Mystery of £1.7m payout for Rebekah Brooks

James Murdoch to face fresh questions from MPs on deal with former executive.

James Murdoch will this week face fresh questions from a parliamentary inquiry into News International's financial links to Rebekah Brooks, who resigned at the height of the phone-hacking scandal. Mr Murdoch's reappearance at the Culture, Media and Sport Select Committee is expected to be dominated by doubts cast on his earlier claims not to have known about the extent of phone hacking at News of the World.

But last night it was claimed that Ms Brooks, who edited NOTW before rising to become chief executive of NI, had received a £1.7m payout, a chauffeur-driven car and a central London office as part of her severance package. It is understood that Mr Murdoch will face claims on Thursday that Ms Brooks has been told she will one day be able to return to the company, possibly in as little as two years. Previously it has been reported that Rupert Murdoch told Ms Brooks to "travel the world" until the scandal had passed.

Ms Brooks resigned from her role in July, days after NOTW was closed following revelations that the teenage murder victim Milly Dowler was targeted by phone hackers after she went missing in 2002. Ms Brooks was later arrested and bailed in connection with allegations of phone hacking and corruption. NI has paid the Dowler family £2m in settlement of their civil claim, while Rupert Murdoch has donated £1m to charities chosen by the Dowler family.

Companies House records show that Ms Brooks resigned from 23 directorships related to the firm, according to The Observer. Tom Watson, the Labour MP and a member of the culture committee, told the newspaper: "It is remarkably curious that such a generous package is given to Ms Brooks when others have been cut loose. It is almost as if she hasn't really left ... I am sure Mr Murdoch will want to explain the decision to his shareholders."

Mr Murdoch, NI's executive chairman, was recalled to the culture committee on Thursday after his evidence given in July was contradicted by former NOTW editor Colin Myler and ex-legal chief Tom Crone. In particular, he will be challenged about what he knew, and when, about the extent of phone hacking at the newspaper group, notably claims that he was told in 2008 about a transcript of a phone message about Gordon Taylor, former chief executive of the Professional Footballers' Association.

The NOTW's claim that hacking was limited to a "rogue reporter" – Clive Goodman, jailed with private investigator Glenn Mulcaire – has been shown to be untrue. Papers obtained by the culture committee from Farrer & Co, NI's former solicitors, include notes, emails and bills that leave executives at the media empire open to claims of serious cover-up.

Since the closure of the Sunday redtop in July, the investigation into allegations of wrongdoing has widened. Last week, police said the number of possible hacking victims was close to 5,800, as Carole Caplin, one-time adviser to Cherie Blair, had been told by police her messages were hacked by Glenn Mulcaire working for NOTW. Investigations are also continuing into allegations of computer hacking and payments to police.

NI declined to comment last night. When The IoS put the location of the office to Ms Brooks's spokesman yesterday lunchtime, we were told the details could not be disclosed for "security reasons".

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