The indecent images on Ben Lewis's phone were discovered by a worker at LL Camps in Bushey, Hertfordshire.
Co-owner Tal Landsman, who is on trial accused of child cruelty, did nothing when he was informed, jurors at St Albans Crown Court heard.
Mr Landsman, 26, denies one charge of cruelty to a person under 16.
He is accused of the offence between 31 July and 7 August 2015.
Prosecutor Ann Evans told the jury Lewis had pleaded guilty to possessing indecent images.
Lewis has admitted three counts of making indecent images and one of taking indecent images.
On the first day of Mr Landsman's trial, LL Camps worker Sandra Vicente told the court Lewis, 26, had given her his phone and PIN so she could play music at a children's party on 1 August.
Afterwards, a colleague asked to look at some photos Lewis had taken of him, but she then clicked on the deleted images.
She first saw pictures of small children, naked and on a beach, and then saw some taken in a "changing room".
"I would say they were aged three to four," she said.
"I felt my brain was polluted. I felt sick."
That night she said she told Mr Landsman, of Crambus Court, Admiral Drive, Stevenage.
The prosecution alleges Mr Landsman, who was one of the camp's safeguarding officers, did nothing and allowed his friend to keep working.
She called the police three days later after Lewis came to her with a three-year-old girl, who he said he had found in the toilets and had wet herself.
The prosecution told the jury when Ms Vicente spoke to Mr Landsman he said would sort it and she should not tell anyone.
Later that night Mr Landsman messaged her and asked if a "million per cent categorically" the picture she had seen was taken in the camp's changing rooms and she replied, "Yeah".
"In an effort to protect his friend, he did nothing about what he had heard, and allowed the parties and activities to keep running the camp until eventually Ofsted moved in and closed the place down on August 6," said Mrs Evans.
The case continues.
Naked photos of three and four-year-old girls were found on the mobile phone of a children's summer camp owner, a court has heard.