Ex-British international athlete Ikem Billy says he was told by Andy Norman – who was then promotions director of the British Athletic Federation and who died in 2007 – to throw a race in September 1989 in order to allow Coe to win. Norman was Billy's agent at the time as well as the race promoter.
Coe is not accused of being complicit in the fix or of knowing about Billy being paid to lose.
Sebastian – now Lord – Coe is currently at the pinnacle of his career, following the success of the 2012 London Olympics and Paralympics. He headed the successful bid for London to host the Games and was then chairman of the London Organising Committee. Yesterday he was named a Companion of Honour in the New Year Honour's List for his work on the Games.
Coe won two Olympic golds in the 1980s. He also set 12 world records. After he retired from athletics, he became a Tory MP and later a life peer. He is vice-president of the International Association of Athletics Federations (IAAF), pro-chancellor of Loughborough University and chairman of the British Olympic Association. This month he won the Lifetime Achievement Award at the BBC Sports Personality of the Year.
He has ambitions to run for the presidency of track and field's world body, the IAAF, and is expected ultimately to gain membership of the International Olympic Committee.
Many within athletics have long suspected that doping and race-fixing was rife in the 1980s – regarded as a "golden decade" of British athletics.
Most of the scandals revolve around former London policeman Andy Norman, who in 1984 was appointed as British athletics' first professional promotions officer.
From the 1970s through to the 1990s there were hardly any British international athletes whose careers were not influenced by Norman. From Brendan Foster and Alan Pascoe through to Steve Cram, Fatima Whitbread, Linford Christie and Jonathan Edwards, Norman managed the careers of champions while operating as a leading sport official.
Norman built his power base in the 1970s through handling the career of Steve Ovett. Because of this closeness to Coe's greatest rival – Norman was best man at the Ovett's wedding – Coe never had Norman arrange his racing for him or manage him, as did so many other athletes. But nor could Coe – as one of the world's biggest track stars – distance himself from Norman entirely.
In 1988, Coe was controversially left off the British team for the Seoul Games and denied the chance to win the Olympic 1500m for a third time. By the following summer, it was clear Coe and Ovett were coming to the end of their careers.
Coe won the English 1500m selection trial race for the following year's Commonwealth Games, which he announced was to be his international swansong before pursuing a career in politics. Coe's send-off meeting – his last race in Britain – was at London's Crystal Palace in September 1989, where he was entered for the 800m.
By his own world record-breaking standards, the 32-year-old Coe had a mediocre season, only once running quicker than 1 min 45 seconds.
According to Ikem Billy, the former European junior champion, less than an hour before he was due to step on to the track for the race, he was approached by Norman and ordered not to win the race. He says that on top of his race fee of about $5000, he was offered $10,000 to lose. Athletics fees then were paid in US currency.
Billy says the approach was witnessed by another runner who competed in a different race at the meeting.
"I hold my hands up," Billy said. "I was paid to finish second. I admit that it was fixed. Andy paid me to finish second. He told me: 'Make sure you don't win'. Everyone was scared of Andy. He dominated the sport. He could do what he wanted.
"That night, an hour before the race, he came up to me and he said, 'The people here have come to see Seb Coe win. They don't care about you'." Billy was that year's national champion at 800m and had been unbeaten by any other Briton over two laps. "Until that night," he said.
"Andy knew Seb wasn't in shape and that I would kick his arse. I remember coming off the final bend, I was on his shoulder, looking round and thinking I could go flying past any time. Instead I just eased off."
Five months later, when they raced again, in the final of the Commonwealth Games 800m in Auckland, Billy placed fifth ahead of Coe in sixth, while a third Englishman, Matthew Yates, took bronze.
According to a BOA spokesman, Coe is out of the country and unavailable for comment.