani’s closet that she had learned during her 2001 affair with then-Mayor Giuliani’s then-Police Chief Bernard Kerik and, further, that the company anticipated Regan might go public with if Giuliani ever ran for president. (Or maybe she is only saying she knew skeletons about Kerik, but those, by association, would have been harmful to Giuliani; I’m not sure.)

The company also needed to discredit her, she theorizes, in case she were ever to reveal that in December 2004 two senior News Corp. executives had allegedly advised her to lie to investigators and conceal evidence from them when they began probing Kerik.

A spokeswoman for News Corp. has called the suit “preposterous,” and a spokesperson for HarperCollins and Friedman echoed that sentiment to me.

The defendants’ first attempt to discredit Regan occurred in 2001, she alleges. (The timeline is puzzling, since Kerik did not first come under suspicion for criminal wrongdoing until 2004, and, as a consequence, it wasn’t publicly known until then that he might pose any problems for Giuliani, assuming Giuliani ever did announce for president, as he finally did this year. Kerik pled guilty to two state misdemeanor charges in 2006, and was charged in a 16-count federal indictment last week. He has pleaded not guilty to the federal charges.)

Anyway, the 2001 incident was one that Regan’s former close friend Michael Wolff wrote about in a Vanity Fair article in May 2007. As Wolff put it: “Judith lost a cell phone on the set of her TV show [and] she was able to have N.Y.P.D. detectives sent out to the homes of the production-crew members she suspected of having snatched it.”

In the complaint, Regan protests that this was a false, nasty rumor spread by, once again, an unnamed senior News Corp. official. The truth was, she explains, that she had not sent the detectives out to catch the guy who had stolen her phone — no, not at all. Rather, it had been her lover, Kerik, who “used his authority as NYC Police Commissioner to send detectives out to investigate” and “who caused the detectives to knock on the doors of Fox News employees.”

In Regan’s mind, evidently, she has now set the record straight. In like manner, she then proceeds, point-by-point, to give her side of a litany of highly embarrassing events, unwittingly confirming most of them in most key respects. (An exception is the anti-semitic remarks, which she consistently denies.)

Along the way, Regan also dredges up some stories I hadn’t previously heard about and which, had I been her lawyer, I might have chosen to let lie. She complains, for instance, that some unidentified person — it’s unclear from the complaint if it’s even a News Corp. employee — had attributed Regan’s success to her “golden vagina,” but that “when Regan complained about this sexist and insulting remark, nothing was ever done.”

In any case, Regan alleges, News Corp. and Friedman, in pursuit of their farsighted goal of undermining Regan’s credibility, set about poisoning the minds of a great many people, evidently with considerable success. The defendants allegedly disparaged her “to prospective and new employees at ReganBooks,” worked to “turn them against” her, tried “to get them to file complaints against her,” failed “to curtail the activities of HarperCollins insiders” who were constantly making “disparaging remarks” about her; and, all in all, “encourage[d] a culture of gossip, back-stabbing, negative leaks and hostility inside and outside the company.”

Moreover, they “plant[ed] employees within ReganBooks to ‘keep an eye on Regan,’ and report back to the HR department at HarperCollins,” she maintains, and “fail[ed] to investigate the serious security breaches that resulted in (among other incidents) an extremely heavy lighting fixture falling out of the ceiling and shattering Regan’s desk.”

Ironically, one of the accusations that Regan says was unfairly leveled against her, according to the complaint, was that she was “out of control.” Yet, of course, that’s precisely the impression left by the complaint itself.

Slackjawed after reading the complaint, I was struggling to put into words my reaction to it. Now more curious than ever about Regan, I read Wolff’s Vanity Fair piece for the first time. I soon found a description of how I was feeling that seemed to fit perfectly, though he was responding to a different document. He was describing his reaction to the O.J. Simpson book itself, when he finally read it in connection with his story. It was such a “run-amok, phantasmagorical marketing-and-merchandizing scheme,” he wrote, “that all you do, as you read it, is consider the psychopathology of how it ever came into being.”

I can’t improve upon that.

REPLY FROM JUDITH REGAN’S CAMP: (E-mail from Allan Mayer, of 42 West, the public relations firm representing Judith Regan, received Saturday, November 17, at 308 pm):

I write as a representative of Judith Regan. Hannah Arendt noted that it is characteristic of the totalitarian style to substitute questions of motive for questions of fact. This seems to be no less true in the blogosphere, though for "motive" one might substitute "tone." Certainly, your musings on Judith Regan's case seem singularly unconcerned with the facts of the matter - namely, that the defendants named in her lawsuit participated in a campaign to destroy her reputation and credibility because they were (and are) afraid of what she knows about Bernie Kerik and Rudy Giuliani. To make such an assertion without any evidence to back it up might indeed be "preposterous," as News Corp. maintains. But that happens not to be the case here. There is hard evidence corroborating Ms Regan's claims, and when it is introduced in court (as it will be at the appropriate time), I hope you will have the grace to apologize for your armchair psychologizing and gratuitous insults.

