LONDON -- When a Parliamentary committee first confronted The News of the World with charges of phone hacking in 2007, the paper's owners produced a reassuring, one-paragraph letter from a prominent London law firm named Harbottle & Lewis.
The firm had been hired to review the e-mail of the tabloid's royal reporter, who had pleaded guilty to hacking the cellphone messages of royal household staff members. The letter said senior editors were not aware of the reporter's "illegal actions," which helped convince lawmakers that hacking was not endemic at the tabloid.
That letter has taken on new significance since it emerged in recent weeks that those e-mails, while not pointing to wider knowledge of hacking, did contain indications of payoffs to the police by journalists in exchange for information. The circumstances behind the writing of that single paragraph are being examined as part of criminal and parliamentary inquiries into whether the tabloid's parent company, News International, the British subsidiary of the News Corporation, engineered a four-year cover-up of information suggesting criminal wrongdoing.
In interviews, two people familiar with both the contents of the e-mails and the discussions between the executives and the law firm provided new details about the possible payoffs. The two people also indicated that both News International and the firm were aware of the information when the reassuring letter was written, yet defined their task as addressing only the hacking issue.
In one e-mail, from 2003, the paper's royal reporter, Clive Goodman, complained to the top editor, Andy Coulson, about a management push to cut back on cash payments to sources, saying he needed to pay his contacts in the Scotland Yard unit that protects the royal family. In another e-mail, Mr. Goodman said that he did not want to go into detail about cash payments because everyone involved could "go to prison for this," according to the two people who described the e-mail's contents.
The two people also said that in the exchange of e-mails, Mr. Goodman requested permission from Mr. Coulson to pay £1,000 for a classified Green Book directory, which had been stolen by a police officer in the protection unit. The book contains the private phone numbers of the queen, the royal family and their closest friends and associates -- a potentially useful tool for hacking.
In the years since the letter was written, various revelations have confirmed that phone hacking was endemic at the tabloid. Evidence disclosed in the past several weeks of widespread payoffs to the police have given rise to a second, and potentially more potent, front in the scandal.
Both Harbottle & Lewis and News International took notice of the e-mails to and from Mr. Goodman containing those initial indications of payoffs in 2007, according to the two people knowledgeable about the events. News International's chief lawyer set them aside for a second look, and they were among the e-mails retained in the files of the law firm. Yet they were not turned over to the police until last month, and no hint of their existence made its way into the firm's single-paragraph letter four years ago.
The two people familiar with internal discussions between News International and the firm, who spoke on the condition of anonymity given the criminal investigations, said company executives urged Harbottle & Lewis to write a letter giving News International a clean bill of health in the strongest possible terms.
The firm had been hired to defend the paper after Mr. Goodman sued, claiming his dismissal over phone hacking was unfair because it was widely known that others were doing it, too. The firm was asked to examine 2,500 e-mails involving Mr. Goodman to defend against his claim that superiors knew about his hacking.
The correspondence between the company and the firm over framing the letter does not make reference to the e-mails on police payments, a source familiar with the exchanges said, but it does reflect "huge anxiety" about the wording.
The final version of the letter, dated May 29, 2007, sent by the firm's managing partner to Jon Chapman, who was head of the legal department for News International, read: "I can confirm that we did not find anything in those e-mails which appeared to us to be reasonable evidence that Clive Goodman's illegal actions were known about and supported by both or either of Andy Coulson, the editor, and Neil Wallis, the deputy editor, and/or that Ian Edmondson, the news editor, and others were carrying out similar procedures."
The company rejected earlier drafts by Harbottle & Lewis that were not as broad, according to the two people with access to the correspondence. One of them said that lawyers on both sides seemed to struggle to find language that said the review had found no evidence of wrongdoing.
"They wanted to bury those e-mails, and they wanted Harbottle & Lewis to give them a letter to indicate there was nothing incriminating in the file," said one of the people who reviewed the exchanges. "They knew exactly what they were doing."
But a former News International official familiar with the matter said that Mr. Chapman was expected to testify to a parliamentary committee that the discussion over the letter had nothing to do with the e-mails suggesting police payoffs and only with finding a way for the firm to say it had looked into Mr. Goodman's allegations about hacking and had found no evidence.
The former official noted that neither Mr. Chapman nor the firm's lawyer who reviewed the e-mails are criminal attorneys. Mr. Chapman is expected to testify that while he noticed the e-mails in question, he did not realize that paying the police was a criminal offense, the former official said. He is expected to testify that Mr. Goodman's e-mail mentioning prison seemed to him to be in jest.
Like Mr. Chapman, Harbottle & Lewis has been asked to give its account to a select committee of Parliament, and it has said it will cooperate as long as the police say its participation will not harm the criminal investigation. News International recently released the firm from its client confidentiality obligations so it can talk to the authorities. While it is unclear what the firm's opinion on the e-mails was in 2007, client confidentiality would have prevented it from unilaterally reporting them to authorities.
Mr. Goodman, who was rearrested this month on suspicion of paying police officers for information, did not return a call requesting comment. Lawyers for Mr. Coulson, who was arrested this month on suspicion of conspiring to hack phones and bribe the police for information, have said that they have told him not to answer questions in the midst of a criminal investigation.
News International discovered the e-mails indicating police payoffs as it was responding to lawsuits filed by phone hacking victims and inquiries from the police. As the company assembled its defense team, a law firm it hired retained Lord Ken Macdonald to advise the News Corporation board on whether the e-mails were evidence of a crime and needed to be turned over to the police.
Mr. Macdonald had overseen the office that prosecuted Mr. Goodman in 2006. But back then, he had not seen the trove of e-mails reviewed by Harbottle & Lewis, since they were never reported to the authorities.
Once Mr. Macdonald saw the e-mails in May, it took him between "about three minutes, maybe five minutes" to conclude that it was "blindingly obvious" that they were evidence of criminal wrongdoing, he told a select committee of Parliament.
Mr. Macdonald advised the News Corporation board to immediately turn the e-mails over to the police, a move that set off the current investigation into the payments made to the police by journalists at The News of the World.
The company then trawled through other documents, including its cash authorization records, and found 130,000 pounds' worth of payments to a group of officers over several years, according to officials with knowledge of the inquiry. Included within those records was documentation of a thousand-pound cash withdrawal around the date of Mr. Goodman's e-mail concerning his purchase of the Green Book from a police officer, according to one person with knowledge of the investigation.
First Published: July 30, 2011, 4:00 a.m.
