Mrs De-Laurey denies the charges against her

Joyti De-Laurey says her former boss knew about the money and it was a reward for dealing with various issues - including covering up his affair.

Only when his wife "went mad" after seeing the statements did Edward Scott Mead take action, the jury heard.

Mrs De-Laurey, of North Cheam, Surrey, denies 21 charges of "obtaining money transfers by deception".

She is accused of taking about �3.3m from Mr Mead and �1.1m from his predecessors at investment bank Goldman Sachs, Jennifer Moses and her husband Ron Beller.

Mrs De-Laurey says she forged signatures to transfer the money to her accounts with the knowledge of Mr Beller and Mr Moses, to whom she was a "priceless" PA.

Among her duties was covering up Mr Mead's affair so his wife and colleagues did not find out, the court has heard.

Scott is a powerful man. I believed...he would sort things out Joyti De-Laurey

On Tuesday she told the trial she confronted him after being challenged by security staff at the bank on 2 May, 2002.

Mr Mead had explained he had taken some bank statements home when his wife saw a transfer to the Bank of Cyprus, the court was told.

"She knew I was going to Cyprus and immediately assumed that I had been stealing money from Scott," Mrs De-Laurey said.

Because of his wife's attitude, he felt he had no choice but to "follow through" her theory and refer it to Goldman Sachs security.

'Keep quiet about affair'

"Throughout this, Scott was very reassuring to me that if I co-operated and was seen to return some monies he would then have the matter resolved.

"He reassured me continually this was something that could be resolved very easily."

She agreed to "show willing" and pay back �500,000 and Mr Mead begged her not to tell about his affair, the court was told.

Mrs De-Laurey told the court Mr Mead had said "words to the effect to be...discreet about his private life".

"Scott is a powerful man. I believed what he said when he said he would sort things out."

She said he seemed shocked when security staff said the matter could be referred to the police.

But even after being arrested and spending three weeks in Holloway Prison on remand, Mrs De-Laurey still thought Mr Mead would resolve the situation.

The trial was adjourned until Wednesday.