Memo Rupert Murdoch: do you really know what goes on in your empire?

On July 8, as the News of the World phone-tap scandal broke, Murdoch assured us that he wasn’t aware of any payments made to settle legal cases that might have linked the company’s newspaper reporters to involvement in criminal activity.

“If that had happened, I would know about it,” Murdoch said in an interview at the Allen & Co. media conference in Sun Valley, Idaho.

But in London overnight, at a parliamentary inquiry into the claims by The Guardian of secret payments by the News of the World to people whose phones were “hacked” by a private detective employed by the News Ltd paper, it was claimed that Rupert’s son and anointed heir James was aware of the payments.

During the three-hour session, it also emerged that James Murdoch, News International’s executive chairman, was “appraised” of the decision to pay £700,000 in damages and legal costs for a breach of privacy, the Guardian and Bloomberg reported.

James Murdoch, the son of News Corp Chairman, Rupert Murdoch, agreed to a 700,000 pound ($1.1 million) payment to a victim of phone-tapping by the News of the World, the editor of the company’s newspaper said.

Colin Myler the paper’s current editor, said he and Tom Crone, legal manager of News Group, a News Corp subsidiary, saw James Murdoch in 2008. The meeting came after lawyers for Gordon Taylor, chief executive of the Professional Footballer’s Association uncovered an e-mail suggesting more than one journalist at the paper knew Taylor’s phone had been hacked.

The three agreed to settle the case out of court. ‘It was an agreed collective decision,’ Myler told a parliamentary committee in London today. ‘It’s how newspapers work.’ James Murdoch runs News Corp.’s European and Asian operations.

It is now clear after this testimony that an attempt by News and its various organs around the world to cast doubt on The Guardian‘s claims are nothing but mischievous spin. This applies to articles in The Times, The Australian and this statement from News International.

Will News now issue a revised statement, or cut Messrs Myler and Crone adrift to protect the chairman’s son and heir?

Questions raised include: were the payments authorised by James Murdoch. And were they disclosed to the board, to Rupert?

James Murdoch now has real problems in Britain. If these claims are not refuted quickly and convincingly, his time at the top of BSkyB, the major satellite media group in the UK, controlled 38% by News Corp, will be problematic.

The Guardian’s Nick Davies raised a series of other questions in a comment piece in The Guardian this morning. He broke the story two weeks ago:

Last week the Guardian disclosed an email, written by a junior reporter, containing a transcript for the News of the World’s chief reporter, Neville Thurlbeck, of more than 30 voicemail messages hacked from the mobile phones of two targets. Adam Price MP described it as “a smoking gun” today. This raised a lot of questions. Who had given the junior reporter the audiotape? Who had he handed the transcript to? The in-house lawyer, Tom Crone, had answers, because he had conducted an internal inquiry. “He doesn’t remember writing it,” he said, adding that that reporter was now unavailable, having been posted to Peru.

And what did Neville Thurlbeck do with the transcript? “He doesn’t remember receiving it,” said Mr Crone. And what about the News of the World’s IT system? Did that contain any trace of the email? Sadly, the system had no trace.

The junior reporter sent to Peru? Can you believe that?