House of Commons - News International and Phone-hacking - Culture, Media and Sport Committee

News International and Phone-hacking - Culture, Media and Sport Committee Contents

3 The Goodman and Mulcaire employment claims

Clive Goodman's dismissal

37. Clive Goodman, then Royal Editor at the News of the World, and Glenn Mulcaire, a private investigator, were arrested in August 2006 on suspicion of illegally intercepting voicemail messages. On 29 November 2006, both Clive Goodman and Glenn Mulcaire pleaded guilty to the charges, brought under section 1(1) of the Criminal Law Act 1977 and section 1(1) Regulation of Investigatory Powers Act 2000. They were convicted and jailed on 26 January 2007.

38. Glenn Mulcaire and Clive Goodman were jointly charged with accessing the voicemails of three employees of the royal household. Glenn Mulcaire alone faced charges of accessing the voicemails of five further people: the publicist Max Clifford, sports agent Skylet Andrew, Professional Footballers' Association Chief Executive Gordon Taylor, politician Simon Hughes MP and model Elle MacPherson. All bar Ms MacPherson, to the knowledge of the Committee, subsequently commenced civil privacy claims and each has been settled out of court. As none of these five individuals was connected to the royal family, none would have been of journalistic interest to Clive Goodman, the newspaper's Royal Editor. As he and Glenn Mulcaire had pleaded guilty, however, neither gave evidence in court so there was no opportunity to test the newspaper and News International's 'one rogue reporter' stance at the time.

39. During the course of our current investigation, solicitors Harbottle & Lewis, who advised News International on the claim, were granted a limited waiver of legal professional privilege by the company as client to co-operate with the Committee. In a letter dated 11 August 2011,[38] they disclosed to us that, on 5 February 2007, Les Hinton, then Executive Chairman of News International, wrote to Clive Goodman terminating his employment with News Group Newspapers and offering him 12 months' base salary. The letter made it clear that this offer was by way of a final settlement and that the company was under no obligation to pay Clive Goodman anything at all. His guilty plea, the letter made clear, was sufficient to 'warrant dismissal without any warnings' and, as for the offer of payment of a year's salary, News International was only proposing to do so in recognition of long service. On 8 February 2007, Clive Goodman's base salary, £90,502.08, was paid.[39] On 2 March 2007 Clive Goodman responded by initiating an appeal against his dismissal on the grounds that his activities had been known about, and supported, by various senior members of staff at the News of the World.[40] Specifically, he stated that:

This practice [phone-hacking] was widely discussed in the daily editorial conference, until explicit reference to it was banned by the Editor. The legal manager, Tom Crone, attended virtually every meeting of my legal team and was given full access to the Crown Prosecution Service's evidence files. He, and other senior staff of the paper, had long advance knowledge that I would plead guilty.[41]

40. Upon receipt of this letter, Daniel Cloke, Group HR Director, and Jonathan Chapman, Director of Legal Affairs, both at News International, undertook a review of e-mails "with a view to determining whether the individuals specified in Mr Goodman's letter knew about his voicemail interception activities".[42] The review took approximately six weeks to conduct.[43] The e-mails had been retrieved "against specific search terms related to the names of the individuals named in Mr Goodman's letter".[44] The e-mail review was carefully circumscribed, as Jonathan Chapman explained to us: "the parameters for the e-mail review were set by claims made by Mr Goodman in the context of his appeal", and, later, "it was reactive [...] it was quite limited in scope".[45] Daniel Cloke told us that "I believe that we carried out the search carefully and diligently".[46]

41. Colin Myler, who by then had replaced Andy Coulson as the Editor of the News of the World in January 2007, and Daniel Cloke then interviewed the individuals mentioned by Clive Goodman.[47] Daniel Cloke told us that "no one, when we spoke to them, admitted any wrongdoing at all".[48] Les Hinton said that he was not directly involved: "I obviously did not look at those e-mails personally but I know that that scrutiny went on and no e-mails that raised any further suspicion were brought to my attention".[49] However, Les Hinton was consulted about the review by Daniel Cloke and was informed of its conclusion.

The Harbottle & Lewis investigation

42. Daniel Cloke suggested to Jonathan Chapman and subsequently to Les Hinton that an external review of the relevant e-mails "by a law firm or barrister might be a good idea and both readily agreed as did Mr Myler". He told us that "I was concerned that as I was inexperienced in this area and as a result might have missed something, that there be a further and independent review".[50] Thus on Daniel Cloke's suggestion, and with Les Hinton's authorisation, a firm of solicitors specialising in employment law, Harbottle & Lewis, was commissioned to examine the e-mails identified by the initial, internal review. The solicitors' examination was limited to a remote, electronic review of the emails, which were made available to them by means of electronic folders held on the company's computer system.

43. On 10 May 2007, Jonathan Chapman e-mailed Lawrence Abramson, a partner at Harbottle & Lewis, stating that he and Daniel Cloke had gone through internal e-mails in the categories to which Clive Goodman's letter had referred "to find any evidence in such e-mails to support the contentions made by Clive Goodman [...] We found nothing that amounted to reasonable evidence of either of the above contentions [that Clive Goodman's illegal actions were known about and supported by senior staff]". The e-mail goes on to state that:

Because of the bad publicity that could result in an allegation in an employment tribunal that we had covered up potentially damaging evidence found on our e-mail trawl, I would ask that you, or a colleague, carry out an independent review of the e-mails in question and report back to me with any findings of material that could possibly tend to support either of Goodman's contentions.[51]

44. In written evidence, Harbottle & Lewis summed up its understanding of these instructions as follows: "if we reject Clive Goodman's appeal against dismissal and he brings employment tribunal proceedings, what is the risk of him establishing from these e-mails that other people were aware of his phone-hacking activities, or were doing the same thing themselves?"[52] Similarly, Daniel Cloke told us that "the reason why I was anxious to get the e-mails reviewed by a third party was to give us comfort on this employment matter that the review Jon Chapman and I carried out was accurate".[53] Thus the Harbottle & Lewis investigation was no more than a risk mitigation exercise in the event of employment tribunal proceedings.

