A prison security chief held secret talks with Jon Venables in which he appeared "very suspicious" of his jailers after a string of stories about his life behind bars were leaked to the press, it has emerged.
A witness, who cannot be identified, was giving evidence in the trial of prison officer Scott Chapman who was allegedly paid £40,000 by newspapers for information about James Bulger's killer after he was sent back to prison in 2010 for child porn offences.
He is standing trial alongside Tom Savage of the Daily Star Sunday and a former News of the World journalist who can't be named.
The woman witness told jurors at the Old Bailey that the leaks had a "catastrophic operational impact" on the prison even though it was never identified.
Under cross-examination, she was quizzed on why she had formed that opinion when reports suggested Venables had a "very good rapport with staff" and nowhere was it recorded that he had lost confidence in them.
The witness said she knew Venables was "very suspicious of the staff around him" but she made the decision not to write it down for fear that too would be leaked.
Paul Mendelle QC, defending Chapman, accused the witness of a "serious breach of duty" for failing to file a report on the meetings she had with Venables.
He said: "Although Venables was suspicious and resentful of staff, you did not record that information because you did not want it to leak?"
She replied: "Yes. It is important in terms of trying to establish the source. That was my reason for going to speak to him. He explained to me he was suspicious of the staff and he told me he was testing staff around him."
Mendelle asked: "His relationship with staff is important?"
She replied: "Yes."
Mendelle went on: "So you are receiving important information about the prisoner's rapport with staff and your evidence is you have at no time recorded it anywhere?"
The woman replied: "No, I did not record it. I was trying to establish the source of the information."
She confirmed "one or two" meetings with Venables but she could not recall when they took place and she "chose not to" fill out a security information report.
Mendelle said: "I suggest in that decision you were in breach of your duties."
She replied: "No. I do not believe so."
Venables was jailed for life for murdering toddler James in Liverpool in February 1993 and was given a new identity after being released on licence.
But his parole was revoked in 2010 and was jailed for two years after admitting downloading and distributing indecent images of children, serving time at the prison at which 42-year-old Chapman worked.
The court has heard that Chapman shared a third of his earnings from The Sun, News Of The World, Daily Mirror, Sunday Mirror, People, Daily Star and Daily Star Sunday with his ex-partner Lynn Gaffney, 40.
The pair both deny misconduct in a public office, while Daily Star Sunday reporter Savage, 37, and a News Of The World journalist, who cannot be named for legal reasons, deny conspiring to commit misconduct in a public office.
John Ryder QC, defending Savage, suggested to the witness that Venables was always going to be at risk in prison and media interest was "inevitable" after what he had done.
He said: "What made him relevant again is, having murdered a child, he was then arrested for offences of child porn and so all of a sudden he became an object of very considerable interest, understandably so. It was inevitable that articles would be written about him."
The witness said: "Not from a member of staff."
Ryder went on: "The interest in the press to start with was what he had done. Child porn and posing as a person who had an eight-year-old daughter who was in contact with a paedophile on the internet arranging to meet and sell this eight-year-old child for sex – a striking fact particularly with regard to a man who had already abducted and killed a two-year-old child, so inevitably from February 2010 there was going to be interest in this man."
The witness agreed that paedophiles were "particularly vulnerable to attack and threat" and as such he was potentially subject to "unusual levels of threat".
The types of stories which appeared in newspapers about Venables included one in which he was described as sitting in his "den" strumming Oasis hits.
Prosecutor Jonathan Rees QC told the court bank account analysis showed Gaffney was "liquidating funds" from newspaper deals for Chapman and giving him money in cash.
Analyst Nadia Tuominem said that between April 2000 and February 2012, her expenditure outweighed her income by £12,815 – equal to around a third share of the £40,000 total payments.
The couple spent more than £15,000 on holidays between January 2010 and April 2012, including a family trip to Orlando, Florida, in September 2011, she said.
The trial of Chapman and Gaffney, from Corby in Northamptonshire, Savage, of East Dulwich, south London, and the ex-News of the World journalist continues.