Will Lewis, the editor of the newspaper at the time the story broke, told the Leveson Inquiry this afternoon that he had initially feared the story was a hoax.
The paper had ten days to analyse the disc covering four years of MPs' expenses information, but it was only after former justice secretary Jack Straw wrote back confirming his expenses that Lewis felt confident to proceed with the story.
"I was also aware that this story was laced with risk all round, as the best and most important journalism tends to be," he said.
The Leveson Inquiry has this week been hearing from senior newspaper professionals on standards in the industry following the phone hacking scandal at the News of the World.
Lewis said that The Daily Telegraph had applied an "iterative process" of five steps before deciding whether to run the expenses story.
"We gathered the best of the best in a secret room to get them to see what was on the disc, they uncovered things no-one thought probable," he said.
"I became aware it was my responsibility to bring it into the public domain. I remember when I was told that Jack Straw replied and confirmed his expenses; only then did I feel able to give the greenlight."
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He said that the middle man who brought the disc to the paper had asked not only for the money and legal protection, but also balanced coverage from the paper.
Lewis said that it was not just about using the story for commercial gain, but an "ethical obligation" to get wrongdoing by MPs into the open.
He added: "We brought this profound wrongdoing at the heart of the House of Commons into the public domain…And I remain proud of that achievement."
Also giving evidence to the inquiry this afternoon is the current Daily Telegraph editor, Tony Gallagher.
Yesterday, former editor of The Sun Kelvin Mackenzie used his witness statement to the inquiry to defend the process of newspapers paying people for information.
"As far as I know we never used private investigators but I am certain that public officials would have disclosed important information to us and that depending on what that information was we would have paid them," he said.
"I am wholly supportive of public officials whistle blowing to The Sun, even if we have to pay money. After all, the police pay informants to disclose information."
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