45. Following a written exchange between the Committee and News International, in 2009, the company's then Chief Executive, Rebekah Brooks, provided a copy of a letter—dated 29 May 2007—from Lawrence Abramson to Jonathan Chapman. The letter, which was quoted and published in the Committee's 2010 report [54] said:

Re Clive Goodman

We have on your instructions reviewed the e-mails to which you have provided access from the accounts of:

Andy Coulson

Stuart Kuttner

Ian Edmonson [sic]

Clive Goodman

Neil Wallis

Jules Stenson

I can confirm that we did not find anything in those e-mails which appeared to us to be reasonable evidence that Clive Goodman's illegal actions were known about and supported by both or either of Andy Coulson, the Editor, and Neil Wallis, the Deputy Editor, and/or that Ian Edmondson, the News Editor, and others were carrying out similar illegal procedures.

Please let me know if we can be of any further assistance.

46. The wording of that letter had been a matter of debate between Lawrence Abramson and Jonathan Chapman. The latter had suggested to Lawrence Abramson that the original wording for the last sentence of the penultimate paragraph should be "having seen a copy of Clive Goodman's notice of appeal of 2 March 2007, we did not find anything that we consider to be directly relevant to the grounds of appeal put forward by him". To this Lawrence Abramson responded: "I can't say the last sentence in the penultimate para, I'm afraid".[55] As may be seen, the original proposed wording was broader and would have given more comfort than the wording eventually agreed upon.

47. Jonathan Chapman told us that there was nothing unusual in the process of negotiating wording:

I am not sure that those outside the hallowed portals of the legal profession will necessarily know this, but when you get a report or an opinion from external counsel, your job is to get it as wide as possible if you are in-house, and their job is to cut it back as far as possible and thus limit their liability subsequently, you might say. There was a normal to-ing and fro-ing, and I would say that, as usual, Mr Abramson won on that one and I lost.[56]

48. The process of negotiating wording may have been a normal one. Nonetheless, the bluntness of the letter from Lawrence Abramson is pronounced and it is difficult to understand why he would have baulked at saying that Harbottle & Lewis did not find anything that it considered to be directly relevant to the grounds of appeal put forward by Clive Goodman if that was indeed the case. The terms of reference given to Harbottle & Lewis were narrowly drawn and the findings of that firm were accordingly narrow. Lawrence Abramson would not commit himself to anything more general.

49. Indeed, the evidence is clear that not all of the e-mails examined by Harbottle & Lewis were entirely straightforward. Lawrence Abramson told us that:

There remained somewhere in the order of a dozen e-mails that I had a query about. I therefore spoke to Jon Chapman and discussed these e-mails with him. During the course of that conversation, Jon Chapman explained and I accepted why those e-mails fell outside the scope of what News International Limited [...] had instructed Harbottle & Lewis to consider. In one specific case, Jon Chapman instructed me to look at News' server myself to put the e-mail in its context which I duly did.[57]

50. The matter appears to have been resolved to the satisfaction of those involved at that time. It is notable that Lawrence Abramson only dismissed the e-mails that had been of concern to him on the basis that they "fell outside the scope of what News International Limited [...] had instructed Harbottle & Lewis to consider". He did not assert that they could or should have been dismissed on any other basis.

51. When the same e-mails were examined by News International's Group General Manager Will Lewis between April and June 2010 they were not dismissed.[58] Indeed, Will Lewis referred some of the material on to a different law firm, Hickman Rose, which in turn referred the matter to the former Director of Public Prosecutions, Lord Macdonald of River Glaven.[59] Lord Macdonald told the Home Affairs Committee that the file of e-mails that he was handed "was evidence of serious criminal offences. I gave that advice to the News Corp board, and I have to say that it accepted the advice unhesitatingly and instructed that the file should be handed to the police".[60] He went on to say that "I cannot imagine anyone looking at the file and not seeing evidence of crime on its face". He also explained that making his assessment had taken him very little time: "about three minutes, maybe five minutes".[61]

52. Lord Macdonald explained that, because of his role as Director of Public Prosecutions at the time that the original police investigation into phone-hacking had taken place, any material in the e-mails that related to phone-hacking had been withheld from him on his request. The evidence that he referred to the police thus related to criminal matters other than phone-hacking.[62] The e-mails now form part of Operation Elveden. For this reason, and given the police investigation in which a number of arrests have now been made, we have neither had, nor sought access to, the relevant e-mails and are not aware of their contents.

53. Nobody has taken responsibility for the fact that e-mails included in—and disregarded by—the two reviews by Daniel Cloke and Jonathan Chapman and by Harbottle & Lewis have subsequently merited referral to the police. Daniel Cloke suggested that, had there been evidence in the e-mail cache of any wrongdoing that lay outside the scope of the employment dispute, it was for Harbottle & Lewis to have acted: "I would have hoped that if an independent third party had thought that there was definite evidence of criminal activity, that that lawyer would have told us. And that lawyer did not tell us that".[63] It is possible that this is not the whole truth: Lawrence Abramson told us that he did indeed query some of the e-mails within the sample, but that he was offered reassurance by Daniel Cloke and Jonathan Chapman.

54. Rupert and James Murdoch placed similar emphasis on the importance of the role played by Harbottle & Lewis. Rupert Murdoch claimed that the firm had been engaged "to find out what the hell was going on".[64] James Murdoch claimed that the letter from Harbottle & Lewis "is a key bit of outside legal advice from senior counsel that was provided to the company, and the company rested on it".[65] Indeed, he claims that the Harbottle & Lewis letter "was one of the pillars of the environment around the place that led the company to believe that all of these things were a matter of the past and that new allegations could be denied".[66]

55. The letter sent by Harbottle & Lewis to News International at the conclusion of the review is, however, tightly worded and does not suggest the granting of a clean bill of health. It does not draw any conclusions about the existence, or otherwise, of evidence of any form of criminal activity other than phone-hacking. Daniel Cloke was quick to note that the review was never intended to range more widely than the parameters set by Clive Goodman's letter: "if there had been a more wide-ranging inquiry [...] frankly, I would not have been involved in it, because I do not have those investigative skills".[67] Jonathan Chapman told us that "I think that Mr Murdoch did not have his facts right when he [blamed Harbottle & Lewis...]. I do not think he had been briefed properly".[68] Harbottle & Lewis, indeed, defended itself vigorously against claims that it should have taken action as a result of its review, stating that "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".[69] Taken literally, this is correct: Harbottle & Lewis was asked to investigate a specific matter and drew its conclusions accordingly.

