Former News of the World reporter Clive Goodman accused his employer of a delivering "a fairly crude carrot and stick" to persuade him not to implicate colleagues in hacking, a court heard.
Giving evidence for a fourth day, the former royal editor said his old boss Andy Coulson "set up the payments to facilitate" the activities of private investigator Glenn Mulcaire and others at the Sunday paper were involved.
He described to the hacking trial how he was put under repeated pressure by Coulson, a News International lawyer and lawyers paid for by NI to say he was the only one involved at the NotW.
Goodman, along with Mulcaire, was arrested for hacking in August 2006 and pleaded guilty at the end of the year, the Old Bailey jury was told. The following year he was dismissed.
Ahead of his sentencing hearing on 26 January, a NI lawyer, who cannot be named, attended a meeting to discuss Goodman's mitigation and what he would say to the probation service.
The NI lawyer joined in discussions "uninvited" and said it was not true to say Goodman expected to be sacked, the court heard.
He allegedly told Goodman: "That will only happen if you blame others. If you do that you really cannot expect Andy to take you back."
Goodman said he then told the lawyers that if he was asked directly he would "give a truthful answer", adding: "It's amazing no-one asked me the question."
After the meeting, Goodman sent an email to his solicitor complaining about the NI lawyer's presence.
The email read to court stated: "He (the NI lawyer) arrived while we were in full flow to deliver a fairly crude carrot and stick from the NotW.
"As the newspaper has no voice at our mitigation/sentencing hearing on January 26th I found the attempt to dictate lines of our defence highly inappropriate and just a bit shocking."
He went on to write he had nothing against the lawyer, adding: "But I felt more threatened by the message he was asked to deliver today than I have been by much of the prosecution case."
Earlier, Goodman told the court that he had felt as if he was "being hung out to dry" following his arrest.
After he was charged, Coulson rang him and tried to persuade him to plead guilty as soon as possible and "make a clean breast of it", he said.
Goodman later described a meeting with Coulson at a cafe in Wimbledon, south west London, when his boss allegedly tried again to convince him to admit he was a "lone wolf" and had "gone off the reservation".
Coulson promised him that if he pleaded guilty he could come back to a job at the NotW as a writer or sub editor, Goodman said.
He claimed Coulson told him: "You could be one of those people who come back – it's up to you."
Goodman said he was worried Coulson had used the phrase "lone wolf" because those were the exact words used by his solicitor who was being paid by News International.
As Goodman prepared his case in November 2006, he told the court his lawyer advised him not to "thrash around and blame anybody else" as a judge was more likely to take a "benign view" of someone who took responsibility for their actions.
Goodman said he was concerned about the dialogue between his lawyer and News International (NI) and that he was getting views of the company as well as the solicitor.
On a suggestion by his lawyer to give papers on the case to the NotW, he said: "I absolutely did not want a set of prosecution documents going to the NotW because I did not trust them – and newspapers are leaky places."
Despite his instructions to the contrary, the lawyer told the NI lawyer that Goodman was happy for the papers to be viewed, the court heard.
The court heard that during another meeting about the upcoming case, the company lawyer told him he would not be dismissed as long as he did not implicate anyone else.
After the meeting with the company lawyer, Coulson rang Goodman at home to "clarify" the job position.
Goodman's lawyer, David Spens QC, read from a transcript of the call his client taped. In it, Coulson said he "cannot be 200 per cent" about what would happen but he had a "duty of care" as editor and his intention was to continue Goodman's employment.
At a subsequent meeting about the case, Goodman was advised by another lawyer paid for by NI not to implicate others in a five-page mitigation document.
Goodman said that was despite the names of three more NotW staff appearing in prosecution papers as having contact with Mulcaire.
He told the court that since none of them had been arrested, police took the decision to "stop at me".
Goodman, 56, of Addlestone, Surrey, denies conspiracy to commit misconduct in public office.
Coulson, 46, of Charing, Kent, denies conspiring to hack phones and commit misconduct in a public office.
All the other defendants in the case deny the allegations against them.
A pre-sentence report stated that a "senior editor" had given "tacit agreement" to Goodman's activities.
But today Goodman said he named editor Andy Coulson when he met the probation service which compiled the report.
He said: "I knew the probation report would not go to NI and it would go to the judge. It was my way of telling somebody in authority."
At the sentencing hearing, no mention was made in mitigation of Coulson or any other NotW executive having anything to do with hacking, Goodman confirmed.
Early in 2007, the NotW's "rogue reporter" line was first given in a letter to the Press Complaints Commission by the paper's new editor, Colin Myler.
Meanwhile, Goodman launched an appeal against his dismissal for gross misconduct, saying Coulson had "full knowledge".
He also named a number of other staff, including co-defendant Stuart Kuttner, who, as managing editor, allegedly signed off payments to Mulcaire for hacking.
Kuttner denies wrongdoing.
Goodman requested copies of emails between various members of NotW staff for evidence in his appeal hearing, the court was told.
He was denied a lawyer so recorded the hearing secretly, he said.
Later, he found 47 inaccuracies in notes of the meeting taken by NI staff.
The internal hearing was headed by Myler, who, given his "rogue reporter" statement, could not be impartial, Goodman said.
In April, Sun editor Rebekah Brooks offered work on a Diana bookzine project. But Goodman said he thought that, because of his whistleblower threat, the work would end when the contract did.
At a second hearing, which Goodman again recorded covertly, he was told NotW was minded to reject the appeal, he said.
In June 2007, NI's head of corporate legal affairs made an offer of £50,000 to stop a public employment tribunal, the court heard.
The final settlement, without admission of liability, was for £140,000, the court was told. It included a confidentiality clause.