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FOR CYNICS WHO SAVOR TALE OF DOMESTIC CHAOS CHEZ Windsor, it was the decade's most delicious scandalfest: No sooner had British tabloids splayed photos of a topless Duchess of York across their lurid pages than it was her sister-in-law's turn to take the heat. On Aug. 24 the transcript of a 23-minute phone conversation between the Princess of Wales and close friend James Gilbey was published in The Sun, revealing to the world that 1) she answers to the nickname Squidgy; 2) she describes life with Prince Charles as "real torture" and 3) she sometimes catches the 92-year-old Queen Mum watching her "with a strange look in her eyes."

The tape's chummy dialogue (the word "darling" pops up more than 20 times) quickly touched of a round of speculation about the Princess' friendships with bachelors like Gilbey, a well-born man-about-town whom she has known since 1979. But the conversation also exposed a side of Di that the bedazzled British public often ignores: With its giggly chatter about shopping, spending and horoscopes, the transcript made her sound like a dim-bulb Sloane Ranger surrounded by sycophants. In the words of John Casey, Fellow of Gonville and Caius College, Cambridge, who lambasted Di and her "moronic friends" in the Evening Standard, "The Princess comes across as a birdbrained egomaniac."

As diverting as it was, however, the release of the poopsie-woopsie conversation between the Princess and the fawning Gilbey (whose relationship with her. most insiders believe, has stopped short of actual sex) seemed like a mere footnote in comparison with the sensational tale that bubbled to the surface later in the week. Throwing a new light on the subject of Diana and her "confidants," an ex-army lance corporal who said he had witnessed decidedly indiscreet action between the Princess and her riding instructor, Maj. James Hewitt, was reported to have come forward with an offer to describe what he had seen. The media hounds smelled blood, and by Sept. 1, Diana's relationship with Hewitt which seemed to have been less innocent than her flirtation with Gilbey had been feverishly dissected. Amid renewed rumors that Wales separation announcement was in the offing, the stakes suddenly seemed higher: The tale-telling was becoming ruthless, and even a Princess had nowhere to hide.

The unlikely source of Di's first round of woes was a retired bank manager from Abingdon, near Oxford, who contacted The Sun in 1990, offering a tape of a 1989 conversation between a man using a cellular phone and a woman whom he believed to be Princess Di. An inveterate eavesdropper who has a radio scanner linked to a 20-foot aerial in his backyard, Cyril Reenan, now 70, was in the habit of illegally recording car-telephone calls made through relaying stations in the area. By Reenan's account, he thought long and hard before going public. "I was frightened of it," he says of the tape. "I thought, 'Well, I like the girl, and I'm a royalist. There's no way I want to harm royalty.' At the same time, it was in the back of my mind that if I had taped it, someone else could too. I said to myself, 'Is she a proper person to be Queen of England?' "

Last week, The Sun claimed it was only coincidental that the paper had withheld the tape until it found itself in the midst of a circulation war. Editor-explained on Aug. 25 that it was "concern over Diana's health" and the shaky state of the Waleses' marriage that kept editors from breaking the story two years ago. But when suggestive bits were leaked by two other papers and it became known that a soon-to-be-published book would be quoting the tape as well, The Sun rushed the transcript into print.

On the tape, said to have been recorded when Gilbey called from his car at the end of 1989, the pair sound like adolescents in the goony throes of love. A sampler:

He: Kiss me, please! (sound of kisses) Do you know what I'm going to be imagining I'm doing tonight, at about 2 o'clock? Just holding you so close to me. It'll have to be delayed action for 48 hours!

She: (giggles)

He: Fast forward!

She: Fast forward!...I shall tell people I'm going [to London] for acupuncture.

He: (laughing) Squidge, cover them footsteps!

At one delicious point, the conversation turns to Diana's talk with the Bight Reverend Peter Nott, the Anglican Bishop of Norwich, and Gilbey gaily asks, "Did you give him a hard time?"