56. Rupert Murdoch suggested that Jonathan Chapman had been negligent in failing to act on the basis of the information uncovered during the e-mail review. He told us that "Mr Chapman, who was in charge of this, has left us. He had that [e-mail cache] for a number of years. It wasn't until Mr Lewis looked at it carefully that we immediately said, 'We must get legal advice, see how we go to the police with this and how we should present it'".[70] In response to this Jonathan Chapman told us that "we came to the conclusion, having carried out that exercise carefully and taken quite a long time on it, that there was nothing there that indicated reasonable evidence of the matters that we were looking for, which was knowledge of, or complicity, in voicemail interception".[71] He then went on to say:

In terms of other illegal activities, I am well aware that Lord Macdonald mentioned stuff to the Home Affairs Select Committee in July. What I can say on that is that I have no recollection of specific e-mails at the time that would have led me to that conclusion, but I am at a disadvantage, of course, because he has seen those e-mails and I haven't seen anything subsequently. If I were to look at those again, I could give my reaction, but I cannot recollect specific e-mails that led me to that conclusion.[72]

When questioned further, Jonathan Chapman reiterated that "to my recollection, as we sit here today, there was nothing that gave me cause for concern or that needed to be escalated".[73]

57. The accounts given by Jonathan Chapman and Daniel Cloke explaining why they took no further action in relation to the e-mails they reviewed are rendered less credible by Lord Macdonald's statement that the criminal activity that he found in the e-mails was obvious to anybody. Since we are unable to view the e-mails for ourselves, we are not in a position to adjudicate. We note, however, that there was sufficient doubt about the content of some of the e-mails examined for Lawrence Abramson to need reassurance on them from Jonathan Chapman. In this context, we are astonished that neither Jonathan Chapman nor Daniel Cloke appear to have referred those e-mails anywhere else. We were particularly surprised that their certainty about these e-mails was such that they did not consult anyone with expertise in the criminal law to set their minds at rest. When we asked them about this, Daniel Cloke did not directly answer the question, even though it was put to him three times. Instead, he replied that the steps that the pair had taken "gave me comfort as an HR director that we had covered all the bases and done the proper thing in terms of investigating these claims, bearing in mind that this was an employment dispute".[74] In other words, Jonathan Chapman and Daniel Cloke were not willing to consider any matters that came to their attention that were not directly related to Clive Goodman's employment claim.

58. Our exchanges on the subject of the Harbottle & Lewis investigation provide an instructive insight into the approach taken by executives at News International to providing evidence to the Committee. On the one hand, senior executives have been quick to point out that they had no involvement. When asked about the Clive Goodman settlement, for example, James Murdoch stated that "first, I do not have first-hand knowledge of those times. Remember that my involvement in these matters started in 2008. In 2007, up until December, I was wholly focused in my role as chief executive of a public company. I was not involved in those things".[75] Similarly, in written evidence about the Clive Goodman settlement, Rebekah Brooks did not herself personally endorse the account that she was giving to the Committee but instead explicitly inserted text drafted by Jonathan Chapman into her letter.[76]

59. Thus senior executives have both denied responsibility for the conduct of the e-mail reviews, but on the other hand have been quick to rely on them when it has suited them to do so. As Jonathan Chapman told us:

I do not think any of them would have direct knowledge of it, because Rebekah Brooks was an editor at the time, Mr James Murdoch was out of the country doing other things and Mr Rupert Murdoch was in the States, so to the extent only that Mr Hinton told him what was going on; there would be no real knowledge of that process. That is why I found it strange that they were very definitive about what had happened, and what its [the Harbottle & Lewis review] parameters were and so on.[77]

60. News International repeatedly made misleading and exaggerated claims regarding the 'investigations' it had purportedly commissioned following the arrests of Clive Goodman and Glenn Mulcaire. As with the Harbottle & Lewis review, this conclusion applies similarly to the earlier engagement of solicitors Burton Copeland in August, 2006. On 30 August 2011, Burton Copeland wrote to the Committee, clarifying that their role was to respond to requests for information from the Metropolitan Police. 'BCL was not instructed to carry out an investigation into 'phone hacking' at the News of the World,'' the firm wrote.[78] Prior to that, on 22 July 2011, Linklaters—the solicitors acting for News Corporation's Management and Standards Committee—also wrote to disown evidence given by Colin Myler and Tom Crone in 2009 that Burton Copeland undertook an investigation into wrongdoing at the paper.[79] Throughout this affair, senior News of the World and News International executives have tried to have it both ways. They have been quick to point to 'investigations' which supposedly cleared the newspaper of wider wrongdoing, but have also distanced themselves from the detail when it suited them.

61. The account we have heard of News International's internal e-mail review and the second review, conducted by Harbottle & Lewis, is unedifying. It is clear that the e-mails examined did not exonerate company employees from all suspicion of possible criminal wrongdoing, possibly not even from phone-hacking. It is probable that all those who reviewed the e-mails will have been aware that this was the case. Indeed, if the content of the e-mails had exonerated News International employees entirely, it is doubtful that Daniel Cloke and Jonathan Chapman would have seen the need to refer the matter to a firm of external lawyers at all. Doing so can only be seen as an exercise in self-protection. The fact that Jonathan Chapman drew up such narrow terms for the Harbottle & Lewis review strongly suggests that he was deliberately turning a blind eye to e-mails that he did not want to investigate further. In keeping his conclusions about the e-mails strictly within the narrow scope of his investigation, Lawrence Abramson was undoubtedly simply doing his job as a lawyer. Indeed, he seems to have made some effort to alert News International to problems that he uncovered. If either Jonathan Chapman or Daniel Cloke had raised the alarm internally, instead of sticking so rigidly to the terms of the reviews, it is conceivable that criminal activity would have been exposed and stopped far earlier. The fact that they were only looking for evidence that supported Clive Goodman's specific assertions is not an excuse for dismissing evidence of anything else.

