News Corporation headquarters is seen in Manhattan on July 14, 2011 in New York City.

Tess Vigeland: The frenzy around the phone hacking scandal in the U.K. may have died down a bit. But the damage keeps compounding.

The New York state comptroller has rejected a $27 million contract with a company called Wireless Generation over concerns about its parent company: Rupert Murdoch's News Corporation. $27 million is just a rounding error for a mega-conglomerate like News Corp.

But the decision suggests that fallout from what began as a newspaper scandal is seeping into other parts of the Murdoch empire. From the Marketplace Education Desk at WYPR in Baltimore, Amy Scott reports.


Amy Scott: Wireless Generation had a deal to create a database of test scores and other information. It would be used to track student performance in New York public schools. But last week, the state comptroller nixed the deal over concerns about phone hacking and police bribery at News Corp in Britain.

Analyst and investor Porter Bibb with Mediatech Capital Partners says all of News Corp is under a shadow.

Porter Bibb: I think it's just a matter of corporate culture. People pick up that kind of information and say, 'Maybe we should just be a little more prudent, and put this out to competitive bid.'

Joan Lebow: Wireless Generation was acquired by News in December 2010. There's absolutely no reason for anyone to be connecting our company to that.

That's Joan Lebow, a Wireless Generation spokesperson. She says the company will try again.

Losing the contract would put another damper on New Corp's push into the education technology business. Last fall, Rupert Murdoch hired former New York City schools chancellor Joel Klein to build that business. He's since been sidetracked, leading the company's internal investigation into the hacking scandal.

Porter Bibb says having to rebid for the schools contract is a minor setback.

Bibb: This is not a big deal, but it's the tip of the iceberg.

Bibb says a bigger problem for the company is news the Justice Department is ramping up its investigation of News Corp's activities in the U.S.

I'm Amy Scott for Marketplace.

About the author

Amy Scott is Marketplace’s education correspondent covering the K-12 and higher education beats, as well as general business and economic stories.

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