Ari Ben-Menashe, whose hotly disputed "evidence" in the Zimbabwe case could send the opposition leader, Morgan Tsvangirai, to the gallows, is accused of trying to convince Mohammed al-Fayed, owner of Harrods, into paying for information three years ago.
He is said to have approached Mr Fayed in 1999 with claims he had evidence the Israeli intelligence service, Mossad, had plotted to kill Diana. The princess died in a Paris car crash in August 1997, along with Mr Fayed’s son Dodi.
"Subsequent investigations established that the Mossad conspiracy theory was nonsense and the matter was reported to police," said Mr Fayed’s spokesman, Chester Stern.
News of the alleged deception, which Scotland Yard has confirmed is still under investigation, casts fresh doubts over the reliability of Mr Ben-Menashe’s evidence in the case against Mr Tsvangirai. That case centres on a grainy and dubiously edited video purporting to show Mr Tsvangirai discussing a plot with Mr Ben-Menashe to assassinate President Robert Mugabe.
Mr Tsvangirai, whose popularity had threatened to unseat Mr Mugabe at elections in March, denies the accusations. The opposition leader claims he was set up by Mr Ben-Menashe, who has admitted to being a long-standing friend of Mr Mugabe .
The shadow justice minister, David Coltart, said yesterday: "We are fast building a strong picture of Ben-Menashe not exactly being a man of good standing."
The Canadian government yesterday confirmed that an inquiry into if Mr Tsvangirai might have a case to answer in Canada for hatching the alleged murder conspiracy with Mr Ben-Menashe in Montreal has come to nothing. "The investigation carried out by the Royal Canadian Mounted Police has been closed because I understand that all investigative avenues were exhausted," said a foreign affairs spokeswoman, Marie-Christine Lilkoff.
It has also been claimed that Mr Ben-Menashe’s Canadian-based consultancy firm, Dickens & Madson, played a role in illegally trading weapons for diamonds in the Democratic Republic of Congo.
A former Mossad operative, Mr Ben-Menashe was also accused of lying under oath during the Iran-Contra affair in the United States and was dubbed a "notorious and chronic liar" by the Jerusalem Post after selling false stories about Israel’s atomic weapons.