British satellite broadcaster BSkyB, part of Rupert Murdoch's UK media business, is facing an escalating investigation into whether it is a fit and proper owner of a broadcasting licence, Britain's telecoms regulator said on Thursday.
Ofcom said it set up a dedicated team in January known as 'Project Apple' to investigate material emerging from the Leveson inquiry and the police's investigations into phone hacking and the corrupting of public officials.
The investigation is considering the status of both James Murdoch, chairman of BSkyB, and News Corp, which holds a 39.1 percent stake in broadcaster, as fit and proper persons to own the BSkyB licence.
Ofcom has a duty under the UK Broadcasting Acts 1990 and 1996 to be satisfied that any person holding a broadcasting licence is, and remains, fit and proper to do so, the regulator said.
New evidence is still emerging from hacking and corruption allegations. Ofcom is continuing to assess the evidence, including the new and emerging evidence, that may assist it in discharging its duties.
Murdoch has remained chairmen of BSkyB, despite stepping down as executive chairman of News International, the British newspaper arm of Rupert Murdoch's News Corp group, last month.
If Ofcom rules against either of them, it could threaten James Murdoch's position or result in News Corp cutting its stake in BSkyB to a percentage that would shed its control of the company.
Ofcom has written to, met and is in dialogue with the various authorities investigating the allegations. This includes the police, the relevant parliamentary committees and British MPs, Ofcom said.
Project Apple was discussed at a board meeting in January, and BSkyB's status to hold a broadcasting licence was also discussed in September and December, but only as part of the chief executive's report, Ofcom said.
BSkyB could not be reached for immediate comment.
Last summer Rupert Murdoch withdrew News Corp's planned bid to take full control of BSkyB after his company admitted phone hacking at his UK newspapers.
News Corp ditched its 8.3 billion pound ($13.13 billion) pursuit of BSkyB after Rupert Murdoch closed the News of the World following a political and public outcry resulting from phone hacking scandal.
($1 = 0.6323 British pounds)
(Reporting by Stephen Mangan and Kate Holton; Editing by Gary Hill)