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Rebekah Brooks, the former News International boss on trial for phone-hacking offences, said the closure of the News of the World had been considered as a way of trying to save News Corp's $12 billion bid for the British pay-TV operator BSkyB before it was engulfed in the scandal over the tapping of murdered Milly Dowler's phone.
Murdoch shut the 168-year-old News of the World in July 2011 amid public and political disgust, days after the Dowler revelations. He also ditched the plans to buy the 61 percent of BSkyB that News Corp. did not own as politicians who had once courted the media mogul turned against him.
Brooks, 45, was arrested days afterwards and is now accused of conspiracy to illegally access voicemails on mobile phones, authorising illegal payments to public officials and perverting the course of justice. She denies all charges.
The jury at London's Old Bailey court were shown an email from Simon Greenberg, then News International's director of corporate affairs, to Brooks and another executive in early June 2011, when police had stepped up an inquiry into phone-hacking but before it had reached crisis point.
"This is why we should consider the shutdown option," Greenberg wrote, which Brooks confirmed was a reference to the newspaper.
"Is the brand too toxic for itself or the company? I believe it is. Unparalleled moments need unparalleled action. You could be the person to save the Rubicon deal."
Brooks, who was giving evidence for a seventh day, said Rubicon was the codename for the BSkyB bid and that they had believed closing down the tabloid would help with media plurality concerns over News Corp.'s proposed takeover.
"I think Simon Greenberg, Will Lewis and I had discussed it (the closure) before as a possibility as the level of civil liability was growing," she said.
In addition to the police inquiry, the company had been addressing an increasing number of phone-hacking victims seeking damages over the behaviour of News of the World journalists, which eventually led it to pay out millions of pounds.
Earlier, Brooks had told the court she thought the company's "rogue reporter" defence to phone-hacking looked shaky in 2009 when she landed the job as chief executive.
Following the phone-hacking convictions in 2007 of private detective Glenn Mulcaire and the News of the World's former royal editor Clive Goodman, News International had repeatedly blamed the practice on a "rogue exception".
However, in July 2009, an email came to light following legal action by one hacking victim which indicated the illegal tapping had not been limited to Goodman.
"It certainly showed ... that the emphaticness of the company's position that nobody else knew what Glenn Mulcaire was doing was looking shaky after that because this was an email from someone at the News of the World," she said.
"This document obviously showed, if not involvement, a wider knowledge."
The trial of Brooks and six others continues.