Dominic Lawson: The wonder is that it took the Royals so long to see through Mohamed al-Fayed

It was only after Diana's death that Windsor Castle decided no longer to take the Fayed shilling

Mohamed al-Fayed emerges with his reputation intact from Lord Stevens's 871 page investigation of his allegations that his son Dodi and Diana Princess of Wales were murdered on the orders of the Duke of Edinburgh. Before the former Metropolitan Commissioner published his findings yesterday, the owner of Harrods was known to be a liar and a fantasist. Lord Stevens's report has done nothing to alter that impression.

It was, after all, as long ago as 1989 that the Department of Trade and Industry Inspectors published their own 752-page report into the takeover of the House of Fraser - of which Harrods was part - by Mohamed and his brothers. The purpose of the enquiry was to establish whether the Fayed family had been honest in the claims they made about their resources and their origins at the time of that acquisition.

Among other things, the inspectors concluded that the Fayeds "were plainly telling us lies". They went on to say that: "In consequence of watching them give evidence we became reluctant to believe anything they told us unless it was reliably corroborated by independent evidence of a dependable nature".

The inspectors described "Mohamed's capacity for fantasy ... and the large number of lies he certainly told us" and that even evidence given by the Fayeds under solemn affirmation "was false and [which] they knew to be false ... this false evidence related mainly, but not exclusively to their background, their past business activities, and the way in which they came to be in control of enormous funds."

The inspectors noted that "the lies which the Fayeds were telling about themselves and their resources were given a credibility they would not have achieved when they were repeated by their very reputable advisors".

While the Duke of Edinburgh deserves sympathy for having to endure Fayed's fictitious claim that he instigated the murder of his former daughter-in-law, there is one sense in which he too deserves a stinging rebuke. Is it not incredible that even after the DTI Inspectors had revealed Mohamed al-Fayed to be a charlatan - and as a result refused a British passport by the Government - Prince Philip chose to associate the Royal Family with him?

In the first instance the Royal Consort came away from an apparently riotous lunch at Harrods with a £15,000 cheque from Mr Fayed for the Duke of Edinburgh award scheme. More insidiously, the Duke allowed Mr Fayed for 15 years to plough some of his many millions into the Royal Windsor Horse Show, as a result of which Mr Fayed gained the right to sit next to the Queen in the Royal Box - an experience which you would have thought Her Majesty would have found not worth repeating.

It was only after Diana's death that the residents of Windsor Castle belatedly decided no longer to take the Fayed-sponsored shilling. Intriguingly, it was also only then that Mr Fayed started to refer to the Duke of Edinburgh as "a Nazi". You see, although Mohamed al-Fayed likes to portray himself as a man of the people, opposed to the old "establishment", the truth is that the Egyptian was obsessed with gaining access to Royal circles.

Not the least of Harrods' attraction to him in the first place was its many Royal Warrants. The man's archaic social aspirations could also be seen in the way he bought the former home of the Duke and Duchess of Windsor, and, indeed, in the fact that he invented the honorific "al" to put in front of plain Fayed.

Mohamed "Al"-Fayed has a peculiarly Middle-Eastern, not to say mediaeval, idea of how power is acquired and wielded in Britain. In a newspaper interview four years ago he referred to Prince Philip as "the guy who is running the country". But Britain, despite what Mr Fayed thinks, is not Saudi Arabia.

I don't mean to suggest that nothing new can be learned from reading Lord Stevens's report. It is especially revealing in its examination of the way in which, as Lord Stevens delicately puts it, Mr Fayed's allegations "have been amended as new information has come to light". In the immediate aftermath of the deaths of Diana and Dodi, Michael Cole, then as now, Mr Fayed's faithful mouthpiece, told a press conference that what the ring that Dodi had bought for Diana meant "we shall probably never know". Later that month, September 1997, Cole made a formal protest to the Press Complaints Commission about newspaper speculation that Diana was pregnant. Such stories were, Mr Fayed's man complained, "defamatory" and gave "currency to nasty rumours."

Later, as we know, Mr Fayed began to piece together his conspiracy theory. He claimed that he "knew" that Diana was to be engaged to Dodi and was carrying his son's child. Later, as these claims were comprehensively discredited, Mr Fayed declared (in June 1998) that "Diana told me" that she and Dodi were to marry, and (in October 2003) that "Diana told me that she was pregnant". By that time, it had already emerged that the post-mortem had shown Diana not to be pregnant.

Yesterday Mr Fayed claimed that Lord Stevens had been blackmailed by the "British establishment" into publishing a cover-up. As a matter of fact, Mr Fayed himself had originally written to Lord Stevens asking the then Metropolitan Commissioner to conduct just such an enquiry. Mr Fayed's reasoning for this, at least, was sound. He knew that Lord Stevens had shown great courage and independence of mind in his investigations of official collusion by the British security services in the killing of Pat Finucane, and others, by Protestant paramilitaries in Northern Ireland.

To the consternation of the security services, Lord Stevens, after an investigation lasting 14 years, declared: "I conclude that there was collusion both in murders and in the circumstances surrounding them." Indeed, I asked Lord Stevens a couple of years ago if he would name the Duke of Edinburgh as the guilty party, if the evidence pointed to that, and he seemed quite cross that I could imagine that he wouldn't.

Yesterday John Stevens was admirably restrained in the face of Mr Fayed's provocation, asking us to consider the feelings of "a grieving father". We should also consider the emotions of Mr Fayed as owner of the Ritz hotel: under French law the employer is financially liable for the actions of his employees, one of whom, of course was the drunk, speeding driver, Henri Paul. As Le Monde recently observed "whoever is ultimately found responsible could face enormous damages ... Princes William and Harry could claim colossal financial compensation from the proprietor of the Paris Ritz."

Legal responsibility is not the same thing as moral responsibility - but this much is clear: Diana, Princess of Wales, having rejected as claustrophobic the embrace of the Metropolitan Police and diplomatic protection squad, trusted her safety and security to the flakey Fayeds. What a dreadful, fatal, mistake she made.

d.lawson@independent.co.uk