Hacking Scandal: Rupert Murdoch Offers $4.7 Million Payout to Bereaved Family

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Bob Dowler, father of slain schoolgirl Milly Dowler, reads a statement next to his daughter Gemma (C) outside The Old Bailey courthouse in London June 24, 2011. (Photo: Paul Hackett / Reuters)

Update: Scotland Yard has “decided not to pursue” its plans to force the Guardian to reveal their sources.

Back in July, News International chief Rupert Murdoch met with the family of Milly Dowler, the murdered schoolgirl whose phone was tapped by News of the World after she went missing in 2002. According to the family’s lawyer, Murdoch “held his head in his hands” at that meeting and repeatedly told the family he was “very, very sorry.” On Sep. 19 it emerged that Murdoch has finally backed up that remorse with a seven-figure settlement.

According to the Guardian, Murdoch’s £3 million ($4.7m) offer includes a £2 million ($3.1m) payout directly to the family. The media tycoon will also contribute an additional £1m from his own pocket to a charity set up in Milly’s memory. Sources close to the negotiations say that the Dowler family rejected an earlier offer totalling £2 million ($3.1m), split between the family and the charity. It’s understood that the Dowlers are considering Murdoch’s latest offer, though they had hoped for a payout closer to £3.5 million ($5.5m).

Murdoch’s proposed settlement is a necessary, but not necessarily sufficient, step in rebuilding the credibility of News International. The hacking scandal has already led to the closure of Sunday tabloid News of the World, the arrest and resignation of News International’s chief executive Rebekah Brooks and a number of financial payments to victims of phone hacking. But the multimillion-dollar payment to the Dowlers would be the largest payment by far—reflecting the public’s disgust that the hacking involved a teenage murder victim. The now defunct tabloid stands accused of deleting several messages left for Dowler, which gave her parents false hope she was still alive during an agonizing six-month search.

The proposed settlement comes at a time the Dowler case is already back in the headlines. On Sep. 16 the London Metropolitain Police said that it would seek a court order under the Official Secrets Act to force reporters at the Guardian to reveal the confidential sources that tipped the paper off to the fact News of the World was under investigation for hacking into Dowler’s phone. The Met applied for the court order “to seek evidence of offences connected to potential breaches relating to Misconduct in Public Office and the Official Secrets Act.”

The left-leaning newspaper described the request as “an unprecedented legal attack on journalists’ sources.”And Alan Rusbridger, the newspaper’s editor, lashed out at the police for their heavy-handed use of the Official Secrets Act, which has special powers aimed at espionage. “What they are trying to do is to find out the source of the embarrassment — and no doubt the Guardian’s coverage was embarrassing to the police,” he said. “It looks vindictive and it looks ill-judged and disproportionate.”

That revenge would motivate the London police isn’t merely the theatrical flourish of a newspaper editor. The Guardian‘s revelation that police never properly investigated the hacking of Dowler’s phone sent shock waves across Britain, revolting the public and politicians on both sides of the political spectrum. Pundits alleged collusion between police and News International, and heads at the top of Scotland Yard began to roll. Metropolitan police commissioner Sir Paul Stephenson resigned on Jul. 17 over mounting speculation about his links to Neil Wallis, former deputy editor of the News of the World. Assistant commissioner John Yates resigned a day later. That did little to inspire faith in the force’s top brass, whose trustworthiness was already in decline. A YouGov poll conducted on July 21 found that just 49% of Britons trusted senior police officers—down from 72% in 2003.

The Met’s crass attempt to uncover the leak will do little to boost their standing with the public—or the media they’re now attacking. The Daily Mail, a middle-brow tabloid with a history of paying out libel damages, has come out in defense of the Guardian. And Tom Watson, a Labour MP, has questioned Scotland Yard’s moral authority: “It is an outrageous abuse and completely unacceptable that, having failed to investigate serious wrongdoing at the News of the World for more than a decade, the police should now be trying to move against the Guardian which exposed this scandal.”

William Lee Adams is a staff writer at the London bureau of TIME. Find him on Twitter at @willyleeadams or on Facebook. You can also continue the discussion on TIME‘s Facebook page and on Twitter at @TIME.