If you have any interest in News Corp’s News Of The World hacking scandal, then you should check out the compelling BusinessWeek story that Bloomberg’s highly respected legal affairs reporter Greg Farrell has this morning about a key moment in the chronology last year: Farrell provides a fly-on-the-wall account of a London dinner party on May 19 where Rupert — hoping to spare himself and his son, Deputy COO James, from embarrassment — decided to let Rebekah Brooks, then CEO of News International, continue to manage the company’s response to the widening scandal. In doing so, Murdoch took the advice of former New York schools chancellor Joel Klein and an outside lawyer, Brendan Sullivan, who defended Oliver North in the Iran-Contra hearings. But he also ignored the recommendation of News Corp’s then-general counsel Lon Jacobs. He had urged Murdoch to take charge and launch his own investigation, instead of letting the London group investigate itself. The CEO told the lawyers, COO Chase Carey, Brooks and others at the party: ”This is going to be handled by Joel and Brendan. I will handle the board. Everyone else stay out of it,” BW reports. Sullivan told the gathering that “Rebekah is innocent.” Two weeks later, Jacobs resigned.

Rupert’s effort to contain the problem was short-lived: The scandal exploded on July 4 when the Guardian published its story alleging that NOTW in 2002 had hacked the phone of a missing and murdered schoolgirl, Milly Dowler, and deleted voicemail messages giving her parents false hope that she was still alive. Brooks, who was NOTW editor during the Dowler incident, resigned on July 15 and two days later was arrested by Scotland Yard. And James now looks like a long-shot to succeed his father as he struggles to come up with a plausible explanation for his ignorance or indifference to the corruption at the newspapers he was supposed to be overseeing.

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