The News of the World told police it had hacked the phone of missing British schoolgirl Milly Dowler and wrote a story based on her voicemail messages which incorporated a comment from the police, a court heard on Tuesday.
Former managing editor Stuart Kuttner explained how the tabloid had accessed the 13-year-old's voicemail messages in 2002 and offered police the information as a possible lead, prosecutors said.
Milly was later found murdered, and the revelation that her phone was among hundreds hacked by the News of the World prompted owner Rupert Murdoch to shut down the Sunday tabloid amid a huge outcry in July 2011.
Kuttner, 73, is on trial for phone hacking at the Old Bailey court alongside former News of the World editors Rebekah Brooks and Andy Coulson. They all deny the charges.
Prosecutors claim that although Brooks was on holiday in Dubai when Milly's phone was hacked, she remained in contact with Coulson, then her deputy editor and also her lover.
The court heard that a story published in the first edition of the paper on April 14, 2002, quoted the voicemail message left for Milly by a recruitment service.
"We're ringing because we've got some interviews starting, can you call me back? Thank you, bye bye," the message said.
But this text was removed from the second edition and by the third edition, the story focused on police suspicions -- as relayed to Kuttner -- that the message was left by a "professional hoaxer", the trial heard.
The court also heard that chief reporter Neville Thurlbeck, who has pleaded guilty to phone hacking, called police and told them the tabloid "had access" to Milly's voicemail.
'Keep an open mind'
On Monday, Coulson's lawyer urged jurors to "keep an open mind" and confirmed the 45-year-old would be giving evidence later in the trial, which is expected to last six months.
"It's his case that he was never party to any agreement to hack phones, whatever others might have been doing on his watch," defence lawyer Timothy Langdale said.
Langdale also revealed that Coulson had his own phone hacked by private investigator Glenn Mulcaire and suggested this would have been unlikely if he had known about the practice.
"Both conspirator and victim? It is fair to say, is it not, that the two things do not sit easily together?" he said.
Coulson replaced Brooks as News of the World editor in 2003 but quit in 2007 when the paper's royal editor and Mulcaire were jailed for phone hacking.
He later took the job of Prime Minister David Cameron's media chief but resigned the post in early 2011 amid increasing questions about what he knew about the scandal.
'Chicken's in the pot'
The court also heard on Monday how Brooks' husband Charlie and Mark Hanna, the former head of security for News International -- the owners of the News of the World -- tried to hide evidence from police.
Security staff moved a rubbish bag of material from the couple's country home and took it to their flat in London under the pretext of delivering pizza, the court heard.
However, before the bag could be recovered it was found by a cleaner and handed to police, prosecutors said.
After one of the security guards dropped off the package, he sent a text message to a colleague referencing the 1968 Clint Eastwood film "Where Eagles Dare".
"Broadsword calling Danny Boy. Pizza delivered and the chicken's in the pot," he texted.
Prosecutor Andrew Edis said this "quite risky" exercise could only be explained as an attempt to hide evidence -- and said it was "inconceivable" that Brooks did not know about it.
Brooks is also accused of directing her personal assistant, Cheryl Carter, to remove seven boxes of notebooks from the company's archive.
Brooks and her husband, Hanna and Carter all deny perverting the course of justice.