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Some believe billionaire Murdoch was due for some comeuppance. "I think Murdoch had it coming," cab driver Jim Roach says. "Working-class people are glad this is happening to him. How can a man who doesn't live in this country own 40% of the media here? It's wrong."

Stock Takes a Dive

Investors aren't liking what they've been reading or hearing.

On Wall Street, News Corp. shares sank 7% to $16.10 Monday and have lost nearly 16% from their 52-week high. Monday's plunge reflects investor concerns that "reputational damage" could spill over to other News Corp. properties, says Standard & Poor's analyst Tuna Amobi.

News of the World accounted for less than 1% of News Corp. revenue and earnings. But Jeffrey Logsdon of BMO Capital markets says investors are worried the allegations could lead to wider questions.

For the stock market, "it's a mystery why this newspaper would go to these lengths to get this story," Logsdon says. "For investors, that makes everything mysterious. Is this localized, regionalized or globalized? No one knows."

Amobi, who rates the News Corp. as a buy, thinks investors are overacting and that the company's global operations are sound. "Right now, the sell-off seems overdone," he says.

Major investors, such as Saudi Prince Al Waleed bin Talal, whose Kingdom Holding's 7% stake is News Corp.'s largest non-family shareholder, told the Financial Times that he still backs Murdoch.

But on Monday, other News Corp. shareholders, including Amalgamated Bank and several municipal and union pension funds, filed an amended claim against News Corp. in Delaware court, accusing the company's board of directors of failing to exercise oversight and take action since news of the hackings surfaced. (An earlier complaint challenged New Corp.'s acquisition of Shine Group Ltd., a film and TV producer that provided a $250 million windfall for Murdoch's daughter, Elizabeth.)

"News Corp.'s behavior has become an egregious collection of nepotism and corporate governance failures, with a board completely unwilling to provide even the slightest level of adult supervision," says co-lead counsel Jay Eisenhofer.

'Tabloids Set the Agenda'

The British scandal has its underpinnings in an ultra-competitive market for readers.

Stephen Ward, director of the Center for Journalism Ethics at the University of Wisconsin-Madison, saw how the British tabloids operate when he spent five years in London as a correspondent for The Canadian Press.

"There are some very good journalists over there, but there's more public tolerance for the British tabloid, anything-goes culture of news," he says. "The tabloids set the agenda."

Nothing in North America compares to British tabloid tactics yet. "Our media, in tone and characteristics, are moving toward a British/Euro model, becoming increasingly competitive and more ideological and partisan" as revenue and resources decline, Ward says.

Phone hacking is illegal in the USA, and goes against journalism ethics. Such an incident occurred in 1998, when The Cincinnati Enquirer which like USA TODAY is owned by Gannett paid a multimillion-dollar settlement and was forced to retract a report on Chiquita Brands International after a reporter hacked into thousands of corporate voice messages.

"This is a classic example of what happens when you do dishonest things and how it can undermine your story," says Kelly McBride, who teaches ethics at the Poynter Institute, a journalism think tank.

"While there are lots of problems in newsrooms, I've never heard of systemic eavesdropping or hacking," McBride says. "We don't have a tabloid or media property that consistently gets scoops on all the big sensational stories. The National Enquirer gets an occasional scoop on a really sensational story, but when they do, it's because they're damn persistent."

Ryan Chittum, a former Wall Street Journal reporter who is deputy editor of the Columbia Journalism Review's online critique of financial journalism, says the scandal will affect Murdoch's reputation and the credibility of other News Corp. properties, including The Wall Street Journal and Fox News.

"When you think of how powerful Murdoch is here and in the UK it's like a Wizard of Oz moment: Pull back the curtain and it's just this pathetic little dude. This is the kind of thing that can take a company down."

Crisis management specialist Robbie Vorhaus says it's too early to determine what impact the scandal will have on Murdoch's U.S. interests, which include TV broadcasting rights to pro football and baseball games.

"When something like this happens, everything is up for observation and conjecture. For now, reputationally, the scandal doesn't touch News Corp. in the U.S. beyond negative association," Vorhaus says.

"However, if like a wildfire, an unlikely spark of any scandal jumps the pond, it could be an unrecoverable crisis."

Contributing: Daniela Deane in London, the Associated Press