She: I did, actually, in the end. I said, "I know this sounds crazy, but I've lived before." He said, "How do you know?" I said, "Because I'm a wise old thing."

He: Oh. darling Squidge, did you? Very brave thing to say to him, actually. Very.

She: It was, wasn't it?

He: Very. Full marks. Ninety-nine out of a hundred!

And there's plenty of idle chat about fashion:

She: What have you got on?

He: The new jeans I bought yesterday.

She: Good!

He: Green socks. White-and-pink shirt...I'm afraid I'm going to let you down by the shoes.

She: Go on, then, (giggles)

He: You can guess.

She: Your brown ones!...

He: The brown suede Guccis. The ones you hate!

She: I just don't like the fact it's so obvious where they came from.

Elsewhere in the transcript, Diana speaks briefly of the schism in her marriage and about buying expensive clothes for her friend Hewitt, long rumored to be a romantic interest. Implying that she sees her work as a protective wedge between her and her husband, she says, "I mean, I'll go out and do my bit in the way I know how, and then I leave him behind. That's what I see happening." She also complains about feeling "really sad and empty," and thinking, "Bloody hell, after all I've done for this f—ing family."

While skeptics insisted that someone (Scotland Yard, perhaps?) could have faked the tape, Kensington Palace insiders conceded that the voices were clearly recognizable and that the transcript was larded with details that no garden-variety trickster could have supplied. Although few outside the royal circle knew about Di's eating disorder in 1989, for instance, the caller asks whether she has binged. The tape also refers to an unplanned visit that Diana made to her childhood home, Park House. (Located on the Sandringham estate in Norfolk, it has become a home for the disabled.) The drop-in was un-publicized, and only the staff and the residents' families knew she had stopped by. Mention is also made of "Mara," who is thought to be Mara Berni, 58, Italian-born owner of the San Lorenzo restaurant, where the Princess often meets with close friends and reportedly receives private mail.

Although Diana's caller was unnamed in the beginning, those who know the two were quick to pinpoint Gilbey. Clues on the transcript include the fact that the caller was then 33, that his name is James, that his astrological sign is Libra, that he lived close to Kensington Palace and that he hunts—all of which apply to Gilbey.

For his part, Gilbey, who has known Diana since their early days in London, promptly denied being the mystery man and disappeared from sight. Only when photographer Andrew Styczynski literally ran into him on Aug. 27 did he surface briefly. Cruising the country roads near the headquarters of the Lotus racing team in Norfolk, Styczynski rounded a corner in his white Montego and accidentally slammed into his prey, who is a marketing manager for Lotus Cars Ltd. Styczynski jumped from his crumpled auto and fired off a few frames before Gilbey ran down the road to the safety of Lotus. Both men were later treated for minor injuries at a local hospital.

As disturbing as Gilbey may have found it, this was not his first encounter with tabloid frenzy. Just this summer, he was hounded by reporters after being identified as a major source for Andrew Morton's Diana: Her True Story. And in 1989 his name was linked with Diana's when the Princess, who had dismissed her bodyguard for the night, was photographed emerging from his Kensington flat at 1:15 A.M. "I suppose it wasn't that wise for Diana and I to meet in those circumstances," he said at the time. "It's hard for the Princess to keep up old friendships."

Despite its revelation, the tape initially didn't seem to tarnish the British public's opinion of Diana. Dubbed the Teflon Princess by one columnist, she effortlessly rode out the embarrassment. In the days following The Sun scoop, tens of thousands of Britons rang the Daily Mirror paper's hotline to say they would still like to see her become Queen.

That, however, was before former Lance Cpl. Malcolm Leete, 32, appeared on the scene—and before the press resurrected tales about Di's alleged dalliance with James Hewitt. Personal valet and groom to Hewitt from 1988 until 1990, Leete, a warehouse foreman who lives with his barmaid wife and 3-year-old son in a council flat in Slough, Berkshire, had been interviewed by a British press agency on Aug. 26 and served up a tale that portrayed Hewitt and the Princess as far more than platonic friends. Although Diana and the major, a 34-year-old cavalryman who distinguished himself as a tank officer in the Persian Gulf, had long been pegged by the press as close—in 1991 his jealous girlfriend complained to reporters that Hewitt and Di were spending too much time together—no one had given the story such a sensational spin.

