Piers Morgan's decision to publish faked photographs of British soldiers abusing Iraqis in the Daily Mirror was a "catastrophic editorial error", the chief executive of the Trinity Mirror group has said.
Giving evidence to the Leveson inquiry into press ethics on Monday, Sly Bailey said the period in 2004 was an "awful time" for the business and she and her colleagues became engulfed in a "maelstrom" of media interest.
"We lost a lot of a readers as a result of that episode," she said.
Morgan was fired as editor of the Daily Mirror after he ran a front page on 1 May 2004 that appeared to show British troops torturing an Iraqi detainee.
Bailey said while she believed Morgan had published the photographs "in good faith" believing them to be genuine, the Trinity Mirror board eventually "lost confidence in him as editor".
The publishers said they had been tricked by a "calculated and malicious hoax". The Queen's Lancashire Regiment (QLR) said at the time the tabloid had endangered British troops by running the pictures.