On Sept. 11, 2009, Britain’s Press Complaints Commission released what turned out to be one of the most embarrassing reports in the modern history of journalism. The press watchdog, which had been set up by the media to police itself, said it had reviewed the Guardian’s July, 2009 stories on rampant phone hacking by tabloid journalists and found them to be overblown. There was nothing “concrete” to suggest there had been a “hitherto concealed criminal conspiracy at “The News of The World to intrude into people’s privacy.”

The commission’s report concluded that the Guardian’s stories “did not quite live up to the dramatic billing they were initially given.”

That assertion has proved entirely false. The full story was far, far more disturbing than had been reported.

British police today arrested Andrew Coulson, the former editor of the now-defunct News of the World for what authorities described today as “suspicion of conspiring to intercept communications.” Earlier this week, the Guardian and other British publications reported that the News of the World had hacked into the mobile phones of the families of terrorist victims, war widows and a 13-year old girl who had been kidnapped and murdered. There appears no end in sight to the revelations, which could easily reach into the top levels of law enforcement, politics and publishing, perhaps even to Rupert Murdoch, whose sprawling media empire included the News of the World. Six journalists, including Coulson, have been arrested so far.

In the face of irrefutable evidence that it had been hoodwinked, the Press Complaints Commission officially withdrew its 2009 report, acknowledging that its findings were invalid.

There are some lessons for readers and investigative journalists on both sides of the Atlantic in this fiasco.

It’s worth remembering that investigative stories unfold episodically and that it often takes months and years for the most important facts to come to light. Imagine if a British-style press commission tried to parse the accuracy of the Washington Post’s Watergate reporting in late 1972, before the White House tapes confirmed the most damning allegations. An assessment of stories on the mistreatment of detainees and prisoners by U.S. anti-terror forces would certainly read differently if it had been written before the Abu Ghraib photos flashed around the world.

Another lesson from this story is the importance of following up. The Guardian pursued these stories after their initial reports, but the allegations received little play in other media outlets. It is a fair guess that Murdoch’s dominance of the British media market—he also owns the Sunday Times of London, the Times, the tabloid daily the Sun, Britain’s SkyNews, the Wall Street Journal and Fox News—might have had something to do with the deafening silence. The controversy was re-ignited in September, 2010 by a New York Times Magazine cover story, which alleged, among other things, that Coulson was aware of what had gone on within his newsroom. At the time, Coulson was serving as senior communications aide to British Prime Minister David Cameron.

This case also allows us to revisit that tired axiom that the cover-up is worse than the crime. Sometimes, cover-ups can work.

Look back at the Press Commission’s 2009 inquiry. Commissioners heard testimony from all of the key players in the phone hacking story, including the police and editors at the News of the World. All insisted that the scandal was limited to the dealings between a private investigator, Glenn Mulcaire, and a single reporter, Clive Goodman, the “royals” correspondent for the tabloid.

The Guardian’s 2009 stories asserted that the practice of hacking into voice mails was widespread and that “thousands” of phones were involved. The editor of News of the World told the commission that these figures were “not just unsubstantiated, and irresponsible, they were wholly false.” According to the Commission’s report, senior officials from London’s Metropolitan Police told them a “small number, perhaps a handful” of phones had been targeted.

On Thursday, the chief Metropolitan police investigator acknowledged that as many as 4,000 people had their privacy breached by reporters.

There are suggestions that executives within Rupert Murdoch’s News International concealed evidence of the hacking. The Guardian reported today that Scotland Yard is investigating the deletion of millions of relevant emails.

James Murdoch, the heir apparent to his father and the chairman of News International, admitted this week that “The News of the World and News International wrongly maintained that these issues were confined to one reporter.” In a statement announcing that he was closing the tabloid, James Murdoch said that the company had given police information that will “prove this was untrue” and that the paper made statements to Parliament “without being in full possession of the facts.”

”This was wrong,” he wrote, “and is a matter of serious regret.”

In his statements today, Prime Minister Cameron has suggested that the affair resulted from a failure of the press to police itself through the voluntary Press Complaints Commission. The watchdog, he said, had proved that it "lacked rigor." Cameron said he has asked for recommendations on a new system for regulating journalism that would be “entirely … independent of the press, so the public will know that newspapers will never again be solely responsible for policing themselves.”

From this side of the Atlantic, that sounds like a terrible idea. Press commissions have never worked well here, and the idea of imposing some sort of government-drafted ethics code on journalists sounds even worse.

The failure being laid bare by this scandal, to an American eye, seems more basic. Britain has laws to protect privacy and punish criminal conduct by journalists. The British police seized the notebooks of the private investigator employed by the News of the World and somehow ended up with a prosecution of a single reporter. The Press Commission’s main misstatements rest on the testimony of police officials. As investigations go forward of how this could have happened, a clear area of inquiry is whether law enforcement authorities circumscribed their investigations to avoid exposing the tabloid’s bribes to police officers, or even because the police themselves feared the power of the country’s dominant media company.

A final lesson from the U.S. experience: Rupert Murdoch runs a famously tight ship. With the arrest of Coulson, the questions mount about his bosses at News International—Rebekah Brooks, Les Hinton and Rupert Murdoch himself—all of whom remain in top positions at the company. Here’s a question from Watergate days that might be helpful:

“What did they know, and when did they know it?”