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Trials and tribulations of News International: Where, exactly, will it all end?

As Andy Coulson leaves the PM's office, James Hanning gets to grips with the convoluted case of hacked phones, detectives, and a red-top newspaper

Why did Andy Coulson resign?

He says it was because the media storm about phone hacking was distracting him from doing his job properly. He was editor of the News of the World from 2003 to 2006, during which time a lot of people had their voicemail messages listened to unlawfully. Two people in the pay of the paper were sent to prison for hacking into the phones of the Royal Family's staff, and a great many people are bringing legal cases to find out if their phones were also hacked during Coulson's time in charge.

But these allegations have been around for ages. What's new?

The News of the World has always said the hacking was a rogue operation, and that only one member of staff, royal reporter Clive Goodman, knew about it, and he went to prison. But in recent weeks the names of two senior members – one current, Ian Edmondson, one former, Greg Miskiw – of the NoW staff have been identified in court documents as having instructed Glenn Mulcaire, the private investigator in question.

That still doesn't mean Andy Coulson knew about it?

It doesn't, and there is no hard evidence that he did. But Sean Hoare, a former friend of his, has alleged he did, and few who work in newspapers believe as professional and hands-on an editor as Coulson could not have known. He stood down as NoW editor, taking responsibility for the actions of his staff but not explicitly denying knowledge of what they had been doing.

So why did Cameron appoint him?

Because he was persuaded, mainly by George Osborne, that Essex-born Coulson, who had worked his way to the top, had the "common touch" that Cameron's privileged circle lacked. He also knew the ways of the tabloid world and, at a time – mid-2007 – when Rupert Murdoch was notably unimpressed by Cameron, was very friendly with Rebekah Wade (later Brooks), Coulson's predecessor at the NoW and now chief exec of News International, and other senior people in the Murdoch empire.

But wasn't he worried that Coulson was soiled goods?

It's not known if Coulson was asked about this possible skeleton in his cupboard when he was appointed as director of communications four months after his resignation, and Cameron has prided himself on having been willing to give him a second chance.

Why did Cameron hold on to him for so long?

Because he values loyalty and had grown close to Coulson, valuing both his streetwise guidance and his sensitivity during a period of personal tragedy. Two years ago, Cameron asked if he knew about the hacking and Coulson said, "categorically", that he didn't. Cameron also twice sought reassurance from Rupert Murdoch. He was told the police had all the evidence, had investigated at the time, and that there was nothing new to concern him. There is no reason to doubt that Murdoch was telling the truth as far as he knew it, and Cameron promised to defend Coulson.

Later, though, it was decided before Christmas that Coulson would leave. But the story wouldn't die down. An announcement was then to be made this coming week, but was brought forward.

So if it was just a rogue reporter, what is the problem?

Because some of the suspected hundreds of victims of the phone hacking have come forward, wanting to know how extensive it was. In the court case in 2006, it was established that five people had had their phones hacked by people working for the News of the World. They were publicist Max Clifford; PFA chairman Gordon Taylor; agent Sky Andrew; politician Simon Hughes; and model Elle Macpherson. Subsequently, two of them, Clifford and Taylor, brought private cases against the paper. News Corp's James Murdoch signed off on two settlements which lawyers say were considerably larger than they would normally have expected to receive for a run-of-the-mill breach of privacy. The cases were settled before key documents were revealed in court. This has aroused both the suspicion of journalists and the appetite of potential celebrity litigants.

So why hasn't the News of the World settled with the other complainants?

Because only one of those who is bringing an action, Sky Andrew, has an open-and-shut case likely to produce a large settlement. People such as Sienna Miller, Steve Coogan and George Galloway have reason to think they were hacked, because some of their details were found in the original police raid on Glenn Mulcaire's house in 2006, but they need to prove it. To do that, they need disclosure of documents from News of the World.

If the police already have so much evidence, why haven't there been more prosecutions?

