Backgrounder: News Corp. Phone Hacking Scandal.

The latest: Rupert and James Murdoch will be called to the Royal Courts of Justice in October for an official inquiry under

The latest: Rupert and James Murdoch will be called to the Royal Courts of Justice in October for an official inquiry under oath.

The story so far: In 2005, a bout of paranoia broke out in Buckingham Palace. Amid the constant stream of speculative gossip written about the royals, News Corp.-owned tabloid News of the World had begun to dig up some morsels so banal they had to be true: Prince William pulled a tendon in his knee, they reported—and in fact, he had. The Royal family began to suspect they were being eavesdropped on.

For years, reporters at the News of the World had been collecting personal information about the subjects of their reporting—celebrities, royals and others—simply by ringing their cell phone numbers, and rather than leaving a message, entering a four-digit PIN to check the messages that were already there. In most cases, this was a simple matter that did not actually involve any “hacking,” since the PINs had not been changed from the default (0-0-0-0). In other cases, reporters assumed false identities—a practice known as “blagging”—to trick phone companies into switching the PINs back to default.

When News of The World published a full transcript of a message from Prince Harry’s girlfriend Chelsy Davy, teasing him for having gone to a strip club one didn’t have to be Sherlock Holmes to deduce that NOTW royal editor Clive Goodman had ears on Prince Harry’s and perhaps Prince William’s voicemail. (The paper’s reckless move occurred in its response to being scooped by rival tabloid The Sun on the strip club romp itself.)

Scotland Yard spent the first half of 2006 watching Mr. Goodman, along with a private eye, Glenn Mulcaire, who’d been assisting him in his reporting. After arresting Mssrs. Mulcaire and Goodman in 2006, investigators discovered cell phone numbers and PIN numbers for thousands of public officials, celebrities, and footballers among his records.

In January 2007, Mr. Goodman and Mr. Mulcaire pleaded guilty to illegally intercepting voicemail messages of the royal family, each receiving less than a year in prison. Andy Coulson, News of the World editor in chief, resigned. All three were given large severance payments from News Corp., which Mr. Coulson continued to receive after he landed as the well-paid communications director of Britain’s Conservative party, six months later. Scotland Yard closed its investigation.

The story was nearly forgotten until September 2010, when the New York Times Magazine published an explosive cover story. Earlier that year, Guardian editor Alan Rusbridger had contacted New York Times editor Bill Keller, frustrated that police had dropped their investigation and that no other outlets were reporting on the hacking. Mr. Keller put three Times reporters on it: Don van Natta Jr, Jo Becker, Graham Bowley. They spent five months reporting the 6,000-word piece.

Among the story’s revelations: Andy Coulson, who had by then moved into 10 Downing to become communications director to Conservative Prime Minister David Cameron, was still receiving payments from News Corp. And according to Sean Hoare, a former entertainment editor at the News of the World, phone hacking was widespread at the paper and had been sanctioned by the top of the masthead.

The piece had the desired effect. Scotland Yard opened a new investigation, and the British press again began to follow the story.

In January 2011, the paper’s news editor, Ian Edmondson, whom Mr. Mulcaire claimed had ordered the hacking, was suspended. Mr. Coulson then resigned from Downing Street, offering the immortal explanation, “When the spokesman needs a spokesman it’s time to move on.” In April, Mr. Edmondson and two reporters, James Weatherup and Neville Thurlbeck, were arrested. Throughout the spring, other public figures who had been victims of phonehacking—including Sienna Miller and sportscaster Andy Gray—sued News Corp. and won settlements.

In March, News Corp received permission from Parliament to acquire the remaining shares of British Sky Broadcasting, the largest cable channel in the UK, of which they already owned 39.1 percent.Many feared the deal would give Murdoch a virtual monopoly.

Also in March, the Guardian revealed that Jonathan Rees, a private investigator on trial for murder, had been contracted by Andy Coulson to provide News of the World information about public figures. That he obtained this intelligence via a network of connections to corrupt police officers raiseed suspicions that Scotland Yard’s original investigation of the phone hacking had been compromised by an effort to protect the agency’s own reputation.

