Modric was still playing for Dinamo Zagreb at the time.
Halford, now a life president of the club, told the Manchester Evening News: “When Dr Shinawatra was here we could have signed Modric.
“Shinawatra was very excited – he had come to me to say we were about to make a big signing, one of the best players in the world, and that's who it was.
“Charlie Corluka had lined it up for Modric to come to us, but when the money was needed, Shinawatra's money was frozen in Thailand.
“He came to me on the first day of the season to say he had to resign, so we didn't get Modric.
“It would have been for around £10million – and now he's in for the Ballon D'Or."