News Corp has been paying the legal bills of the convicted criminal who is suspected of hacking the mobile phone of the murdered schoolgirl Milly Dowler.
In evidence to MPs, James Murdoch admitted he was "shocked" and "surprised" to discover that his company had been underwriting the fees of the private investigator Glenn Mulcaire, who is facing a series of civil actions over his illegal interception of phone messages and may yet face further criminal charges.
"I was very surprised to find the company had made contributions to legal fees," said Mr Murdoch Jnr, who is News Corp's deputy chief operating officer. "They were done, as I understand, in accordance with legal counsel."
James was unclear when he was asked who would have signed off such payments. He suggested that it was "the management of the legal cases". He was unable to say whether the payments to Mulcaire continued. When queried as to whether a managing editor would have been involved, his father interjected to say: "It would not have been the managing editor. It would have been above."
Asked if the matter would have been the responsibility of Les Hinton, the former executive chairman of News International who last week resigned from his position as publisher of The Wall Street Journal, Mr Murdoch Snr responded: "Could be" before adding that the final decision would have been made "on the instructions of the chief legal officer".
That was understood to be a reference to Jon Chapman, who this month stood down as News International's director of legal affairs.
Confirmation that the company has been financially assisting a convicted felon in his legal battles puts more pressure on James Murdoch, who took control of News Corp's UK newspaper arm in December 2007. It is likely that the information will be considered by the media regulator Ofcom, which is gathering evidence on whether News Corp is a "fit and proper" company to own a British broadcasting licence. James Murdoch is the chairman of BSkyB.
James Murdoch also defended his authorisation of a £700,000 payment to Gordon Taylor, the chief executive of the Professional Footballers' Association, and said that he had acted on legal advice. James Murdoch had clearly identified his signing off of the payment to the hacking victim as a potential problem. "The underlying fact was not in dispute," he told the MPs, adding that the company's lawyers advised him that "the company would lose that case".
The payment is seen as crucial in determining Mr Murdoch Jnr's suitability to run a major company and how much he appraised himself of the extent of phone hacking.
"There was no reason at that time to believe... it was anything other than in the past," he said, adding that he had been advised on the matter by Tom Crone, the former News of the World legal manager who quit the company last week, and Colin Myler, the last editor of the paper, which was closed down earlier this month.
He was then further pressed on why so much money had been paid to Taylor and to another hacking victim, the publicist Max Clifford, who received £1m, when the record amount paid in a damages claim was the £60,000 paid by the News of the World to Max Mosley.
He said he believed that the confidentiality clauses imposed on Mr Taylor and Clifford and another victim, the publicist Max Clifford, as part of their settlements were standard legal procedure..
The hearing was also told of the extraordinary legal backing given by News Corp to the former royal editor of the News of the World Clive Goodman during his court case more than four years ago, after which he was also jailed. Even though he had pleaded guilty to phone-hacking, Mr Goodman was represented by the leading silk John Kelsey-Fry, who was described at the hearing as "one of the most eminent lawyers in the country and certainly one of the most expensive". James Murdoch was unable to explain why.
James Murdoch was asked if News International had made payments to Andy Coulson in the period after he resigned as editor of the News of the World. He denied knowledge of this.
'You're a naughty billionaire,' the attacker said
The middle-aged man in the chequered shirt pushed past me just as Louise Mensch was finishing her question. In his hand was a blue carrier bag. He looked like he was trying to leave in a hurry.
Then someone screamed. I looked round a saw a paper party plate heaped with shaving foam from the bag which he was smearing across Rupert Murdoch face and suit a couple of yards away.
“You are a very naughty billionaire,” he said.
Rupert just sat there not moving. Not saying anything.
A slightly portly policeman started running across from the far side of the room but he was no match for Wendi Murdoch. Sitting just behind her husband she instinctively leapt up and lunged at the man’s face – making contact with some papers she had in her hand.
Another aide tried to grab him before the policeman even made it to Mr Murdoch’s side.
As the attacker was led away Mrs Murdoch turned to her husband and his son. “I got him,” she said - almost gleefully.
Rather tenderly she then perched on the committee room table in front of Mr Murdoch, removed his glasses which were smeared with foam and tried to clean his face and bald head with a handkerchief and a bottle of mineral water.
Rupert himself still said nothing.
Whether he was shocked, upset you couldn’t really tell. He looked vulnerable – less the multi-billionaire media mogul and more the 80–year-old man.
His son, however, was angry. As officials tried to clear the room of the press and public he demanded of the nearest policeman – his own face covered in foam - how the man had got past security.
“Unfortunately the X-ray machines don’t pick up foam,” was the slightly lame reply.
“This is a circus,” James Murdoch replied. “Honestly, this is a circus.”
Another aide – mistaking me for a committee official – demanded to know if the cameras were off.
James then demanded an adjournment. But surprisingly his father, now with his foam-smeared suit jacket removed and wet shirt revealing his vest underneath was the one who was keen to continue.
“It’s fine. Let carry on.” I was then ushered out.
Even at close quarters Rupert’s reaction was inscrutable. At first I thought he was shocked. But now I am not so sure. It was almost as if he welcomed the ritual humiliation.