That's a question for Andy Hayman, who ran the original inquiry, and the Met. The police took a vast haul away from Mulcaire's house, but used very little of it in the eventual court case. They admit privately that the case was not well handled at the time, but that they secured the necessary convictions and sent a firm message. They also say that criminal proof proving hacking has taken place is very different from merely finding large amounts of circumstantial evidence.

Were News International the only people doing this?

Absolutely not. Senior people at the company have been complaining that they are having to carry the can for a practice that was widespread. Speaking of the imprisoning of royal reporter Clive Goodman, Piers Morgan, former editor of the Mirror, said that he was "a convenient fall guy for investigative practices that everyone knows were going on at almost every paper in Fleet Street for years". Other papers are bound to be drawn into any thorough inquiry, and this may be discussed when the DPP meets the Met next week.

Is Cameron damaged by this affair?

Questions have been raised as to Cameron's judgement in appointing Coulson. Apart from the circumstances of his departure, Coulson had seemed like an ideal choice for the job. Having been reassured as to Coulson's past, Cameron believed him and showed him loyalty. For this he might be charged with naivety in the face of private warnings. More recently, when doubts about Coulson's credibility were mounting – doubts Cameron must have shared – he appears to have taken refuge in a more cynical position, calculating that if a paper trail were ever found, he could say he was lied to. He has remained true to his promise to Murdoch to defend Coulson, although the straw that broke the camel's back in Coulson's mind has not been identified. A very close friend of his said some weeks ago: "Andy has balls of steel and won't go a moment before he has to." Cameron's friendship with Rebekah Brooks invites scrutiny. Her husband, Charlie Brooks, knows the PM from Eton, and their two families are in frequent social contact during weekends in Oxfordshire. While the hacking scandal rumbles on, this does not look good, given the political support the Murdoch papers have offered the coalition. It looks even less good when News Corp is lobbying hard to secure ownership of the 61 per cent of BSkyB that it does not already own.

What can they do to sort out the mess?

They have put out statements talking of a zero-tolerance approach to wrongdoing, and Rupert Murdoch was heard complaining some weeks ago that they have nothing to hide, so why does their legal position seem so defensive? The problem is that the written evidence from the raid on Mulcaire's house in 2006 and Mulcaire's recent testimony in response to court orders keep tripping them up. The naming of Ian Edmondson as having been in receipt of an unlawfully acquired transcript runs directly against the "lone rogue" theory. The paper has suspended Edmondson.

Why not ask the people who have been accused?

Because, speaking under caution, most say "no comment", or that they know nothing. Others, like Clive Goodman, or Glenn Mulcaire, who knows everything, have agreed settlements with their former employer. So the absence of a smoking gun, which News of the World says does not exist, has stymied the outraged. But, as interest grows, there must be a temptation for former employees to sell their stories. Ian Edmondson, suspended by the News of the World while its third internal enquiry into hacking takes place, has been in talks with the paper. He is thought to be unhappy about the terms of any severance deal and is considering his options. Another former executive, Greg Miskiw, is also thought to have been the object of a number of offers for his story, but has so far declined, as has Glenn Mulcaire. Yet the day is looming when they may be required to give evidence in court, so they may not have the luxury of choosing.

What happens next?

Rupert Murdoch is in town this week, so anything could happen. He only came to admire David Cameron late in the day, having been persuaded to do so by his son. James has been anxious to run his own show, but a father as powerful as Rupert does not relinquish power so readily, even to his own son. The hacking episode has been a major test for the 39-year-old. Similarly, Rebekah Brooks, whom Rupert has always admired and liked, has battled hard to slay the hydra-headed litigants, but the number of civil cases shows no sign of abating, and some key cases are reaching a crucial stage.

Sky Andrew, whose phone was definitely hacked, is showing little sign of settling before a court hearing, but he is thought to have been in talks with Brooks and her representatives. George Galloway, on the other hand, has said he "doesn't need the money" that might come from any settlement, should he turn out to have been a victim of hacking, and wants to see his case through to the end. Quite an in-tray for Simon Greenberg, who begins his job as News Corp's new PR chief tomorrow.