Scotland Yard sources say that Sir Paul, 51, who has pledged to resign if he is personally criticised, was forewarned in a letter last month from Sir William Macpherson of Cluny, the inquiry chairman.
The Commissioner had hoped to escape censure in the report, which attacks 23 other officers for their role in the failed murder investigation. But he has now been told that, as far as Sir William is concerned, the buck stops with him as head of the organisation.
He is expected to be condemned principally for reassuring Stephen's parents, Neville and Doreen, that the investigation was being properly conducted, without taking steps to establish whether that was in fact the case.
The 23 other police officers facing criticism - more than one-third of those who gave evidence to the public inquiry - are named for the first time today by The Independent.
The inquiry report, which is to be published next week, will spark renewed calls for Sir Paul to resign. But if he is true to his word, he will go of his own accord.
Last October, he told The Independent that he would step down if criticised. He has reiterated that promise several times since, telling an interviewer as recently as last week: "If I felt that anyone was saying that I had personally acted badly or dishonourably, then I wouldn't hesitate to go."
At the same time, though, he has been increasingly bullish of late, expressing his determination to remain in his job until his seven-year term expires next January.
The criticism will please Sir Paul's enemies in the Home Office, who believe that the Metropolitan Police needs a new figurehead untarnished by the public relations disaster of the Lawrence case. Others believe that Sir Paul, despite everything, is best equipped to preside over the radical reforms that are expected to flow from the recommendations in Sir William's report.
As Commissioner of a force of 26,000 officers, he would normally have been able to argue that he could not possibly have an intimate knowledge of every criminal case and could not therefore be held responsible for success or failure.
But the Lawrence murder was different. In late 1993, many months after Stephen was stabbed to death in south London, Sir Paul told the family via a letter to their solicitor that he had taken "a close personal interest in this case from the start". He assured the Lawrences that everything possible had been done to catch their son's racist killers, and repeated this when he met them in person the following year.
Sir Paul apparently based these assertions on an internal review of the murder investigation conducted by one of his high-flying officers, Detective Chief Superintendent Roderick Barker. The review, which concluded that the investigation had "progressed satisfactorily" and that all lines of inquiry had been correctly pursued, was cited for four years by high-ranking Met officers as proof that the Lawrences' concerns were unjustified.
The inquiry heard that, rather than rely on the advice of his aides, Sir Paul read and approved the Barker review himself. His judgement is thus expected to be criticised by the inquiry, on the basis that this bland document should have rung alarm bells and prompted him to ask further questions.
The review was dismissed as "indefensible" by Sir William, who interrupted Det Ch Supt Barker's evidence to declare him an unreliable witness.
As well as giving false comfort to the Met, the review materially affected the success of subsequent attempts to reinvestigate the murder. In 1997, a Police Complaints Authority report identified dozens of missed opportunities and lines of inquiry. Had they been pointed out four years earlier, the killers might have been caught.
Sir Paul is also expected to be criticised for attacking the public inquiry in its early weeks, saying in a statement through his barrister, Jeremy Gompertz QC, that he feared that it was damaging relations between the police and the black community.
He was questioned closely, when he appeared before the second part of the inquiry, about the grounds on which he had reassured the Lawrence family that all was well.
Sir William's report is likely to have concluded that institutional racism obstructed the murder investigation and that it also blights the Met - a view steadfastly resisted by Sir Paul.
Sir Paul last night declined to comment until the report is published next week.
The prospect of his resignation over the Lawrence affair lends a certain symmetry to his career as Commissioner. Sir Paul, who was appointed a few weeks after Stephen was murdered, used his first public speech to pledge that the Met would be "totally intolerant" of racism. Now, race may have proved his nemesis.
The 23 who stand accused,
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