A News of the World journalist was told to “call in all those bottles of champagne” to get inside information about a terrorist plot from a senior policeman, the Leveson Inquiry heard today.
John Yates, Scotland Yard's former head of counter-terrorism, admitted he "may well" have drunk champagne with crime reporter Lucy Panton, but denied he did her any favours in return.
Mr Yates, who resigned over the phone-hacking scandal in July last year, also confirmed he was a "good friend" of former News of the World executive editor Neil Wallis.
The pair attended football games together and met at least seven times between April 2009 and August 2010, the press standards inquiry heard.
Meanwhile, fellow former Metropolitan Police anti-terror chief Peter Clarke defended his decision to restrict the scope of the force's original 2006 investigation into phone hacking at the News of the World.
He said police were dealing with a huge terrorist threat to the UK at the time, including a plot to blow up transatlantic airliners which was foiled two days after officers arrested the Sunday tabloid's royal editor Clive Goodman.
Mr Clarke told the inquiry: "Invasions of privacy are odious, obviously. They can be extraordinarily distressing and illegal but they don't kill you. Terrorists do."
On October 30 2010 Ms Panton, the News of the World's crime editor, was asked by news editor James Mellor to find out more from Mr Yates about a printer cartridge bomb found on a cargo aircraft at East Midlands Airport the previous day.
Mr Mellor wrote in an email: "John Yates could be crucial here. Have you spoken to him? Really need an excl (exclusive) splash (front page) line so time to call in all those bottles of champagne..."
Ms Panton replied: "Noted. Not got hold of him yet still trying."
Robert Jay QC, counsel to the Leveson Inquiry, said the email suggested that Ms Panton had "plied" Mr Yates with champagne and the favour was to be returned.
Mr Yates replied: "I hadn't been plied with champagne by Lucy Panton, and I think it's an unfortunate emphasis you're putting on it."
Asked whether he ever drank champagne with the News of the World reporter, Mr Yates said: "There may well have been the odd occasion, yes, when a bottle was being shared with several people, but nothing in the sense that you're suggesting."
Ms Panton, who is married to a Scotland Yard detective, was arrested in December on suspicion of making corrupt payments to police officers. She was later bailed and has not been charged.
The inquiry heard that Mr Yates met Mr Wallis regularly, sometimes for private meals with other friends including wealthy property developer Nick Candy, and on other occasions on official business at New Scotland Yard.
They ate at up-market London restaurants including Scott's and Cecconi's in Mayfair, Scalini in Chelsea, and Bar Boulud in the Mandarin Oriental hotel in Knightsbridge.
Mr Yates admitted that he and Mr Wallis discussed professional matters on the way to and from the "two or three" football matches they attended together.
He said: "In the margins, yes, but seriously it was far more about domestic life, family life, football. There was life outside the Met and I'm sure there's a life outside News International for him."
Giving evidence via videolink from Bahrain, where he is overseeing reform of the police, Mr Yates added: "I have always been completely open that he's a good friend. He certainly was a good friend - I haven't seen him for nigh on a year."
Mr Yates and former Metropolitan Police commissioner Sir Paul Stephenson both resigned after facing questions about their links to Mr Wallis, who was arrested on suspicion of phone-hacking last July.
Scotland Yard paid Mr Wallis's PR firm Chamy Media £24,000 for communications advice between October 2009 and September 2010.
Goodman and private investigator Glenn Mulcaire were jailed in January 2007 after they admitted intercepting voicemail messages left on royal aides' phones.
Mr Yates was criticised for not reopening the phone hacking inquiry after the Guardian published a story in July 2009 revealing the illegal practice was far more widespread than previously believed.
Prime Minister David Cameron set up the Leveson Inquiry last July in response to disclosures that the News of the World hacked murdered schoolgirl Milly Dowler's phone after she disappeared in 2002.
The first part of the inquiry, sitting at the Royal Courts of Justice in London, is looking at the culture, practices and ethics of the press in general and is due to produce a report by September.
The second part, examining the extent of unlawful activities by journalists, will not begin until detectives have completed their investigation into alleged phone hacking and corrupt payments to police, and any prosecutions have been concluded.
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