Phone hacking: News Corp loses £17 million contract with New York education department

Rupert Murdoch's News Corporation has lost a £17 million contract with the New York government because of the News of the World phone hacking scandal.

News of the world, Rupert Murdoch leaving News International

News Corp's education software arm, Wireless Generation, had agreed to provide the New York state education department with a $27 million computer system to track pupils' test results.

However, Thomas DiNapoli, the State Comptroller, vetoed the deal last week.

In a letter to the education department, he blamed the crisis in Mr Murdoch's British newspaper division.

"In light of the significant ongoing investigations and continuing revelations with respect to News Corp., we are returning the contract with Wireless Generation unapproved," he said.

Mr DiNapoli said the contract was being put out to tender because officials could not be sure that Wireless Generation's parent company had an appropriate record of "vendor responsibility".

The FBI is investigating allegations that phone hacking by News Corp.
journalists may have taken place in the US, and that other branches of the company hacked into rival firms' computer systems.
The decision also came as teachers unions protested against using a News Corp. subsidiary to handle pupils' information, which they described as "especially troubling" in light of the hacking scandal.
Questions have also been raised over Wireless Generation's dealings with New York City. Before being bought by News Corp, it helped develop schools systems worth tens of millions of dollars for the city.
Weeks before Mr Murdoch's company bought 90 per cent of the firm for $360 million last November, Joel Klein, a former New York schools chief, joined News Corp. as its educational technology chief.
Ethics rules forbid former city employees from working on commercial matters they also had involvement in as city officials. News Corp. said Mr Klein was not involved in the purchase of Wireless Generation.
Wireless Generation said it was "disappointed" by the decision. The state education department accused Mr DiNapoli of bowing to "political pressure".