62. Senior executives at News International undoubtedly extolled the thoroughness of the reviews rather too fervently. It was certainly expedient for them to rely upon the apparently positive outcomes of the reviews in giving evidence to the Committee. Senior executives were clearly aware that the reviews proved less than they were claiming for them and that the assertions that they made to the Committee were the result of a deliberate strategy to exaggerate evidence in support of the company's innocence.

The decision to settle Clive Goodman's claim

63. In the context of the unprompted offer of a year's salary and his criminal conviction leading to dismissal for gross misconduct, Clive Goodman's claim for unfair dismissal is startling. Indeed, on 6 September 2011, Colin Myler told us several times that he had been very surprised that the Company had any obligation to hear Clive Goodman's appeal: "I felt it was a pretty extraordinary sequence of events that a man who had pleaded guilty and served a prison sentence then had the opportunity to appeal against his dismissal".[80] We have sought to understand why News International should have settled the claim under such circumstances, unless it felt that it had something to hide that it would not want to be aired at a tribunal.

64. News International has repeatedly denied that the payments made to Clive Goodman compromise the company in any way. Witnesses have consistently argued that the decision to settle his employment claim was made for pragmatic, commercial reasons. Jonathan Chapman did not think that this was surprising in a commercial context, telling us that "many companies, particularly big companies, pay out on employment claims of little or no merit for pragmatic reasons, because they do not want stuff to be raked up. Even if allegations that are unfounded are made in the context of a tribunal, those who wish to believe those allegations will believe them".[81] This is true: clearly, companies will often settle employment claims before they reach tribunal to avoid embarrassing publicity and the cost of litigation, which is not recovered in employment cases. Even where there has been a criminal conviction, there remains the risk that procedural errors might render a dismissal unfair.

65. Jonathan Chapman categorically denied that the company had anything to hide, repeating the claim that the company had investigated the claims being made by Clive Goodman and had found them to be baseless: "we had carried out an e-mail review and a number of executives had been interviewed by Mr Cloke and Mr Myler".[82] In October, Les Hinton told us that: "I decided at the time that the right thing to do was to settle this and get it behind us".[83]

66. When Clive Goodman was dismissed in February 2007, Les Hinton made it clear that the company was not obliged to pay him anything, but was offering him a year's salary in recognition of long service and the needs of his family. The decision to settle Clive Goodman's employment claim is at variance with the terms of this letter but has, nonetheless, been presented to us as a pragmatic, commercial decision. We recognise the legal precedents and accept that News International was acting within accepted commercial norms by settling before the case reached tribunal in order to avoid litigation costs and reputational damage. Despite the legal precedents, however, we are astonished that a man convicted of a criminal offence during the course of his work should be successful in his attempt to seek compensation for his perfectly-proper dismissal. Illegally accessing voicemails is wrong and News International should have been willing to stand up in an employment tribunal and say so.

67. In the rush to "get it behind us", News International neglected to go further than the narrow confines of the due diligence exercise it had commissioned in response to Clive Goodman's employment claim. Ironically, by not taking Clive Goodman more seriously, the company ensured that, far from being put behind them, the matters that Clive Goodman raised in his appeal were left to fester untreated. The reputational damage is by now far worse than it would have been had the company acted on Clive Goodman's warning early in 2007.

Amounts and authorisation

68. The amounts paid to Clive Goodman did not stop at a year's salary. In fact, he was paid a total of £243,502.08 by News International from the time of his arrest in August 2006. until the conclusion of his claims. In a letter of 11 August 2011—the same date as the disclosures by Harbottle & Lewis and a full two years after the Committee first sought to get to the bottom of what pay-offs were made to Clive Goodman—James Murdoch told us:

I am informed that Mr Goodman was paid £90,502.08 in April 2007 and £153,000 (£13,000 of which was to pay for his legal fees) between October and December 2007. The first payment was approved by Mr Daniel Cloke, Director of Human Resources for News International. The second was approved by Mr Cloke and Mr Jon Chapman, Director of Legal Affairs for News International. These payments were in the context of an unfair dismissal claim brought by Mr Goodman.[84]

69. The second payment of £153,000 was broken down by Jonathan Chapman as, approximately, £90,000 notice; £40,000 compensation; and £13,000 legal expenses.[85] The total amount of the payments made to Clive Goodman came as a surprise to the Committee, which in 2009 had been left with the impression that the amount was much smaller. This is important because any suggestion that the Committee was deliberately given the impression that the payment totalled less than was actually paid to Mr Goodman would tend to lend weight to the argument that News International had something to cover up; had paid Clive Goodman to remain silent; and had concealed information about the payments from the Committee and others to prevent this being known.

70. In a letter dated 4 November 2009, which was marked confidential at the time but has been published with this Report, Rebekah Brooks cited Jonathan Chapman as saying:

Pursuant to the agreement, Mr Goodman was paid his notice and an agreed amount representing a possible compensatory award at tribunal (which was some way below the then £60,600 limit on such awards). It should be noted that, as a matter of policy, News International companies tend always to pay notice, even in cases of summary dismissal (which is not unusual).[86]

71. In the counter-intuitive circumstances of Clive Goodman being successful at an employment tribunal, despite his conviction, any statutory compensation award would have been made in addition to any contractual pay entitlement. Legal fees apart, therefore, the £153,000 pay-off made to Clive Goodman in the autumn of 2007 is, strictly speaking, not at variance with the careful wording in Rebekah Brooks' 2009 letter to the Committee.[87] That letter failed, however, to make explicit the terms of the payment, in particular the fact that "his notice" here meant a year's salary.

72. We accept that Rebekah Brooks' letter to the Committee of November 2009 was accurate in stating that the amount of compensation paid to Clive Goodman (£40,000) fell below the statutory limit of £60,600 on such awards. The answer that she and Jonathan Chapman gave the Committee in that letter was, however, incomplete because it did not specify the significant amount of money paid to Clive Goodman by way of "notice" (£90,000), nor that he had already separately been paid £90,500 when he was first notified about his dismissal. Such incompleteness is either the result of an attempt to play down the settlement, or of ignorance about the full extent of the payments or both. None of these scenarios casts Rebekah Brooks and Jonathan Chapman in a positive light: either they should have been more frank or else they should have been better informed.

