Tom Watson of Parliament’s Culture, Media and Sport committee — which is investigating the Murdoch scandals — says this is “the most significant piece of evidence that has been revealed so far” involving “one of the largest cover-ups I have seen in my lifetime”: The committee has a March 2007 letter that a fired reporter wrote to the company that says phone hacking “was widely discussed in the daily editorial conference” until then-editor Andy Coulson banned it. Clive Goodman wrote the letter to News International’s Human Resources director — and sent a copy to the company’s then-chief Les Hinton — to appeal his firing for “gross misconduct” after he pleaded guilty to conspiracy to intercept voicemail messages from employees of the royal family. Goodman called the firing “perverse” and “inconsistent” because it was “carried out with the full knowledge and support of” a senior journalist whose name has been redacted at Scotland Yard’s request in a copy of the letter published by The Guardian. The letter adds that a NOTW lawyer and editor “promised on many occasions that I could come back to a job at the newspaper if I did not implicate the paper or any of its staff in my mitigation plea. I did not, and I expect the paper to honour its promise to me.” Four days after the letter was sent, Hinton told Parliament that he had investigated the hacking situation and was convinced that Goodman was the only reporter involved. The Goodman letter also creates big problems for Coulson, who went on to become Prime Minister David Cameron’s spokesman. Coulson has said that he didn’t know that hacking took place under his watch at NOTW.

But the Goodman letter and other evidence the committee released on Tuesday also will turn up the heat on News Corp Deputy COO James Murdoch. He testified in July that as late as 2008 he thought Goodman was the only reporter who had engaged in hacking: That is his defense against the charge that he in effect paid hush money in a 2008 settlement with a hacking victim who could have implicated a reporter other than Goodman. Murdoch told the committee last month that he had “rested on” a May 2007 letter from a law firm News Corp had hired — Harbottle and Lewis — that indicated Goodman was a lone “rogue reporter.” Yet the firm says in an Aug. 11 letter to the committee that it “rejects” Murdoch’s claim. It hadn’t been hired, as Rupert Murdoch told the committee, to “find out what the hell was going on” at NOTW; It was only supposed to consider Goodman’s appeal of his dismissal. “It was a short and limited exercise lasting two weeks and mostly involving junior employees,” the law firm says. “All of this was known to News International.” The law firm’s letter follows charges from three former News International executives that James had seen — before his keep-quiet payment — an email that made it clear at least one other NOTW reporter was tainted.

Committee Chairman John Whittingdale says it now “very likely” members will recall James Murdoch but not necessarily his father, Rupert.