Secret negotiations are under way to redevelop Alexandra Palace in a deal worth more than pounds 25m. Haringey council, trustee of the Palace, is holding confidential meetings with investors whose plans include a hotel complex, planetarium or even casino at the 'people's palace' in north London.

Go-between for the deal is an American leisure consultant, Anne Cardash, who has been given an office at the Palace and has for the past month been going through business records. Discussions are so secret only the council's most senior officers and an elite band of councillors have been informed. Even Haringey's Labour Leader, Toby Harris, has been kept in the dark.

Those briefed know little of Ms Cardash's background and cannot discuss the deal because of a confidentiality clause.

Rumours abound in Haringey that Ms Cardash is an American millionairess who wants to buy the palace. In fact she represents a team of investors prepared to pump millions into the notorious white elephant which is at the centre of a debt row - pounds 42m and rising - for which no one will take responsibility.

Ms Cardash appeared in May. Her first approach was not made to Haringey, but to the manager Charles Gorman. She then went to the authority's senior officers and finally select councillors were informed - a secretive approach which has incensed people in Haringey.

Independent London has learnt that solicitors acting for Ms Cardash have written to the trust offering to buy the freehold for pounds 25m. The company quoted as the interested buyer was Axon Holdings Ltd, a small robotics firm, based in the Isle of Wight, which employs 10 people. Its managing director was baffled as to why Axon had been named. 'We have never heard of Anne Cardash, he said. 'Axon Holdings hasn't got spare cash for a phone call to London, let alone to buy a palace.'

Councillor Derek Wyatt, chairman of the board of trustees, admitted the letter had been written, despite the fact that any such deal would run into legal problems under charity laws. The buy-out bid was, according to Mr Wyatt, 'a misunderstanding.

'We cannot sell, but might be able to get the lease extended. . .but only to the right investors. Axon Holdings was quoted in the letter, but I do now know why.'

Mr Wyatt's confidential arrangements prevent him from revealing Ms Cardash's financial backers. 'Anne Cardash has an office at the palace and access to some records, he said.

'She is a front person for a group of backers and has been studying bookings and conference and banqueting facilities. We are having meetings to establish who the backers are and will be proceeding with due diligence.'

Haringey's director of corporate services, John Pirrie said: 'I do not know what Ms Cardash's background is. If we are seriously wanting to enter into a contract we will thoroughly investigate their background and want to see the colour of their money, but it is very early stages.' He declined to discuss who the investors were.

Toby Harris, the leader of the council, knew even less, but insisted: 'I am sure I would have been told at the appropriate time. I will be talking to people.'

Iain Harris, of Malkins, solicitors for the charity trust, expressed concern. 'I would advise great caution about providing confidential information to any third party until one had established their bone fides and standing.

'I had never heard of Anne Cardash until I received a letter from her solicitor.'

This is not the first time Haringey has tried to extricate itself from the palace. Proposed schemes have ranged from indoor real-snow ski slopes to theme parks, but the debt problem which worsens by millions a year has always doomed such plans to failure.

Three years ago the Attorney General ruled that no 'irrevocable commitments' could be entered into until the issue of the debt was resolved, effectively curtailing any move to sell.

Councillors say the crisis is a result of bad luck: critics allege incompetence and mismanagement.

The troubles began in 1980, when the former Greater London Council gave Haringey an pounds 8.5m sweetener to take over the palace.

A few months later fire reduced the great hall to a shell. On paper, financing the re-build posed few problems. The architect responsible, Dr Peter Smith, had pounds 42m to spend on refurbishment, which featured eight 20ft palm trees shipped from Alexandria and planted beneath a canopy of 2,500 panes of glass. Investment consisted of the original pounds 8.5m grant, pounds 18.5m insurance from the fire, and pounds 15m interest from money invested.

When the council took over trusteeship it delegated its duties to a committee of councillors called the Alexandra Palace and Park board. That committee acted as charity trustees and approved the rebuilding budget. Members expected it to cost pounds 35.43m, leaving a reserve of a pounds 6.6m. Their sums somehow fail to add up, but no one realised until 1988, four years after work began. By 1991 total debt was more than pounds 27m.

The overspend was discovered when Project Management International (PMI), a firm appointed as project manager after Dr Smith's early retirement, discovered development costs exceeded the approved sum.

In October 1988, the council asked PMI to investigate. The result was a critical document which accused the council of not exercising sufficient control, and criticised Dr Smith for having a questionable system of reporting costs -which he denies.

The debt grew by millions a year as Haringey, the trustee board and the Charity Commission wrangled over responsibility. The trustee board said the buck stopped with the local authority, a view backed by the Charity Commission.

Haringey resolved to persue recovery of the debt from the charity's assets. After a six-year dispute both the local authority and the trust have reached stalemate. Neither has the money to resolve the debt.

Councillor Mark Cooke, a former chairman of the trustee board, says the incestuous relationship between council and trust could lead to

bizarre conflicts. 'We would be in

one committee meeting with the trust solicitor saying 'don't pay this debt', then get to another council meeting where the council's legal advisors would urge: 'You must get this money back'.'

Haringey has turned in desperation to the Department of the Environment and hopes the senior civil

servant assigned to 'listen and advise' will be able to save it. The talks are expected to last until next month.

It has also turned to Brussels for a grant.

A pounds 42m windfall is unlikely to be forthcoming from the DoE. 'We are willing to listen to ideas, but not likely to give any money,' said a spokesman.

The continued wrangling, mystery and confusion does nothing to reassure Haringey residents who may still have to one day absorb the multi-

million debt through their council tax.

A gypsy's curse spells 132 years of disaster and crisis

In 1862 when a 'people's palace' was planned, an angry Romany woman was ejected from the site

and she damned it forever. Since then it has been plagued by disaster and financial crisis.

In 1863 The Alexandra Palace Company was formed to build a rival to Crystal Palace. Construction began in 1864, but the company liquidated in 1865.

The palace finally opened on 24 May 1873, but was burned down on 9 June.

It was rebuilt by 1875, but two years later the owner went bankrupt. During the First World War Ally Pally was a prisoner of war camp and in 1936 the BBC launched television broadcasting there.

The Second World War saw bomb damage.

In 1964 the GLC took over administration and by 1980 had managed to persuade Haringey to take over trusteeship. A fire on 9 July 1980 reduced 50 per cent of the palace to a shell

and by 1994, the redevelopment scheme had led to overspending and a pounds 42m debt.

(Photograph omitted)