London – Testimony by James Murdoch about Britain’s phone hacking scandal came under renewed scrutiny on Friday with Prime Minister David Cameron saying that Mr. Murdoch still had “questions to answer” and a lawmaker calling for the police to open a new inquiry.
The pressure on Mr. Murdoch built a day after two former executives of News International — the British subsidiary of the News Corporation — publicly contradicted evidence he gave on Tuesday to a parliamentary panel seeking to untangle the story of phone hacking at the now defunct Murdoch tabloid The News of the World.
“Clearly James Murdoch has got questions to answer in Parliament, and I’m sure he will do that,” Mr. Cameron said during a visit to an auto plant in the British Midlands. “And clearly News International has got some big issues to deal with and a mess to clear up. That has to be done by the management of that company. In the end the management of the company must be an issue for the shareholders of that company, but the government wants to see this sorted out.”
The two former executives said on Thursday that they told Mr. Murdoch in 2008 of evidence suggesting that phone hacking at one of the company’s tabloid newspapers was more widespread. They said they informed Mr. Murdoch at the time that he was authorizing an unusually large secret settlement of a lawsuit brought by a hacking victim.
Mr. Murdoch, who runs the News Corporation’s European and Asian operations, including News International, told the committee on Tuesday that he agreed to pay £725,000, which was then about $1.4 million, in the case because it made financial sense. He testified that he was not aware at the time of the evidence, which probably would have become public had the case proceeded and undermined the company’s assertion that hacking was limited to “a lone rogue reporter.”
But Colin Myler, former editor of The News of the World, and Tom Crone, former News International legal manager, said Mr. Murdoch was “mistaken” in his testimony to the parliamentary panel. They said that when settling the lawsuit brought by a soccer union leader, Gordon Taylor, Mr. Murdoch knew about a crucial piece of evidence that had been turned over to the company: an e-mail marked “for Neville” containing the transcript of a hacked cellphone message, apparently a reference to the paper’s chief reporter, Neville Thurlbeck.
“In fact, we did inform him of the ‘for Neville’ e-mail which had been produced to us by Gordon Taylor’s lawyers,” Mr. Myler and Mr. Crone said in the statement released Thursday night. On Friday, Tom Watson, an opposition Labour lawmaker who has been prominent in the hacking inquiries and is a member of the parliamentary committee, told the BBC that he would “formally” ask the police to investigate the executives’ assertions.
“This is the most significant moment of two years of investigation into phone hacking,” Mr. Watson said.
Referring to the executives’ account, he said on BBC television: “If their version of events is accurate, it doesn’t just mean that Parliament has been misled, it means the police have another investigation on their hands.”
He added: “There is only going to be one person who is accurate. Either James Murdoch, who to be fair to him is standing by his version of events, or Colin Myler and Tom Crone.”
Separately, Chris Bryant, another Labour lawmaker, who says his own phone was hacked, said he had written to nonexecutive directors of the News Corporation urging that James Murdoch and his father, Rupert, be suspended from their roles in running the company.
He said the company had displayed a “complete failure to tackle the original criminality” while “the lackadaisical approach to such matters would suggest that there is no proper corporate governance within the company.”
The circumstances surrounding the settlement of the Taylor case are a focus of the parliamentary inquiry because they could shed light on whether there was an effort by News International to obscure the extent of the hacking. It was the first lawsuit brought by a hacking victim, and it came while the company, which owned the tabloid, was reeling from the 2007 guilty pleas of Clive Goodman, the paper’s royal reporter, and Glenn Mulcaire, a private investigator, for hacking the phones of the royal household.
Mr. Myler and Mr. Crone’s statement seems to mark a round of finger-pointing, days after the testimony of James Murdoch and his father, who declared that he was not to blame for the hacking and that he was let down by people he trusted.
Mr. Myler and Mr. Crone spoke out because they were angry that the company was telling reporters that they had failed to tell James Murdoch about critical facts in the lawsuit, three executives said in interviews. In a statement, Mr. Murdoch said, “I stand by my testimony to the select committee.”
On Tuesday, Mr. Murdoch also told the committee that he “did not get involved in any of the negotiations directly” and that the settlement seemed reasonable at the time. Beyond Mr. Myler and Mr. Crone, other News International executives, as well as members of Mr. Taylor’s legal team, painted a picture of Mr. Murdoch as being quite engaged in keeping the case from going to trial. They say that the size of the settlement he authorized reflected that.