73. The discretionary payment of a year's salary, £90,500, made in early 2007, was not accounted for in the November 2009 letter. We have sought to ascertain whether this amount was deliberately concealed, or was simply not known about within the company. James Murdoch's written evidence asserts that Daniel Cloke authorised the first payment of £90,502.08, made in February 2007. Daniel Cloke's oral evidence on 6 September 2011 contradicted this: "in terms of the first £90,000, I was not even aware that that had been paid, because the letter was—I think—in February, and I did not know of any of this until the appeal process came".[88] It is clear that the payment was made at Les Hinton's suggestion. In oral evidence Jonathan Chapman stated that: "Mr Hinton asked me to help him with that letter [of 5 February 2007]. He indicated that he was going to pay 12 months' salary, and he said that he wanted to do it on compassionate grounds because of Mr Goodman's family situation".[89] He emphasised Les Hinton's responsibility for the decision to make the payment in the answers to several subsequent questions, for example: "It was not me agreeing to that, it was not me having a say on that finally. It was Mr Hinton".[90] Les Hinton agreed: "I made that decision myself".[91]

74. We did not find any evidence to disprove the account that the only people involved in the decision-making chain that led to the payment of £90,502.08 to Clive Goodman in February 2007, as part of his dismissal terms, were Les Hinton, who suggested the payment; Jonathan Chapman, who assisted in the drafting of the letter to Clive Goodman; and Daniel Cloke, who authorised the payment when it was made. The evidence suggests that Les Hinton also authorised the £153,000 settlement to Clive Goodman, paid out between October and December 2007. In 2009, he himself stated that "putting aside signatures, I would take responsibility for a payment such as that".[92] In written evidence Daniel Cloke described the authorisation process for the payment:

As is usual in contentious employment cases, Mr Chapman as Director of Legal Affairs to the Company assessed the matter to make a recommendation as to whether to settle or try to defend the case. [...] Mr Chapman made the recommendation (with which I agreed) to try to settle the case on reasonable grounds which after negotiation with Mr Goodman's lawyers was approved by Les Hinton.[93]

75. This account is supported by the November 2009 letter from Rebekah Brooks to the Committee, which states that "Les Hinton [...] authorised the settlement with, and payment to, Clive Goodman, following discussions with Jon Chapman and Daniel Cloke".[94]Thus it is clear that Les Hinton authorised both of the payments made to Clive Goodman, and so will have been aware that they totalled around £1/4 million.

76. When Les Hinton gave evidence to the Committee, for the second time, on 15 September 2009, he made it clear he was under instructions from News International not to discuss the settlement with Clive Goodman (and with Glenn Mulcaire, to which we turn later in this chapter), on the grounds that they were confidential.[95] Nonetheless, he certainly played down his role in relation to them: "I ended up being advised that we should settle with [Clive Goodman and Glenn Mulcaire] and I authorised those settlements"; and again: "the employment law was complicated and I was told that we should settle and I agreed to do it".[96] It is clear that both Jonathan Chapman and Daniel Cloke had a role in the process by which the amounts were arrived at, although Jonathan Chapman has sought to distance himself from the earlier payment, made in April 2007: "The £90,000, I have to leave to Daniel or Mr Hinton to explain, because that was outside my brief and I don't really have any recollection of how that fitted into it. It is not part of the settlement—the £90,000".[97] He later described that first payment as "gratuitous".[98] This is not the description that he would have given had the payments been made on the basis of his advice. Jonathan Chapman's evidence suggests that Les Hinton's role was far more directive than he had led us to believe in 2009.

77. As well as downplaying his role, in evidence in 2009, Les Hinton also appeared to lose much of his memory, certainly as far as Clive Goodman was concerned:

Well there were employment-related payments made to them. Even though I have been told not to relay the information, I do not remember it except that in the case of Glenn Mulcaire it had reached some point of employment tribunal proceedings but I ended up being advised that we should settle with them and I authorised those settlements.[99]

78. Whilst citing the involvement of Daniel Cloke and Jonathan Chapman in the process, when pressed as to who precisely had given him the advice to settle with Clive Goodman on employment grounds, Les Hinton went on to say:

You know what, there were several senior people, and I cannot remember. Nor can I remember the particular legal people. There were people who gave me the advice and I cannot remember who they were.[100]

79. On 24 October 2011, on his third appearance following the disclosures of the Clive Goodman payments and correspondence, Les Hinton's memory was—in some respects, at least—distinctly sharper:

Chair: you decided that he should receive one year's salary payment of £90,000, and you authorized that payment.

Les Hinton: I did.[101]

Chair: So you paid him in essence, two years' notice, or one year's notice twice over?

Les Hinton: We paid him a year's salary, and we paid him the £90,000 of notice in relation to his appeal, yes.[102]

80. Asked to explain the double payment, however, Les Hinton's memory again began to fail him: 'I can't recall exactly what the process was of those payments, Chairman, but what I can say is that, in my mind and, I think, in others' minds, the matter of my having given Clive Goodman a year's salary and the subsequent appeal were treated separately".[103] He did not specify who the 'others' allegedly were.

81. Tom Crone was also certainly aware that payments had been made to Clive Goodman, though not necessarily the full amount. This is clear from the evidence he gave on 21 July 2009. Under persistent questioning, he first categorically denied knowledge of any payment, then cited misunderstanding and 'confusion' about the question, before finally admitting the newspaper group 'may have' made a payment.[104] While Tom Crone was evasive, and plainly reluctant to make the admission, from the same evidence session it seemed clear to us that Colin Myler did not know, even though he was aware that Clive Goodman had lodged an appeal against dismissal. Repeatedly Colin Myler said he was not aware[105] and Tom Crone's eventual admission appeared to Committee members to come as a complete surprise to the News of the World's editor:

Paul Farrelly: Would you clarify that [payments to Clive Goodman] to us?

Mr Crone: I am not absolutely certain, but I have a feeling there may have been a payment of some sort.

