Jacques Morel alleges that the late French photographer James Andanson organized a plan to stop the car carrying Diana and boyfriend in the Pont d'Alma so paparazzi could take photos and get interviews. He says he has written a book on the subject, so far unpublished.
Morel, who began testifying Wednesday, said he saw a line of 10 to 12 photographers and a man with a video camera just inside the tunnel before the crash on Aug. 31, 1997. No other witness has claimed to see photographers waiting in the tunnel, though several have said photographers were quickly at the scene of the crash.
The inquest jury must decide how Diana and Dodi Fayed came to die in the crash, which also killed driver Henri Paul.
Morel claimed he had seen secret papers supporting his contention, but Michael Mansfield, a lawyer for Fayed's father, Mohamed al Fayed, questioned whether such a file existed.
"How would you like to bet?" said Morel, who testified via video link from Paris. "I can bet with you 1 million U.S. dollars and if you bet with me, I can send you the file within 24 hours."
Morel claimed he had given a copy of the file to Fayed's legal team, which Mansfield denied.
"I would like to add that there are not only Mr. al Fayed's representatives in possession of this file, but the entire world has it. All the journalists in the world have a copy of this file, but they cannot use it," Morel said.
Richard Keen, a lawyer representing the Paul's family, asked Morel whether he really was in the tunnel at the time.
"Yes, I was there. I don't think I dreamed it, there are things that I saw and heard," Morel said.
Responding to questions from Richard Horwell, representing London's Metropolitan Police, Morel confirmed that he alleged that Paul was a paid informant of secret service agencies and that CCTV images of the car's route to the crash had been covered up.
Horwell asked whether Morel hoped to make a lot of money from the book.
"I just hope to recover the money I have lost during the last 10 years," said Morel. "The rest is for the children in the third world."
"The truth is you will write and say anything to make money, won't you?" Horwell said.
"I say what I have heard and what I have seen," Morel replied.
Mohamed al Fayed has alleged that Andanson, who died in 2000, was involved in a plot to kill his son and the princess, and that he was the driver of a white Fiat Uno which collided with the couple's car near the tunnel.
That car has never been traced.