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In July 2008, News International’s chief financial officer, Clive Milner, was asked to endorse a check for £725,000. He was not told what it was for — only that “the check is for James Murdoch,” according to a company official with direct knowledge of the matter and an account Mr. Milner has shared with friends.
The negotiations were so tightly held that only Mr. Crone, Mr. Myler and Mr. Murdoch knew about them, said two company officials. The officials said that even employees who were typically involved in legal decisions did not learn of the settlement until it leaked in a newspaper.
“I was gobsmacked” at the amount, one of them said.
Mr. Murdoch testified on Tuesday that the size of the settlement reflected a judgment “by distinguished outside counsel” that the company was going to lose the case and that potential damages that could run up to about $1.6 million at today’s rates.
But the $1.4 million settlement was a record amount for a privacy case. At the time, cases involving published stories shown to have violated the privacy of claimants were settling for $6,000 to $24,000, lawyers said. Another factor that made the Taylor settlement unusual was that The News of the World had only prepared, but not published, an article about Mr. Taylor.
On July 24, 2008, while the negotiations in the Taylor settlement case were drawing to a close, Max Mosley, a former auto racing executive, won a $120,000 judgment over a front-page article in The News of the World that falsely accused him of engaging in “sick Nazi orgies.” That settlement was considered a record at the time. In current hacking cases, News International itself has said any settlement beyond about $160,000 is unreasonable.
When Mr. Taylor’s legal team began negotiations, the company offered about $99,000. But the figure kept rising as the company was made aware of the evidence that Mr. Taylor’s lawyer had obtained by court order.
The evidence came from a trove that Scotland Yard had seized during the investigation of the hacking of the royal household’s phones from the home of Mr. Mulcaire, the private investigator who worked for the tabloid.
In addition to the “for Neville” e-mail, News International lawyers were also shown a draft of the unpublished article about what was said to have been an affair between Mr. Taylor and his assistant. The article was based on a voice mail message left on his phone by the assistant that said, “Thank you for yesterday.” In fact, the woman’s gratitude was for a speech Mr. Taylor gave at her father’s funeral, according to his lawyer, Mark Lewis.
Among the evidence made available to News International was an audiotape of Mr. Mulcaire instructing a reporter on how to hack phone messages. It turned out that the reporter worked for another newspaper, but at the time, company executives believed he worked for them, said one executive.
The turning point in negotiations came in April 2008 after a judge ordered Mr. Mulcaire, in open court, to identify “Neville” and the reporter whose voice was heard on the audiotape. That is when News International increased the offer to about $798,000 for Mr. Taylor and $648,000 for legal costs, according to three people with direct knowledge of the talks. The legal fees represented 100 percent of the amount requested by Mr. Taylor’s legal team, which occurs only rarely in such cases, the three people said.
“It very quickly became silly money,” said a person with knowledge of the negotiations.
Indeed, counting News International’s own legal bills, the total cost to the company exceeded the $1.6 million figure, at today’s exchange rates, that Mr. Murdoch testified he worried the company would have to pay if the case went to trial.
After Mr. Murdoch insisted that he knew nothing about the underlying facts, Tom Watson, a Labour member of Parliament, told him on Tuesday, “But you paid an astronomical sum, and there was no reason to.”
Mr. Murdoch told the committee that he thought it was “simply a matter” relating to Mr. Goodman’s actions, and that he acted on the advice of both Mr. Myler and his counsel.
Pressed about his lack of knowledge — at one point Adrian Sanders, a Liberal Democrat member of Parliament, asked him if he “was familiar with the term willful blindness” — Mr. Murdoch explained that he had only just taken over the News Corporation’s Europe and Asia operations when he was advised, in early 2008, to settle the case.
He said that even with the benefit of hindsight, he would do it again, but added that “if I knew that what we know now,” he would also have contacted the police and “moved faster to get to the bottom of these allegations.”
Ravi Somaiya and Graham Bowley contributed reporting from London, and Alan Cowell from Paris.
This article, “Murdoch Testimony on Hacking Comes Under New Scrutiny,” originally appeared in The New York Times.