On July 4, the Guardian published a scoop seen by many as the turning point in the case against News International. It reported that in 2003, News of the World writers had hacked the voicemail box of Milly Dowler, a 13-year-old girl who’d been reported missing and was eventually found dead. Finding the mailbox full, reporters had deleted some messages to open up more space—leading Dowler’s parents and the police to the conclusion that she herself was accessing the phone and might therefore still be alive. Dowler was the first reported victim of phone hacking who was not a public figure, but soon reports emerged of hacked phones belonging to relatives of soldiers killed in Iran and Afghanistan, civilians killed in the 7/7 London bombings, and even American 9/11 victims. (The FBI has since begun investigating the final claim, as well as whether News Corp. could be prosecuted under the Foreign Corrupt Practices Act. They are the scandal’s only transatlantic reverberations thus far.)

Whereas readers seemed willing to accept invasions of privacy when the targets were celebrities and sports figures, the Dowler case seemed to horrify them. Advertisers began to flee the paper, and on July 7, James Murdoch announced that the 168-year-old weekly tabloid would cease to publish, putting 200 employees out of work. Many saw the move as an effort to protect the rest of the company and to save the BSkyB deal.

On July 8, Andy Coulson was arrested.

Two days later, the final edition of the News of the World rolled off the presses, its proceeds going to charity.

On July 13, with members of Parliament demanding that the BSkyB deal be called off, Rupert Murdoch announced News Corp. had withdrawn its bid. Throughout the month, a stream of key figures resigned: News of the World legal manager Tom Crone, News International CEO Rebekah Brooks, and Wall Street Journal publisher Les Hinton, as well as metropolitan police commissioner Sir Paul Stephenson and his deputy John Yates.

Rupert Murdoch took out full-page ads in his rival British papers apologizing for the breach of trust, and personally visited the family of Milly Dowler. On July 17, Ms. Brooks, the flame-haired former editor of News of the World, often referred to as “the slapper,” was arrested. The next day, Sean Hoare, the first former employee to go on the record about the pervasiveness of phone hacking within News of the World, dropped dead of unexplained but not suspicious reasons.

On July 19, Ms. Brooks and Rupert and James Murdoch were questioned by a Parliamentary committee about the hacking. Rupert stammered frequently and appeared distant, if not disoriented. Father and son denied that they’d known about the hacking, the payments of Mr. Mulcaire’s legal fees, or other details of News International’s internal operations. A comedian and activist in the audience named Jonny Marbles lunged at Rupert with a pie plate full of shaving cream. Wendi Murdoch slapped him and Mr. Marbles was carried off to jail.

The next day, News Corp. announced it had ceased to pay Mr. Mulcaire’s legal fees. Colin Myler, a former News of the World editor, and Tom Crone, the resigned legal manager, wrote a letter to Parliament countering James Murdoch’s testimony, indicating that they had informed the CEO of an email suggesting that hacking practices went beyond the “rogue” reporter Clive Goodman. A second parliamentary committee concluded that News Corp. had made deliberate efforts to thwart its investigations.

In August, two more former News of the World editors—Stuart Kuttner and Greg Miskiw—were arrested, and The Guardian published a 2007 letter from Clive Goodman to News International executives appealing his dismissal, which provided more evidence that knowledge of widespread hacking went to the top of the masthead. Mr. Goodman is now suing the company for the money promised to help pay his legal fees, which News Corp rescinded once Parliament suggested it looked suspiciously like collusion. In August, in response to a court order from layers for actor Steve Coogan, whose voicemail was also hacked, he released the names of additional reporters who had made use of his services.

The scandal has prompted inquiries into News Corp.’s other London tabloid, The Sun, and Scotland Yard still has thousands more phone hacking victims to contact, who could potentially drain News Corp’s coffers.

  Backgrounder: News Corp. Phone Hacking Scandal.