Former 'News of the World' (NotW) editor Rebekah Brooks has told a court she offered a job to the newspaper's former royal editor after his release from prison for phone hacking in order to avoid "more damaging headlines".
Ms Brooks (45) said Clive Goodman had threatened to take News International to an "embarrassing employment tribunal" and claim that others at the 'NotW' were involved in phone hacking.
Ms Brooks, of Churchill, Oxfordshire, denies conspiring to hack phones and other charges against her.
Goodman (55), of Woodham Lane, Addlestone, Surrey, denies conspiring to commit misconduct in public office.
On hacking at the 'NotW' during her own editorship, Brooks said: "I had the belief – and still have the belief – this was not happening under my editorship. Not knowing perhaps does not equal it not happening but I just do not remember feeling that at the time."
She told the court she offered Goodman a backroom role at the 'Sun' in April 2007.
"He was going to allege that other people at the 'NotW' knew he was accessing voicemails and agreed to it and certain other people were involved in that practice," she said.
"The company felt although they believed the allegations were unfounded and without any basis of evidence . . . to go through an embarrassing employment tribunal . . . and cause more damaging headlines . . . they could stop that."
She said the allegations were against senior management at 'NotW' but not against her. Goodman declined the job offer and instead accepted a financial settlement from the company, she said. The trial was adjourned until today.