By Leete's account, the relationship between Diana and Hewitt began in the summer of 1988 when she started riding lessons at Combermere Barracks in Windsor. "Modest" and "very friendly," in Leete's words, she took instruction from the major once a week at 8 A.M.—mounting up at the riding school and heading into Windsor Great Park without the detective who had accompanied her. Her only escort was the handsome Hewitt, who, Leete says, was "very respectful towards her."

In time, claims Leete, Diana's visits became more frequent, and soon she was taking lessons three times a week. Eventually, he says, "she started sending Hewitt presents and buying him things. She bought him suits, ties, shoes, socks—you name it." (The Sun ticked off the list: "Expensive shirts from Harvie and Hudson in Knightsbridge, pinstripe double-breasted suits from Savile Row and leather hand-stitched shoes from St. James's cobbler John Lobb...[as well as] a diamond-studded tie pin and a gold-and-silver alarm clock Di bought him from the Queen's jeweler, Asprey." Di herself said on the tape, "Well, I've decked people out in my time.... James Hewitt. Entirely dressed him from head to foot, that man. Cost me quite a bit.")

In the fall of 1988, Leete says, he witnessed an especially close encounter between Di and Hewitt. Due at the barracks in Windsor at 3:30 one November afternoon. Diana allegedly turned up at 4, when an "anxious and upset" I few ill rushed to "open her door and give her a kiss." More than an hour after they went inside the riding-school arena for Di's lesson, says Leete, curiosity got the better of him, and he stepped onto a platform that gave him a view into the building. "I saw the pair of them in the corner.... I wasn't quite sure about what I saw at first." says Leete. "They were kissing and cuddling.... I saw his hands going up the back of her blouse. Her blouse was outside her jodhpurs. She was all over him. He was all over her."

A few months later, Leete continues, "I went up to the mess one morning, and you could see his bedroom window. I saw the Princess in there. She was in his bedroom [sitting on the windowsill].... She turned round, saw me, and ran out of the room. I went to his room, and I could smell her perfume, so I knew she'd been in there for some time.... And women aren't allowed in the officers' bedrooms." For the next year and a half, he claims, "I didn't say anything because I was just so shocked."

After spinning his story for the wire service, Leete—a gardener's son who joined the army at 16—eon-ceded that he had had his differences with the meticulous Hewitt. "I was always al his beck and call. I was a slave, basically," says Leete. "He's definitely a toff. Snob is the word." Still, Leete insists that his revelations had nothing to do with revenge. "I believe people in Britain are entitled to know what I know about their future Queen," he says.

Not surprisingly, finding witnesses to lend credence to his story—or to brand it untrue—seemed all but impossible. Soldiers al Knightsbridge Barracks in London, where Hewitt is based, were under strict orders to keep silent. Said one trooper: "It's more than my job's worth even to mention [Hewitt's] name." Yet Leete is hardly backing down. "I know what I saw, and I know it's the truth," he says. "I'd put my son's life on it."

Stories of a Di-Hewitt connection are not new. The Millfield-educated son of equestrian-school owners in Devon, Hewitt had given riding lessons to Wills, 10, and Harry, 7, and had served as a sort of surrogate father to both. In 1989 and 1990, he and "Dibbs," as he called the Princess, were seen at London parties and restaurants. After he left to fight in the Gulf War in January 1991, she "would wake as early as 5 A.M. to hear the latest radio and television reports of the fighting, fearful that anything should happen to 'my James,' " as biographer Nicholas Davies put it in Diana. That July the two (who are still said to be in close touch) sparked a round of gossip when Hewitt was among the intimates who spent the evening of her 30th birthday at Kensington Palace. Charles was, as usual, absent.

