Former News of the World royal editor Clive Goodman kept a dossier of incriminating emails showing senior News International figures were aware of phone-hacking, a court heard.
Andrew Edis QC prosecuting told the court that bosses at the newspaper “had every reason to be worried” by Goodman.
He said: “Mr Goodman had kept a little file of emails which showed, we suggest, that what he was doing was officially sanctioned by people senior to him."
Edis said Coulson attempted to placate Goodman following his arrest even claiming he could return to the paper if he was jailed.
However, News of the World lawyer Tom Crone had concerns about Goodman shortly before his trial.
In an email from December 2006, News International lawyer Tom Crone warned Coulson that he might not stick to "the preferred line", the court heard.
Edis said: "Mr Coulson was concerned about that, and Mr Crone said to Mr Coulson in an email that there was a risk that Mr Goodman may stray off the preferred line. In other words, he might let the cat out of the bag, we say."
Edis asked the jury why had Coulson claimed Goodman (pictured above) may be able to return to the paper.
"And yet he had brought great risk to the News of the World and caused them serious damage because he had been committing crimes with Mr Mulcaire in getting stories for them.
"You would think they would be very cross with him – unless, of course, they knew all about it.
"Mr Coulson on the telephone is actually reassuring Mr Goodman that he may still have a job even if he goes to prison."
The jury was told that Coulson was concerned that Goodman, who was jailed in January 2007 for conspiring to hack phones, might tell his probation officer about phone hacking at the newspaper while he was awaiting sentencing.
All defendants deny the charges.
The trial continues.