James Murdoch knew that phone-hacking at News Corp's News of the World went beyond one "rogue" reporter more than three years ago, the company's ex-chief UK legal counsel has told British lawmakers, contradicting repeated denials by Mr Murdoch.
A committee investigating allegations that hacking occurred on an industrial scale and was covered up by senior executives was told that Rupert Murdoch's son James had been made aware the practice was more widespread than thought but had failed to take any action.
Lawyer Tom Crone also claimed that News Corp's British newspaper arm had hired freelance journalists to snoop on the private lives of lawyers currently representing hacking victims, casting doubt on the company's recent apologetic stance.
"I saw one thing in relation to two of the lawyers," he told a parliamentary committee. When asked whether he knew the source of the information, he said: "Freelance journalists employed by News International," referring to News Corp's UK newspaper unit.
News Corp has been engulfed by the phone-hacking scandal since it was revealed in July that the illegal practice extended beyond celebrities and politicians to murder victims including schoolgirl Milly Dowler, and British war dead.
Mr Crone repeated that he had explained to James Murdoch in 2008 the significance of a key email obtained by a hacking victim, which contained transcripts of intercepted voicemails unrelated to the reporter who had already gone to jail.
"This document meant there was a wider News International involvement," Mr Crone told the committee, when asked to explain what he had told Mr Murdoch in a meeting in which Colin Myler, the tabloid's last editor, was also present.
Mr Myler and Mr Crone said the so-called "for Neville" email was the only reason Murdoch had approved a £700,000 payout to the victim, soccer executive Gordon Taylor.
"Since he gave us the authority we were asking for in the context of what we'd said to him, I would take it that he understood that for the first time he realised the News of The World was involved, and that involvement involved people beyond Clive Goodman and on that basis he authorised the settlement," Mr Crone said.
Mr Murdoch, who took charge of News Corp's European operations in late 2007, has repeatedly said he was not aware at the time of a "for Neville" email or that phone-hacking was widespread. He has given evidence to the committee and may be recalled.
Since the scandal erupted, the company has dropped a $12bn bid for British satellite broadcaster BSkyB, shut down the 168-year-old News of the World, and seen two senior executives, Les Hinton and Rebekah Brooks, resign.
British Prime Minister David Cameron, who hired ex-News of the World editor Andy Coulson as his spokesman, has been forced to join his opponents in turning on Rupert Murdoch and his newspaper empire. Mr Coulson has since resigned and been arrested.
James Murdoch was not in charge of News International at the time the hacking that is known about occurred. But he joined shortly afterwards and may have presided over a huge corporate cover-up.
Today, members of the committee frequently appeared exasperated by the witnesses' repeated claims to have no recollection of key events and documents.
Mr Crone said he had not read the Gordon Taylor file since he last gave evidence to parliament on the matter in 2009, eliciting an incredulous response from lawmaker Tom Watson.
"What on earth were you doing for two years Mr Crone? The entire focus of public enquiry has been on the Taylor payment, you were the legal director of News Group Newspapers and you are seriously telling me you have not reviewed that file in over two years?" he asked.
"Not in any detail, no," Mr Crone replied.
Earlier, two other ex-News International executives said the company had done all it could to investigate a 2007 claim by Clive Goodman that hacking was commonplace.
Daniel Cloke, who ran News International's human resources at the time, said no evidence had been found to support Goodman's claim, which was made in a letter appealing against his unfair dismissal and published last month.
"At that particular moment in time, this was one employee - ex-employee - making allegations about others," Mr Cloke told the committee today, when asked why the company had not done more to uncover the scale of the phone-hacking.
"We interviewed those people, we also then looked at around 2-2,500 emails and then took it to a third party," he said.
"That gave me comfort as an HR director that we had covered the bases and done the proper thing."
Asked why the company had approved payments of a quarter of a million pounds to Goodman after he lost his unfair dismissal appeal, Mr Cloke and ex-commercial lawyer Jon Chapman presented it as pragmatism, not a measure calculated to buy his silence.
"It was a stark choice - settle at a reasonable figure or end up in tribunal," Chapman said. "At the tribunal proceedings, Mr Goodman would have been able to make a number of allegations, which we didn't believe... in a public forum."