Mr Myler [turning to Mr Crone]: With?

Mr Crone: Clive Goodman.

Mr Myler: I would have to check.[106]

82. In subsequent written evidence, nonetheless, Colin Myler backtracked as to his lack of knowledge. In a letter dated 4 August 2009,[107] he wrote: 'I and Tom Crone were broadly aware of the claims and the fact that they were settled, but not of the terms of the settlement.' This was clearly an attempt to salvage something of the united front which had cracked in oral evidence—and typifies the initial, closing ranks approach of the News of the World and News International in dealing with questions about phone-hacking affair and its aftermath.

83. It is not clear the extent to which either of the Murdochs were made aware of either of the payments to Clive Goodman. When asked whether Les Hinton had referred the matter to either of the Murdochs, Daniel Cloke answered, "Not to my knowledge, no, I am not aware of the conversations that Les Hinton might have had with those two gentlemen".[108] In 2009, Les Hinton was asked what Rupert Murdoch thought about the "Clive Goodman case" and answered that "he was very concerned about it".[109] He did not, however, state whether Rupert Murdoch had been made specifically aware of the financial settlement arising from the case. The oral evidence given by Rupert and James Murdoch on 19 July 2011 would tend to suggest that they had not been—Rupert Murdoch because he has no involvement in his companies at that level and James Murdoch because it predated his arrival at News International.[110] James Murdoch, for example, told us in a variety of different ways that "I do not have any direct knowledge of the specific legal arrangements with Mr Goodman in 2007, so I cannot answer the specifics of that question".[111]

84. The total amount paid to Clive Goodman is extraordinary when one considers that he had been convicted of a criminal offence and that his actions had helped stain the reputation of the company. The double payment of a year's salary was, by any standards, 'over-generous' and it is impossible, therefore, not to question the company's motives. The pay-offs to a convicted criminal hardly reflect well on Les Hinton, who had authority over both payments. When questioned about them in 2009 he was startlingly vague and—inexcusably—sought to portray his role as a passive one, simply following the advice given to him by his subordinates. The evidence we took in 2011 suggests that he not only authorised the payments, but took the decision to make them in the first place. Furthermore, he was responsible for the double payment of Clive Goodman's notice and, his 'selective amnesia' notwithstanding, he would have been perfectly well aware of what he had done. We consider, therefore, that Les Hinton misled the Committee in 2009 regarding the extent of the pay-off to Clive Goodman and his own role in making it happen.

85. The testimony regarding the payments to Clive Goodman is not the only evidence from Les Hinton which we find unsatisfactory. He first appeared before the Committee on 6 March 2007, precisely four days after Clive Goodman's letter alleging widespread involvement in phone hacking, which was copied to him.[112] Whether or not Les Hinton had seen this letter before his appearance in 2007, he certainly had by the time he did so on 15 September 2009 when he said: 'There was never firm evidence provided or suspicion provided that I am aware of that implicated anybody else other than Clive within the staff of the News of the World. It just did not happen'.[113] This was not true. Clive Goodman had certainly provided 'suspicion' of wider involvement, but Les Hinton failed to mention it to the Committee.[114] At no stage did Les Hinton seek to correct the record, even when invited by the Committee to do so. We consider, therefore, that Les Hinton was complicit in the cover-up at News International, which included making misleading statements and giving a misleading picture to this Committee.

86. When the predecessor Committee published its Report on Press standards, privacy and libel in 2010, it did not know the amount of News International's settlement with Clive Goodman but was left with the "strong impression that silence has been bought".[115] We have subsequently learnt that News International paid Clive Goodman a total of £243,502.08 from the time of his arrest in August 2006. The size of the pay-off serves to confirm our view that it was used to buy Clive Goodman's silence.

87. It was only on 11 August 2011, in the letter to us from James Murdoch,[116] that News International finally came clean about the extent of the pay-offs to Clive Goodman. Up until then, the evidence given by News International executives had been vague and at times incomplete, often for the stated reason that the person being asked was not the person ultimately responsible. In the case of the vague answers given by the Murdochs on 19 July 2011, we would have thought that they could have anticipated the line of questioning simply by reading the transcripts from the Committee's evidence sessions in 2009. It is not a sufficient excuse that Les Hinton authorised the payments and has since left for the United States. Personnel changes are commonplace and we would be very surprised if News International did not keep records of its financial decisions.

LEGAL FEES

88. Approximately £13,000 of the £153,000 settlement with Clive Goodman comprised a payment to cover his legal fees. In 2009, Les Hinton told us that this was not unusual: "when employees get into difficulty it is not unusual for them to be indemnified by the company that employs them and for their legal fees to be paid".[117] This is true: an employer has to indemnify his employee against claims made against him for acts done by him in the course of the employment. By extension, it could be said that there is a duty on the employer to stand behind the employee and assist him in his defence in such circumstances. It is unusual for an employer to pay the legal fees of an employee facing a criminal charge, but this is because most criminal charges apply to acts committed outside the scope of an employment. In Clive Goodman's case, however, the criminal act involved him carrying out his job in an illegal manner. In that case, it would not necessarily have been improper or particularly surprising for News International to have paid his legal fees, and—however distasteful it may seem in retrospect—it certainly does not imply complicity by itself in the criminal act of phone-hacking.

89. The settlement with Clive Goodman, including the element to cover his legal fees, was authorised by Les Hinton in 2007.[118] However, when asked in 2009 whether or not News International had paid Clive Goodman's legal fees, Les Hinton answered "I absolutely do not know. I do not know whether we did or not".[119] When he was asked if he knew who would have authorised such a payment he answered: "I would guess the Director of Human Resources but I do not know".[120] When questioned in 2011 about the discrepancy between his 2009 answer and the fact that he authorised the payment of the fees, he said: "if I had been sure at the time, I would have told you".[121]

90. When asked about who would have authorised the payment of Clive Goodman's legal fees, Tom Crone answered that "Les Hinton was the chief executive at the time. I would imagine that he would have authorised it".[122] When pressed, he said that "I've answered. Les Hinton. It's possible that Andy Coulson could have done it, as the editor at the time", and later "I am certain that Andy Coulson knew that and I am fairly sure that Les Hinton knew, but I can't be absolutely certain".[123] We have been unable to ask Andy Coulson for his account of the payments made to Clive Goodman, so as not to impede ongoing police proceedings and can, therefore, draw no conclusion about his involvement.