One of the more vivid reports about Hewitt's involvement with Diana came in 1991 from Hewitt's ex-girl friend, Emma Stewardson, 31, who told reporters that she was "torn apart" by the relationship. Stewardson and Hewitt had dated for four years and were expected to marry, when she went to a tabloid with a report that he was smitten with the Princess. This year author Davies reported that she had spoken with him about Hewitt. " 'Jamie told me all about his crush one evening in the summer of 1990...,' " Davies said she had told him. " 'He told me that Diana had become a friend of his, a very close friend. He told me he was infatuated with her but realized she was married and nothing could come of it.' "

As The Sun reported this month, something did come of it. Diana and James, the paper claimed, "used a quiet London house for secret meetings...arriv[ing] separately to avoid suspicion and stay[ing] together for several hours. Hewitt boasted...about it to friends." By The Sun's, account, Hewitt's braggadocio was a problem for Di; the two allegedly split for a time in 1989, when he "told an old pal that he and Di enjoyed a 'physical relationship' and claimed to pals that the Princess was obsessed with him." But Di was said to have forgiven him later, and to have "confessed to the Marquess of Milford Haven that her affection for Hewitt was undying."

In the wake of the latest wave of scandal, signals from Buckingham Palace were muted. By some accounts, the Windsors had been bracing for the Gilbey tape for some time, and the story of Diana's relationship with Hewitt was no surprise. If the tales had any effect on the royal family, it was to underscore the deep estrangement between the unhappy Princess and her increasingly impatient mother-in-law, who, according to Di biographer Lady Colin Campbell, sees Diana as a "scheming ingrate." Coining on the heels of her alleged collaboration with biographer Andrew Morton, who portrayed her as a martyr with a cold-fish husband, the revelations are believed to have stemmed any latent family sympathy for Diana among the Windsors.

In recent weeks, some royal watchers have claimed that there is even a palace plot to discredit the rebellious Princess, who, they say, is trying to "beat the system" by manipulating the press. Others note that the palace seems merely to have dropped its protective shield; rather than calling the car-phone tape a hoax, for example, a royal spokesman said only that am determination as to its authenticity was "inconclusive."

Campbell says the knives have been out for the Princess since June 15, when the Queen and Prince Philip, the Duke of Edinburgh, had a meeting with the Waleses at Windsor Castle. As Campbell tells it, the others fell betrayed by Diana, and "the Duke more or less told [her] that the whole family would be better off without her." According to a newly updated British version of Campbell's Diana, the Princess Nobody Knows, "Diana was asked what she wanted, and she replied, simply, 'A legal separation.' " Although the Queen argued for a show of unity (which the Waleses supposedly agreed to provide until year's end), Diana is lobbying for "an official separation, with her own official residence, her own official staff and the right to continue her official duties," writes Campbell.

Will the Princess get what she wants? "I think this tape has undermined her negotiating position considerably, because this is the first proof put before the public that Diana is not as innocent as she has pretended to be," Campbell says. Now, with Leete's peephole revelations muddying the waters even more, seasoned royal watchers believe that the growing war among the Windsors has greatly dimmed Diana's prospects for becoming Queen. In recent weeks, British commentators have begun to openly debate the merits of a step-aside arrangement that would allow the scarred Charles to cede his position as heir apparent to Prince William.

As what one paper called "the worst crisis since the Abdication [of King Edward VIII in 1936]" was playing itself out, there were signs that even the Queen's late-summer retreat to Balmoral offered little escape from the grinding reality of family strife. By one account, witnesses heard raised voices from Craigowan Lodge, the sprawling house where Diana was quartered with Charles. Said a staff member: "Charles and Di were keeping others awake by their shouting. But it was impossible to tell what they were arguing over."

MICHELLE GREEN
TERRY SMITH, MARGARET WRIGHT and LAURA SANDERSON HEALY in London

  • Contributors:
  • Terry Smith,
  • Margaret Wright,
  • Laura Sanderson Healy.