The first phone hacking arrests at the News of the World caused Rebekah Brooks "huge shock and confusion", the former editor said in court today.
Brooks was on holiday in Italy when she was told by a Sun colleague in 2006, and immediately phoned News of the World editor Andy Coulson to find out what happened.
Initially, Brooks heard of a raid on the offices and the arrest of royal editor Clive Goodman for phone hacking – an offence he later admitted, she said.
It was only later that she heard that a private investigator – Glenn Mulcaire – had been picked up by police for intercepting voicemails too.
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She told the Old Bailey: "I remember a huge shock and confusion."
On speaking to co-defendant Coulson about Goodman, she said: "He sounded very shocked and concerned. He told me what he (Goodman) had been arrested for. It stands to reason I said 'Is it true?'. I'm sure at the beginning no-one knew whether it was true or not.
"It was the enormity of the raid on the News of the World, there was a royal editor arrested accused of interception of emails…"
Brooks, 45, of Churchill, Oxfordshire, and Coulson, 46 of Charing, Kent, deny conspiring to hack phones and other charges against them. Goodman, 55, of Woodham Lane, Addlestone, Surrey, denies conspiring to commit misconduct in public office.
Brooks, who was editor of the Sun at the time, said news of the arrests was,"if not a big national story, certainly a big media story".
"Obviously the Sun newsdesk would have been interested as everyone else," she said.
"It was a sister newspaper and involved people they knew."
She added: "I think there was general surprise about Clive from memory.
"Disbelief at the allegation but as time went on, where it looked like being true, shock and surprise at Clive."
Brook said there was a "certain amount of grumpiness" from the Sun team because the newspaper rarely used private detectives and there had been a "failure" by the newspaper industry to monitor their methods.
She told the court: "They felt they had been cheated… by intercepting voicemails. If I can reflect the newsroom of the Sun, I think that was what they would have thought."
Brooks said there was "a great deal of concern" within News International.
"I think initially concerned about the investigation," she said.
"What it had been covering so far and where it was going.
"I can't remember exactly when it came out the Counter Terrorism Squad had been looking at the News of the World and Glenn Mulcaire for quite a long time before the arrests.
"It was all quite an anxious situation."
But Brooks insisted she did not feel personal anxiety at learning that Mulcaire had worked at the NotW during her editorship – more that there had been a "collective failure" in the industry in the early 2000s in the use of private detectives.
It was later that police contacted Brooks to inform her that her own phone had been hacked by Mulcaire for 18 months.
She said: "I remember being pretty shocked by it. Certainly surprised. My instant reaction was I had a personal pin number so it was not possible."
On her feelings ahead of a police meeting about it, she said: "I had a natural curiosity to find out what had happened with my own phone."
Brooks said police did not mention during their initial meeting that Kemp's name had been found in Mulcaire's notes.
She told the court she was also not told of any investigation into criminal wrongdoing during her editorship of the News of the World.
She reported back to News International after her meeting with police, the court heard.
Brooks told the company that police thought they had Goodman and Mulcaire "banged to rights", and that there were up to 110 victims of Muclaire's hacking, the hearing was told.
She told the court she later agreed with bosses at News International that she would not make a formal complaint to police about Mulcaire's hacking of her phone.
"We all agreed it would not be right thing to do to make a formal complaint and become a prosecution witness," she said.
"The complexity that would cause at a corporate level given the private detective work for the News of the World. I think we all agreed that was right."
The court heard that Coulson resigned in 2007 after Goodman and Mulcaire were convicted of hacking because it happened on his watch.
After that, News International made statements that no-one else had been involved.
On hacking at the News of the World during her own editorship, Brooks said: "I had the belief – and still have the belief – this is 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."
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Brooks said she had lunch with Goodman (pictured above) in April 2007 to offer him a backroom job following his release from prison after he threatened to claim that others at the News of the World were involved in phone hacking.
He had discovered that his contract had been terminated by News International while on "home leave" from prison, she said.
Goodman had requested financial compensation but his terms had been refused by News International and he now planned to take the company to an employment tribunal, Brooks said.
"He was going to allege that other people at the News of the World knew he was accessing voicemails and agreed to it and certain other people were involved in that practice," she said.
"Certainly by March 2007 a line had been drawn under that episode with News International, within the police and the self-regulatory body.
"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."
Brooks said the allegations were against senior management at the News of the World but not against her.
"It was a delicate situation," she added.
"There were two sides to every story. Clive was angry."
Goodman declined the job offer and instead accepted a financial settlement from the company, Brooks said.
The trial was adjourned until tomorrow.
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