91. We accept that, however distasteful it may seem, there was nothing inherently sinister about News International paying Clive Goodman's legal fees in respect of the criminal charges he faced. Now that we are certain that he authorised the payment, however, we are distinctly unimpressed by Les Hinton's 2009 assertion that he did not know whether or not the company had paid those fees. Declarations of ignorance or amnesia do not assist News International in its bid to convince the Committee, and the wider public, that it had nothing to hide. If it was legitimate to have paid Clive Goodman's legal fees, the company would have been better advised to admit to having done so. Again, we consider that Les Hinton's unwillingness to be explicit over the payment of legal fees was a deliberate effort to mislead the Committee over News International's payments to Clive Goodman after he was charged and convicted.

Clive Goodman's prospects for re-employment

92. Far from expecting to be dismissed, his appeal against his dismissal suggests that Clive Goodman may have hoped to have been given a job by News International once he had served his sentence, as "a sub-editor, a book filleter or in such a capacity".[124] In oral evidence on 6 September 2011, Tom Crone stated that, between Clive Goodman's arrest and his conviction, Clive Goodman:

was quite pessimistic, depressed and worried about his family for obvious reasons and his future. Now, I was able to say to him, 'Andy Coulson is hoping that he can find a way that you can come back to the company. It is not absolutely certain that you are going to lose your job over this [...] Once you have served whatever sentence—if there is a sentence—is going to be imposed upon you.'[125]

93. Tom Crone was not sure whether Andy Coulson had raised the matter with Les Hinton, though he remembered Andy Coulson saying that "I'm hoping I'll be able to persuade Les".[126] He also said that, when he had been shown a draft of the letter sent by Les Hinton to Clive Goodman on 5 February 2007, in which Clive Goodman was summarily dismissed, in the light of his earlier conversations with him, "I was very annoyed".[127]

94. When we asked Les Hinton about whether he had considered giving Clive Goodman his job back after his conviction, he said: "No. I dismissed him for gross misconduct, so of course not".[128] Once again, we have been unable to ask Andy Coulson about the veracity of Tom Crone's account because of ongoing police proceedings.

95. Tom Crone's account provides an intriguing insight into the culture at the News of the World. Evidence given to the Committee points to a culture of mutual protection within the newsroom at the News of the World. Jonathan Chapman told us that:

I have noted that on the editorial side at News International, there has certainly always been more of a feeling of family compassion and humanitarian stuff, which, as a person on the commercial side at News International, I am not sure that I would enjoy. I do not think that there is anything sinister in that; I just think there is quite a big feeling of family on newspapers. When someone messes up badly and commits a crime, I think there was also a feeling that, yes, they have done a terrible wrong, but their family should not suffer. I am not sure that applies through the business to the rather newer commercial side at News International.[129]

CONFIDENTIALITY

96. Clive Goodman's financial settlement contained a confidentiality clause. We were interested to find out whether the confidentiality requirement had any impact on the size of the payment. When we asked Jonathan Chapman about this, he told us that:

After some discussion with Mr Goodman's lawyers, a proposed settlement was reached which was approved by Les Hinton and Daniel Cloke, our Director of Human Resources. This was then embodied in a compromise agreement. This is a type of settlement agreement required to be used in employment cases and which complies with the specific requirements of section 203 of the Employment Rights Act 1996. In this case, we used a standard-form News International compromise agreement and only minor changes were made to it. In particular, there was nothing tailored specifically to Mr Goodman's possible future activities.[130]

97. Les Hinton believed that the decision to include a compromise agreement in the settlement had been "mutual".[131] As set out above, one of the considerations in making the settlement without going to tribunal was the desire to avoid allegations made by Clive Goodman being aired in the public domain. This rationale is not unusual in a commercial context and could apply whether or not News International believed the allegations in question to be true. Thus it could be argued that confidentiality was inherently a factor in the settlement. How significant other factors may have been is unclear. The statutory cap on awards by an employment tribunal for unfair dismissal, for example, does not apply where the claim is based on discrimination or the making of a protected disclosure, otherwise known as "whistleblowing". We have received no evidence, however, that Clive Goodman was claiming whistleblower status.

98. Regarding the principal reason for confidentiality in the Goodman settlement—making sure his allegations were not aired in public—in 2009 Les Hinton continued to maintain News International's standard line, telling us: "I cannot actually see what silence there was left because these chaps had been through months of police interrogation, months of investigation, they were taken before the court and I do not know what silence there was. There was a court hearing, there was a rigorous police enquiry; I am not sure what silence you are talking about."[132] In fact, Les Hinton had no basis on which to say this. There was no public cross-examination in court, nor any thorough investigation by the company into wrongdoing. By settling with Clive Goodman, with a confidentiality clause included, News International had ensured that its public stance would not be openly contradicted.

The settlement with Glenn Mulcaire

99. Neither Clive Goodman nor Glenn Mulcaire has co-operated with this Committee, nor has News International provided us with copies of the settlement or compromise agreements, including the clauses relating to confidentiality. Clive Goodman told us that he wanted to put the affair behind him and, through an intermediary, we understood that Glenn Mulcaire was concerned that saying anything to the Committee might prejudice an indemnity he had been given by the newspaper group, which protected him from civil action by phone hacking victims. The existence of an indemnity was alluded to in questioning of Les Hinton in 2009, but he refused to confirm or discuss it.[133] In evidence, Les Hinton, Tom Crone and Colin Myler were open, however, in confirming that a settlement had been reached with Glenn Mulcaire after he, too, had threatened to take the organisation to an employment tribunal. They did not, however, reveal details.

