Sir William Macpherson of Cluny also dismissed an internal review of the Lawrence murder investigation undertaken by the officer, former Detective Chief Superintendent Roderick Barker, as "indefensible".
The review concluded that the conduct of the investigation had been satisfactory and that all lines of inquiry had been correctly pursued, and it was cited for four years by the highest-ranking Metropolitan Police officers as proof that detectives did all they could to catch Stephen's killers.
Sir William, a former High Court judge, made his unexpected intervention after the public inquiry into Stephen's death was told that Mr Barker was chosen for the review because he was regarded as "the creme de la creme" by Sir Paul Condon, the Metropolitan Police Commissioner.
Sir William said he and his advisers had carefully considered Mr Barker's evidence to the inquiry.
"We feel it necessary and right that we should say, in our view, his value as a witness and his credibility in vital matters has already been much undermined, for reasons which will be perfectly obvious for anyone here today," he said.
"Our present view ... is that we feel we ought to indicate that this review is likely to be regarded by us as indefensible, for what must be obvious reasons."
He suggested to lawyers that further questioning of Mr Barker, who retired last year, would, therefore, be a waste of time.
Stephen Lawrence, an A-level student, was stabbed to death in a racist attack by a white gang in Eltham, south-east London, in April 1993.
A lengthy catalogue of serious errors and omissions by the murder squad has been outlined to the public inquiry over the past 10 weeks, including an admission by senior officers that they could have made arrests within 48 hours.
The inquiry heard yesterday that the contents of Mr Barker's review, which was carried out in autumn 1993, were approved by Sir Paul and the area assistant commissioner, Ian Johnston.
Mr Johnston defended the murder investigation after the inquest in February 1997, saying he believed that "right from the start we did all we could".
High-ranking officers continued to maintain this stance until the publication of a scathing report by the Police Complaints Authority (PCA) in December of last year.
The PCA report criticised Mr Barker's review for failing to give fresh impetus to the investigation by identifying mistakes and lost opportunities. It said that the reassurance that the review gave to senior detectives was "ultimately highly damaging".
Earlier yesterday, Mr Barker agreed with Stephen Kamlish, counsel for the Lawrence family, that he was hand-picked for the review because he was "one of the Met's best".
Mr Barker denied that his review had been "a whitewash". But he agreed that when he was briefed by his superiors, he was told "not to upset or undermine" senior detectives.
Stephen's father, Neville, said after yesterday's hearing: "It has now been made clear that the review is a complete and utter cover-up. I want to know who is going to accept responsibility for this cover-up."
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