The PA to former News of the World editor Rebekah Brooks confused MI5 with MFI.
Cheryl Carter, who worked as Ms Brooks' personal assistant for 16 years, made the mistake during a telephone call to the media tycoon Rupert Murdoch.
The error was revealed during the latest session of the phone-hacking trials at the Old Bailey.
A jury heard Brooks say that Carter was an "amazing friend" and a "brilliant PA," who acted as her "eyes and ears of the newsroom".
But asked to talk about her downsides, Brooks admitted that mother-of-two Carter could be "scatty and forgetful".
On one occasion Carter told Rupert Murdoch that Brooks had gone to furniture store MFI, when she had been instructed to tell him she was attending an important meeting at MI5.
"I was petrified that Rupert was going to hang me," Brooks added.
Cheryl Carter has been charged along with Rebekah Brooks of an offence of conspiring to cover up evidence to pervert the course of justice between 6 and 9 July 2011.
Both deny the charge.
Brooks was questioned by her lawyer Jonathan Laidlaw QC: "The prosecution asserts that you recruited Cheryl to pervert the course of justice. Is she the sort of candidate that you would cast for that role?"
Brooks replied: "No, but also because she is an incredibly decent, hard-working woman. It's not just because she's scatty, as she is, but because she's true."
Brooks said Carter and her other personal assistant were "constantly looking for places to store bulky materials" as the number of notepads and other materials she had gone through over the years took up lots of space.
Asked if she knew seven boxes were removed from the News International archives, Brooks said: "Absolutely not."
Asked if she had any knowledge of the boxes, Brooks replied: "No."
Earlier in the session, Brooks said she had received death threats after it emerged that murdered schoolgirl Milly Dowler's phone had been hacked.
She said she was also sent messages of support as she found herself the "central figure" of the story, including one from former prime minister Tony Blair.
"Let me know if there's anything I can help you with," wrote Mr Blair on 5 July 2011. "Thinking of you. I've been through things like this."
Brooks replied: "Thank you, I know what's it's like. GB (Gordon Brown) pals getting their own back. Rupert and James (Murdoch) have been brilliant.
"Hopefully even in this climate the truth will out."
Brooks denies conspiring to hack phones, conspiring to commit misconduct in public office and conspiring to cover up evidence to pervert the course of justice.
All seven defendants at the phone-hacking trials deny the charges against them.