100. When they appeared before us on 19 July 2011, Rupert and James Murdoch were asked about the indemnity to Glenn Mulcaire and alleged payment of his legal fees. During questioning, James Murdoch publicly confirmed—for the first time—payment of Glenn Mulcaire's legal fees, and Rupert Murdoch said he would put a stop to the arrangement "if it is not in breach of a legal contract".[134] A halt was, in any event, called immediately after their appearance at the Committee, following which Glenn Mulcaire sued News Group Newspapers for breach of contract. Thanks to this questioning, Rupert Murdoch's follow-up action and Glenn Mulcaire's lawsuit, we do now have details of the settlements the group reached with the private investigator, including the agreements regarding confidentiality. These are contained in a judgment delivered in the High Court on 21 December 2011,[135] which upheld Glenn Mulcaire's case and ordered the company to adhere to the terms of the indemnity. The judgment discloses that Glenn Mulcaire was given an indemnity on 28 January 2010 in a letter from Farrer & Co in respect of the costs of opposing a court order to name those who had instructed him to target and hack into the phone of Max Clifford.

101. Following further civil claims in 2010 by the interior designer Kelly Hoppen, by Skylet Andrew and by Nicola Philips, then a colleague of Max Clifford's, Glenn Mulcaire sought confirmation that NGN would meet the costs of defending these claims, too. The indemnity was duly given by Julian Pike of Farrer & Co in a letter dated 29 June 2010. It was the second indemnity given by NGN to Glenn Mulcaire; the first was in relation to the civil claim by Gordon Taylor in 2007, the judgment says. Under its terms, NGN agreed to meet Glenn Mulcaire's legal costs and any damages awarded against him, provided that he kept NGN fully informed and did not publicly reveal the indemnity's existence, especially to claimants and their lawyers. The judgment discloses that in 2007 Glenn Mulcaire "was paid £80,000 in full and final satisfaction of all his claims"—one third, as we now know, of the total payments to Clive Goodman. As part of the settlement, the judgement states: "He undertook not to disclose the terms of that settlement nor thereafter to make any statement or comment which might injure, damage or impugn the good name, character or reputation of NGN."

102. By this time, Glenn Mulcaire knew the amount NGN was paying to settle the civil claims, and clearly felt aggrieved. On 2 July 2010, his lawyer Sarah Webb, presently a partner at solicitors Payne Hicks Beach, asked for a further £750,000 for Glenn Mulcaire for further co-operation in all the civil litigation. "Mr Mulcaire considered," the judgment states, "that he had 'carried the can' for all those involved in telephone tapping at NGN. By at least 2010 he felt he had been badly treated by NGN when compared with others also involved in telephone tapping at NGN; as subsequently became apparent, some were paid substantially more, others retained their positions in NGN." As part of the negotiations over the indemnity, Sarah Webb recorded in her attendance notes a conversation on 28 June 2010 with Julian Pike of Farrers: "Whilst he acknowledges the indemnity that they have offered, I think he actually feels that News Group should be paying him more in effect for his silence." In the event, the indemnity was extended to cover the further cases and, following this, on 1 September 2010, Tom Crone finally responded to the additional £750,000 demand, refusing to pay the money.

103. Tom Crone was, according to the judgment, particularly sensitive about there being any publicity at all about the arrangement: "His concern that any payment made to Mr Mulcaire should not become public knowledge was not related just to the conduct of NGN's defence to claims made or anticipated", as Sarah Webb's evidence recorded. A dispute then took place with NGN over whether Glenn Mulcaire should provide a defence and information demanded in the Skylet Andrew claim. "NGN considered that it would be easier to settle that claim if the information had not been provided and Mr Mulcaire did not serve a defence," the judgment stated. "On 9 September Mr Pike indicated in an email to Ms Webb that service of a defence would bring into play conditions 2 and 4 of the Indemnity Letter."

104. In the event, Glenn Mulcaire served a defence in this case—but refused to supply the additional information sought by the claimant—but subsequently, as the judgment states, he co-operated with NGN after it extended the indemnity to all the 38 civil cases which had started by 28 July 2011, including appealing a High Court ruling that he reveal who instructed him over phone-hacking. The significance of 28 July 2011 is that it was the date on which Farrer & Co wrote to Glenn Mulcaire confirming—following the Murdochs' appearance at the Committee—that NGN would no longer pay his legal fees. Glenn Mulcaire's legal action started on 17 August 2011. By that time, the judgment records, the newspaper group had paid a total of £269,305.70 in respect of Glenn Mulcaire's legal costs in the civil claims, with a further £95,531.24 having been billed but not paid—making a total of some £365,000.

105. The arrangements with Glenn Mulcaire following his conviction were every bit as distasteful as those with Clive Goodman, if the newspaper had nothing to hide. The settlement, though, is hardly surprising given News International's over-riding desire to avoid the bad publicity which an employment tribunal would bring.

106. The facts revealed in the High Court judgment in Glenn Mulcaire's favour in December 2011 are instructive as to the lengths to which News International has gone to maintain confidentiality. The indemnity given to Glenn Mulcaire, paying any costs and damages from the civil phone hacking claims, was not only conditional on its existence not being revealed; it could also, the company's lawyers sought to maintain, prevent Glenn Mulcaire serving his own defence in those cases. The company's determination to cover up the extent of the phone hacking scandal is also further demonstrated by its willingness to meet the costs of Glenn Mulcaire's successive appeals against court rulings to reveal who instructed him to hack the phones of the various targets.

107. Following a recent Court of Appeal decision to uphold the High Court's rulings, Glenn Mulcaire is currently taking the matter to the Supreme Court—all at News International's expense. We look forward to the final judgment and any further light that any evidence, finally, from Glenn Mulcaire sheds on this damaging affair. So far, with the complicity and financial support of News International, he has kept silent.

38 Ev 202 Back

39 Ev 254 Back

40 Ev 202 Back

41 Ev 202 Back

42 Ev 223 Colin Myler also indicated at one stage that he may have carried out the review (see Press Standards, Privacy and Libel, Vol II, Ev 311), but there is no other evidence to support this. It seems that he probably conducted the interviews but not the paper review. Back

43 Q 656 Back

44 Ev 223 Back

45 Qq 607 and 620 Back

46 Ev 223 Back

47 Ev 223 Back

48 Q 611 Back

49 Press standards, privacy and libel, Vol II, Ev 385 Back