A News of the World journalist was told to "call in all those bottles of champagne" to get inside information about a terrorist plot from a senior policeman, the Leveson Inquiry has been told.
John Yates, Scotland Yard's former head of counter-terrorism, admitted he "may well" have drunk champagne with crime reporter Lucy Panton, but denied he did her any favours in return.
Mr Yates, who resigned over the phone-hacking scandal in July last year, also confirmed he was a "good friend" of former News of the World executive editor Neil Wallis and that the pair had attended football games together, the press standards inquiry heard.
Meanwhile, fellow former Metropolitan Police anti-terror chief Peter Clarke defended his decision to restrict the scope of the force's original 2006 investigation into phone hacking at the News of the World.
He said police were dealing with a huge terrorist threat to the UK at the time. Mr Clarke told the inquiry: "Invasions of privacy are odious, obviously. They can be extraordinarily distressing and illegal but they don't kill you. Terrorists do."
On October 30 2010 Ms Panton, the News of the World's crime editor, was asked by news editor James Mellor to find out more from Mr Yates about a printer cartridge bomb found on a cargo aircraft at East Midlands Airport the previous day.
Mr Mellor wrote in an email: "John Yates could be crucial here. Have you spoken to him? Really need an excl (exclusive) splash (front page) line so time to call in all those bottles of champagne..." Ms Panton replied: "Noted. Not got hold of him yet still trying."
Robert Jay QC, counsel to the Leveson Inquiry, said the email suggested that Ms Panton had "plied" Mr Yates with champagne and the favour was to be returned.
Mr Yates replied: "I hadn't been plied with champagne by Lucy Panton, and I think it's an unfortunate emphasis you're putting on it." Asked whether he ever drank champagne with the News of the World reporter, Mr Yates said: "There may well have been the odd occasion, yes, when a bottle was being shared with several people, but nothing in the sense that you're suggesting."
Ms Panton, who is married to a Scotland Yard detective, was arrested in December on suspicion of making corrupt payments to police officers. She was later bailed and has not been charged.