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The infamous "Squidgygate" tapes of Princess Diana speaking intimately with an alleged lover were recorded by the Government Communications Headquarters and deliberately leaked over the public airwaves, her former bodyguard told an inquest panel looking into her death.

The UK spy agency regularly bugged and taped Diana and other members of the royal family, according to Ken Warfe, who served as a bodyguard to the princess from 1987 to 1993. Ostensibly the reconnaissance was to protect the family from assassination by the Irish Republican Army.

A tape of a 1989 New Year's Eve conversation between Diana and James Gilbey contained a half-hour of pillow talk. Gilbey repeatedly told her, "I love you" and called her by the pet name "Squidgy" 53 times.

According to Warfe, the recording was made by the UK government's top secret monitoring station and then continuously broadcast until picked up by ham radio enthusiasts. The hams then turned the tapes over to the media. Warfe didn't say why the spooks wanted to make the conversations public.

The revelation came during an inquest into the August 1997 death of Diana, her boyfriend Dodi Fayed and driver Henri Paul in a high-speed car crash as they fled paparazzi in Paris.

It wasn't the only shocker let loose during the hearing.

Warfe said royal family members were jealous of Diana's popularity and that she believed private secretaries to the Queen and Duke of Edinburgh were "sharpening their knives" against her.

Because of her distrust of the royal family and of intelligence services, the princess in 1993 hired electronic surveillance experts to sweep her apartments at Kensington Palace for bugs. They posed as carpet fitters to avoid detection, Warfe said, but eventually four men were detained after they tried to access a telephone exchange.

The tender New Year's Eve exchange was recorded while Diana was staying with the Queen at Sandringham estate in Norfolk and Gilbey was at an undisclosed location speaking on a mobile phone.

After the conversation was recorded, it was broadcast on a loop until it was picked up by radio ham Cyril Reenan, who sold it to a newspaper. Reenan was said to have stumbled upon the conversation accidentally using a radio scanner.

Coverage from the Telegraph and the BBC are here and here, respectively