News International made payments to phone hackers Clive Goodman and Glenn Mulcaire after they were convicted of the crime, James Murdoch admitted today.
Goodman, former royal editor at the News of the World, and private investigator Mulcaire, were both jailed in 2007 over royal phone taps.
Mr Murdoch insisted he had been "very surprised" to find that payments had been made towards the legal fees of the pair, but was told it was "customary" and admitted the payments could even be continuing.
During the hotly-anticipated Commons Culture, Media and Sport Committee session, Conservative Philip Davies questioned how Goodman would have been able to hire John Kelsey-Fry, described as one of the most expensive lawyers in Britain and the "go-to" legal man for celebrities.
Mr Davies said it would lead "most people to suspect" that his fees were being paid for by News International.
He pressed Mr Murdoch to reveal what payments had been made to Goodman and Mulcaire following their convictions.
Mr Murdoch said: "I asked the question myself and I was very surprised to find the company had made certain contributions to legal settlements.
"I don't have all of the details around each of those - not legal settlements sorry, legal fees - I was surprised, I was very surprised to find out that had occurred.
"They were done, as I understand it, in accordance with legal counsel and their strong advice."
Asked who signed the cheques, Rupert Murdoch said "it could have been" Les Hinton, head of News International at the time, or, alternatively, the chief legal officer.
It was put to the Murdochs that their company had been paying legal fees for Mulcaire, a "convicted felon" - a charge James Murdoch admitted.
He said: "I do know certain legal fees were paid for Mr Mulcaire by the company and I was as surprised and shocked to learn that as you are."
But he denied the fees were paid to buy Mulcaire's "cooperation and silence", saying: "When the allegations came out I said: 'Are we doing this? Is this what the company's doing?'
"The strong (legal) advice was that from time to time it's important and customary even to pay co-defendants' legal fees."
He said he did not know whether his organisation was continuing to contribute to the fees, but added that he had "asked the company to find a way for these things to cease".
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