LONDON (Reuters) - Prime Minister David Cameron gave a former tabloid editor whom he hired as his top spokesman access to some of the government's most sensitive secrets without full security clearance, an inquiry heard on Thursday.
Andy Coulson, a former editor of Rupert Murdoch's News of the World, told a government-ordered investigation into press standards that Cameron's Conservative Party had asked few questions about his past and not carried out a full security check when he was appointed.
The inquiry also heard how Coulson held shares in Murdoch's News Corp while working for the government, something he said might look like a conflict of interest.
Coulson took up the role as the Conservatives' director of communications, helping to steer Cameron's bid to become prime minister, just six months after he stood down as editor of the now-defunct Sunday paper following the jailing of one of his reporters for phone hacking.
Critics says Cameron appointed Coulson in order to secure the backing of the journalist's former boss, Murdoch, and say the appointment showed a shocking lack of judgement.
"Did you have any unsupervised access to information designated top secret or above?" Robert Jay, the lead lawyer for senior judge Brian Leveson, asked Coulson.
"I may have done, yes," he said.
"Did you ever attend meetings of the national security council?" Jay asked, referring to a body of senior politicians, defence and intelligence chiefs which is chaired by the prime minister.
"Yes," Coulson told the public inquiry, which Cameron reluctantly ordered last year after the phone hacking scandal spiralled out of control, forcing Murdoch to close the News of the World.
A full security clearance procedure includes a review of the applicant's finances and detailed interviews about their past. The government released a statement, saying Coulson had only seen the information he was cleared to see.
The former editor also revealed that he had received payments and healthcare provided by Murdoch's British newspaper arm as part of his severance package while he was working for Cameron in opposition.
NO 'GRAND CONSPIRACY'
The involvement of Coulson and another former editor - Cameron's friend Rebekah Brooks - turned the long-running hacking story into a national political scandal that has laid bare the close ties between senior politicians, the police and the media.
Coulson has been arrested for phone hacking and bribery while Brooks has been arrested for the same offences and a further charge of conspiracy to pervert the course of justice. Brooks will appear before the inquiry on Friday.
Judge Leveson told court 73 in the Royal Courts of Justice that he would avoid asking Coulson what he knew about phone hacking to prevent damaging any criminal court cases, curtailing any possible bombshell revelations.
Coulson, appearing confident throughout the hearing, was asked instead why Cameron and future Finance Minister George Osborne would have wanted to employ him when they were in opposition, with lawyer Jay suggesting that they were trying to secure the backing of Murdoch's newspapers.
Coulson denied any 'grand conspiracy' between media tycoons and senior politicians but did say that the fallout from the phone hacking scandal was forcing politicians to distance themselves from journalists and media bosses.
"I want to make it quite clear that there was never any inappropriate deal between the papers and the party," Coulson said. "There were no conditions or contingencies suggested or levied in return for a newspapers' support."
The revelations about the close ties between Murdoch executives and Cameron's party have come at a difficult time for the prime minister, following a drubbing in local elections and a budget castigated for cutting taxes for the rich.
The left-leaning Guardian newspaper, which has led the coverage of the phone hacking scandal, has said it warned Cameron against employing Coulson, citing information it had but was unable to publish for legal reasons.
An updated biography of Cameron, serialised this week in the Times newspaper, said that aides to the royal family warned the prime minister that Buckingham Palace also did not think the appointment of an editor of such a salacious paper would be an appropriate move.
Coulson had edited the News of the World when its royal reporter went to jail for hacking the phones of staff working for Princes William and Harry.
Coulson said he told Cameron he had known nothing about the illegal practice going on at the paper.
In May 2010 Coulson moved with Cameron into Downing Street to act as the Prime Minister's official spokesman, winning early plaudits for giving the wealthy and privileged Cameron a better understanding of the average voter.
With the allegations about phone hacking refusing to die down, and the link to Cameron becoming ever more damaging, Coulson left Downing Street in January 2011 saying: "When the spokesman needs a spokesman, it's time to move on."