Phone hacking letter spells more trouble for Murdoch and News Corp.

A letter from a former News of the World reporter, who was jailed in 2007 for hacking the phones of British royalty, further calls into question the veracity of testimony from Rupert Murdoch and his son James at last month's sensational phone hacking hearing.

The letter from Clive Goodman to News International, the British newspaper arm of Mr. Murdoch's News Corp., says that NotW editors "widely discussed" the practice of hacking until ordered to stop by former deputy editor Andy Coulson, who was later hired as Prime Minister David Cameron's communications chief.

The appearance of the letter on Tuesday now suggests that James Murdoch may be recalled to Parliament to answer questions about whether he knew more than they admitted to at the July 19 hearing.

“If the content of [Mr. Goodman’s] letter is confirmed it will suggest the evidence James Murdoch gave the committee is not consistent with evidence now coming out,” says Martin Moore of the London-based Media Standards Trust.

British Labor MP Tom Watson, a member of the parliamentary culture, media, and sport select committee, called the Goodman letter “the most significant piece of evidence that has been revealed so far. It completely removes News International's defense. This is one of the largest cover-ups I have seen in my lifetime."

Britain's phone hacking scandal blew up in July after the Guardian revealed a widespread practice of hacking phones as a way to publish juicy tabloid stories that eventually began to trade on the private anguish of ordinary people. The Guardian revealed that NotW went so far as to erase the voice mail of a murdered young girl, Milly Dowler.

The news brought about widespread revulsion in Britain against Murdoch's News Corp., the closure of the 163-year old NotW, and kicked off a political scandal about Prime Minister Cameron's decision to hire Mr. Coulson (who has resigned from 10 Downing Street and been charged in the phone hacking inquiry).

Dated March 2, 2007, Mr. Goodman's letter was sent as a protest against his firing from NotW following his arrest for phone hacking. Goodman, the former royals correspondent, asserts dismay over his dismissal since hacking was “widely discussed” and supported by senior NotW management.

At the parliamentary hearing last month, the Murdochs asserted that they did not know the scale of the hacking practice until recently, and said they thought it was restricted to Goodman. Yet immediately after the hearing, two former News International executives contested the younger Murdoch’s claim of ignorance.

For his testimony, James Murdoch said he relied on a legal analysis of Goodman’s activity by the law firm of Harbottle and Lewis to suggest that he thought hacking was not widespread. The Harbottle firm now states it was not hired to perform any exhaustive review of criminality or illegal behavior at News Corp. beyond that of Goodman, and called the Murdoch testimony that used their finding “self serving.”

The firm said its initial News Corp. employed statement on Goodman’s hacking, that suggests other News Corp. executives were not connected to Goodman's hacking, was subject to detailed negotiations with News Corp. when it was released.

"There was absolutely no question of the firm being asked to provide News International with a clean bill of health which it could deploy years later in wholly different contexts for wholly different purposes. … The firm was not being asked to provide some sort of 'good conduct certificate' which News International could show to Parliament,” Harbottle and Lewis wrote to the committee after July 19.