Two former News Corp. employees say that James Murdoch, the company's deputy chief operating officer, misled Parliament in a committee hearing on Tuesday. Labour MP Tom Watson asked Murdoch about a settlement paid to phone-hacking victim Gordon Taylor, the former head of the Professional Footballers' Association. James denied knowledge of an incriminating e-mail that proved Taylor's phone had been hacked. Former News of the World editor Colin Myler and former News International legal chief Tom Crone said in a statement that Murdoch did know about the email: 

Just by way of clarification relating to Tuesday's CMS Select Committee hearing, we would like to point out that James Murdoch's recollection of what he was told when agreeing to settle the Gordon Taylor litigation was mistaken.

In fact, we did inform him of the "for Neville" email which had been produced to us by Gordon Taylor's lawyers.

"Neville" refers to News of the World's former chief reporter Neville Thurlbeck. The e-mail included transcripts of hacked phone calls and were addressed to Neville in an email that passed through private investigator Glenn Mulcaire in 2005. Murdoch's knowledge of this email is relevant as it would reveal that knowledge of phone hacking traveled further up the management ladder than News Corp. executives are claiming. Murdoch himself signed off on Taylor's $1.1 million settlement.

"When you signed off the Taylor payment, did you see or were you made aware of the full Neville e-mail, the transcript of the hacked voicemail messages?" MP Watson asked on Tuesday.

Murdoch replied bluntly, "No, I was not aware of that at the time."

After Myler and Crone's accusation hit the press, the chair of the Parliamentary committee John Wittingdale asked James Murdoch "to respond and to clarify" what he knows, noting that the committee considers the Neville e-mail one of the most critical pieces of evidence in the whole inquiry. James Murdoch denies Myler and Crone's account of the events and is standing by his original statement to Parliament.

Should James Murdoch be found to have misled Parliament, he could face criminal charges but the consequences for the rest of the Murdoch family are much more grave.

"If their statement of tonight is correct, Rupert's son will have proved to have misled parliament," report The Guardian's David Leigh and Nick Davies. "He will also have destroyed the Murdoch family's last line of defence against the scandal - that they knew nothing, and had been betrayed by those underlings they trusted. They are, in effect, accusing James Murdoch of being part of the cover-up, one in which the company's executives vainly twisted and turned to conceal the truth about phone-hacking and blame it on a single 'rogue reporter.'"