Rupert Murdoch tells the Leveson inquiry the News of the World was involved in a phone-hacking "cover-up". But former NoW legal manager Tom Crone accuses Mr Murdoch of a "shameful lie".

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On his second day of giving evidence to the inquiry into press standards, the chairman and chief executive of News Corporation said his company was the victim of a "cover-up" at the News of the World, from which he and other executives were "shielded".

The 168-year-old newspaper closed last year amid allegations that its journalists hacked into the voicemail of murdered schoolgirl, Milly Dowler.

Asked by Robert Jay QC why he shut the Sunday tabloid, Mr Murdoch replied: "I panicked. But I'm glad I did."

He added: "This whole business of the News of the World was a blot on my reputation".

But this afternoon Tom Crone, who quit as News International legal manager last August, responded angrily to Mr Murdoch's suggestion that it was he who supervised the "cover-up".

"[Rupert Murdoch's] assertion that I 'took charge of a cover-up' in relation to phone hacking is a shameful lie. The same applies to his assertions that I misinformed senior executives about what was going on," Mr Crone said in a statement.

Statement by Tom Crone

"Since Rupert Murdoch’s evidence today about a lawyer who had been on the News of the World for many years can only refer to me, I am issuing the following statement.

"His assertion that I 'took charge of a cover-up' in relation to phone-hacking is a shameful lie. The same applies to his assertions that I misinformed senior executives about what was going on and that I forbade people from reporting to Rebekah Brooks or to James Murdoch.

"It is perhaps no coincidence that the two people he has identified in relation to his cover-up allegations are the same two people who pointed out that his son's evidence to the Parliamentary Select Committee last year was inaccurate.

"The fact that Mr Murdoch’s attack on Colin Myler and myself may have been personal as well as being wholly wrong greatly demeans him."

Misinformed and shielded

The media mogul told the Leveson inquiry that he and senior NI executives were not informed - or were misinformed - and were "shielded" from what was going on at the paper.

"I blame one or two people for that, who perhaps I shouldn't name because for all I know they may be arrested yet," he said.

He added: "But there is no question in my mind that maybe even the editor, but certainly behind that, someone took charge of a cover-up which we were victime to and I regret".

Mr Murdoch also revealed that the former editor Colin Myler was not his choice, but Les Hinton's. "I can think of some stronger people," he said. Mr Murdoch said that he trusted Mr Hinton and "delegated" the decision. "I relied on Mr Hinton, who had been with me for 50 years".

Live blog: Rupert Murdoch at the Leveson - day two

'A lot of pain'

The News Corporation CEO stressed that corporate governance as his company had been completely overhauled since the phone-hacking scandal.

"I have been through the whole of News Corporation," he told the inquiry. "I have spent hundreds of millions of dollars. In London alone... we have examined 300 million emails.

I'm guilty of not paying enough attention to the News of the World. Rupert Murdoch

"It led to the arrest and terrible distress of a number of families of journalists who'd been with me many, many years - friends of mine. And it caused me a lot of pain. But we did it."

And he appeared keen to separate what had happened at News of the World from business practices elsewhere at News Corporation. Denying that he adopted a "cavalier" attitude to business risk, he told the inquiry: "I'm guilty of not paying enough attention to the News of the World any time that I was in charge of it, certainly. But to say that it's me, around the world: no."

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Resignation calls

His evidence follows a dramatic two days, in which his son, James Murdoch, gave testimony which sparked calls for the Culture Secretary, Jeremy Hunt, to resign, following claims his department provided the Murdoch's with a back-channel to privileged information ahead of their bid for BSkyB ownership.

Instead, his special adviser, Adam Smith, yesterday tendered his resignation in the wake of a series of emails delivered before the inquiry which suggested that he personally acted as a conduit between the two parties.

Early on during the morning session on his second day of evidence, Mr Murdoch announced he did not believe he had ever met Jeremy Hunt and had never had any telephone conversations with him.

He also suggested that the closeness of the relationship between Frederic Michel, News Corporation's senior public affairs executive, and Adam Smith, Jeremy Hunt's special adviser, had been exaggerated.

Waging war

The 81-year-old media mogul's first day of evidence has already lifted the lid on how he has developed and maintained, and sometimes broken, relationships with a succession of prime ministers and senior political figures over 40 years of involvement in British life.

Insisting that he has "never asked a prime minister for anything", he revealed how numerous leaders have attempted to court him and win the support of his publications.

Some of the claims have led to a public spat between himself and Gordon Brown, who called for Mr Murdoch to correct his testimony after he claimed the former prime minister threatened to "wage war" on the Murdoch empire when The Sun switched its allegiance to the Tories in 2009. Today Mr Murdoch said: "I stand by every word of it".

The Inquiry also heard how David Cameron interrupted a family holiday to meet him on a yacht off the Greek island of Santorini in August 2008. "Mr Cameron might have thought stopping in Santorini might impress me. I don't know," Mr Murdoch said.

Of Margaret Thatcher, Mr Murdoch said that their relationship was "respectful".

However he admitted that he met Tony Blair three or four times a year, and had discussions on issues ranging from street crime to healthcare, Europe, Islamic terrorism and Iraq and Afghanistan.

Mr Murdoch is reported to have said: "If our relationship is ever consummated, Tony, then I think we will end up making love like porcupines - very, very carefully."