Claims that children were drugged as part of alleged sex abuse were unfounded, according to the paediatrician who made the allegations.
Dr Lazaro was awarded an OBE for her work with children.
In a 2002 libel trial, Dr Camille De San Lazaro admitted exaggerating accounts of abuse, compiled for a report into a Newcastle nursery.
But she denies a charge of professional misconduct at the General Medical Council's fitness to practice panel.
Two nursery nurses successfully sued the authors of the report for libel.
Christopher Lillie and Dawn Reed, who worked at the city's Shieldfield Nursery, were accused of sexual offences, but the charges were dropped at the direction of a judge at Newcastle Crown Court in 1994.
Following the acquittals, the council commissioned the report - entitled Abuse in Early Years, to carry out a review of the nursery.
Following its publication, Mr Lillie and Ms Reed successfully sued the authors at the High Court in 2002. They were each awarded £200,000.
'No proper basis'
Under cross-examination in this trial Dr Lazaro admitted her accounts of abuse had been "overstated, exaggerated and emotive".
The hearing also heard she had written that drugs had "almost certainly" been involved in abuse.
In the libel trial Mr Justice Eady said to her: "You had no proper basis to say that to them, did you?"
She replied: "I agree."
Dr Lazaro received an OBE in 1999 for services in the care of sexually abused children.
The hearing is expected to last up to two weeks.