An recent interesting throwaway line in a really fascinating article shed some light on this debate:

The kids all said that a) no one listens to the radio anymore, b) they mostly steal music, but they don’t consider it stealing, and c) they get most of their music from iTunes on their iPod. They told us that MySpace is over, it’s just not cool anymore; Facebook is still cool, but that might not last much longer; and the biggest thing in their life is word of mouth. That’s how they hear about music, bands, everything.

That’s a quote from Mark DiDia, head of operations for Columbia Records, which is owned by Sony (SNR). It comes from an article in last weekend’s New York Times Magazine, “The Music Man,” about Rick Rubin, the guru-like record producer that Sony hopes will save its slowing dying business. The “kids” DiDia refers to are recent college grads in a focus group. I’m certain that the management team at MySpace and Facebook will tell you a million reasons why the kids are wrong and that their business story will continue for years. Still, the thing about focus groups is that they don’t lie.

For what it’s worth, the kids may think Facebook is about to become uncool, but the oldsters are just discovering it. When I returned from a weeklong vacation I had 23 “friends” requests at Facebook, 9 from people I actually consider my friends or meaningful acquaintances. I go to Facebook about once every three weeks just to see who has asked to be my friend. I quickly leave, however, and suspect most of the 30-year-old-plus people who are now finding out about Facebook will do the same.

Incidentally, I am using the demure-to-the-point-of-nauseating phrases “S-word” and “F-word” because my earlier feature story about this case (entitled “Bleep Deprivation,” and published in the March 19 issue of Fortune) stirred some internal controversy at the time with some of our partners and affiliates, because it used the actual, unexpurgated Anglo-Saxon expletives at issue. That story is now available here. (Alternatively, you can see what it looked like in the magazine (with graphics) by following these instructions: click here for the digital version of that whole issue; then click on the magazine photo; then click on the window where it says “C1 of 233″; when the window goes blank, type in “53,” which is the page number of the story; then click “enter.”) (For FCC chairman Kevin Martin’s unprintable reply to the ruling, try here .)

In any event, in yesterday’s ruling, in Fox Television Stations v. FCC, two of the three judges on the appeals panel decided that the FCC had acted “arbitrarily and capriciously” when, in 2004, it did an abrupt about-face in longstanding policy and discarded its so-called “isolated and fleeting expletives doctrine.” Under that doctrine, the FCC had, until then, essentially given broadcasters of live TV a free pass if someone unexpectedly ran off the reservation and used one or two expletives in isolation. Beginning in early 2004, however, after Bono used the F-word in accepting a Golden Globe award on a live broadcast on Fox Television Stations – a unit of News Corp. (NWS) – the FCC decided to crack down and begin imposing a one-strike-you’re-out rule. It later also applied the new rule to two similar incidents on the Billboard Music Awards, which were being broadcast live by NBC, a unit of General Electric (GE). (Viacom (VIA) also intervened in the case; It is still challenging, in a federal appeals court in Philadelphia, the fine levied against it for the Janet Jackson incident during Super Bowl XXXVIII, which was broadcast on CBS (CBS) and produced by MTV.)

The two judges in the majority, Judges Rosemary Pooler and Peter Hall, said the FCC had failed to articulate a reasonable basis for the shift in policy. They also strongly hinted that the FCC should not waste its breath trying to provide a more convincing statement of reasons now since, in all likelihood, the policy it tried to enforce would probably be unconstitutionally vague in any event.

The third judge on the panel, Pierre Leval, dissented. Interestingly enough, however, he did so only as to the F-word. He felt that while the FCC had adequately justified its decision to regulate even a single use of that word, he agreed with his colleagues that such draconian regulation of the S-word would probably violate the law and, possibly, the constitution. He reasoned that back in 1976, when the U.S. Supreme Court first upheld the federal law that purports to outlaw indecency in radio and TV broadcasts, it emphasized “the accessibility of broadcasting to children.” Judge Leval then continued: “The potential for harm to children resulting from indecent broadcasting was clearly a major concern justifying the censorship scheme. In this regard, it seems to me there is an enormous difference between the censorship of references to sex and censorship of references to excrement. For children, excrement is a main preoccupation of their early years. There is surely no thought that children are harmed by hearing references to excrement.”

Though this is just a dissenting opinion of course, even dissents can become influential over the years if they have persuasive force. So tell me readers and parents, given children’s “preoccupation” with excrement, should the regulation of fleeting and isolated references to “s–t” be unconstitutional?

A four-year-veteran at Google (yes, typical stock-option grants take four years to vest), Feikin was cut from a different cloth than other Googlers. Her glittering resume includes stints at Time Warner’s AOL unit (TWX), News Corp.’s (NWS) 20th Century Fox and the consulting giant McKinsey. (No slouch: She’s Harvard Law and Duke undergrad to boot.) Google Video’s relative lack of traction compared with YouTube shows that on the Internet even a well funded product guided by an experienced and savvy strategist doesn’t always win.

In an email to her peeps Feikin reflected on her “amazing years” at Google, which included the “launch and phenomenal growth of a once-tiny product called Google Video.” She said she’s leaving for “new adventures.” She shouldn’t have any trouble finding them.