Robert Fellowes, who is married to Diana's sister Jane and was formerly private secretary to Queen Elizabeth II, testified at the coroner's inquest that he was in Norfolk in eastern England on the August night that Diana and her boyfriend Dodi Fayed were in a fatal car crash in Paris.
The British inquest into the Aug. 31, 1997 deaths began Oct. 2 after a decade of British and French police investigations and French court proceedings. The jury's role is to determine how the victims died; it has no authority to blame any individual.
Fayed's father, Mohamed Al Fayed, has claimed that Fellowes _ now Lord Fellowes _ had commandeered a communications post at the British Embassy in Paris on the night to send messages to an intelligence agency as part of a murder plot.
Fellowes also testified that the queen, like Diana, was concerned about the possibility of bugging, and that public rooms at Buckingham Palace were regularly swept for eavesdropping devices.
He also revealed that the palace, after consulting the government, decided not to initiate an investigation of the interception of embarrassing telephone calls involving Diana and her former husband, Prince Charles.
Michael Jay, who was Britain's ambassador in Paris in 1997, testified on Monday that Fellowes was not at the embassy on the night of Aug. 30-31, when the crash occurred.
Roberto Devorik, a friend of Diana, has testified that she thought Fellowes hated her.
"I'm sad if she felt that," Lord Fellowes said.
"Clearly the events of the 1990s made our relationship more complicated," he said, adding: "I was very fond of her then as I always had been and sad that she had not had a happier and more stable time in those troubled years."
Ian Burnett, a lawyer employed by the coroner, Lord Justice Scott Baker, reminded the inquest that Al Fayed had alleged that Fellowes had been at the embassy from 11 p.m., shortly before the crash, and had commandeered a message center.
"In other words it was being suggested that you were intimately concerned in the murder of your sister-in-law. You understand that that was the allegation?" Burnett said.
Asked whether he was in Paris on the night, Fellowes said: "We were in Norfolk that evening, we had people to stay, we went to an entertainment by Mr. John Mortimer in Burnham Market church."
Fellowes said there was concern at the palace in 1993 following the leak of two telephone conversations: one between Diana and her friend James Gilbey, who called her "Squidgy," and another intimate chat between Charles and Camilla Parker Bowles, who became his second wife.
Al Fayed's lawyers have alleged that Diana's conversation was intercepted by GCHQ, the electronic monitoring arm of British intelligence.
Fellowes said the government advised against a formal investigation, fearing that if it became known it would be seen as confirmation of some involvement by government agents in the interception.
The inquest has heard testimony about Diana's fears of surveillance, and that she had ordered sweeps of her rooms at Kensington Palace that turned up no firm evidence of bugging.
Fellowes said the queen had similar concerns, and the office where he met the queen was regularly checked.
"I wouldn't say it was a constant preoccupation but yes we needed reassurance at regular intervals that there was no bugging going on," Fellowes said.
The British coroner disclosed Monday that the cost of the inquest has reache the equivalent of $4.3 million.
Nearly $2.15 million was spent on the team of lawyers assisting Baker. The next largest expenditure, some $720,000, was for the jury's visit to Paris and the cost of video conferencing for witnesses testifying from Paris and from other countries.