Financial backers linked to Israel and a private intelligence firm helped fund the travels of Liam Fox's close friend Adam Werritty, according to reports.
The Times claims they helped channel £147,000 into a company set up by Mr Werritty, who used it to join the defence secretary on trips abroad.
The lobbyist is due to be questioned again later as part of a probe into his relationship with the minister.
Mr Fox insists his friend does not work for him officially or unofficially.
The Times claims a money trail links Mr Werritty to a private intelligence company with strong interests in Sri Lanka and a property investor who lobbies the UK government on behalf of Israel.
The paper also alleges links to a venture capitalist whom it claims is "keen for stronger ties with Washington".
BBC political editor Nick Robinson said Mr Fox's story was that Mr Werritty was funded by ideological backers, rather than backers of companies who wanted defence contracts.
But he said Cabinet Secretary Sir Gus O'Donnell was not likely to be impressed by that argument - as in effect it meant Mr Fox was using an alternative source of advice to the civil service, being paid for by private funds.
Continue reading the main story “
The civil service - and many outsiders - will, I suspect, believe that Mr Fox has allowed himself and them to be compromised. ”
BBC Political Editor
Liam Fox: Why he might go
Our correspondent said ultimately there would be a perceived difference between the civil service view on taking outside advice and the political view, and in the end it would be up to David Cameron to decide Mr Fox's future.
The defence secretary has faced continuous pressure after it emerged his best man and former flat mate Mr Werritty was present on 18 of his overseas trips, including visits to Sri Lanka and Dubai, despite having no official role.
Mr Werritty had also met the defence secretary at the Ministry of Defence (MoD) 22 times since May 2010 and handed out business cards claiming he was Mr Fox's adviser.
Meanwhile, it has been reported that the pair attended a $500 (£318) dollar-a-head dinner in Washington with senior defence industry figures which had not been declared by the MoD in its list of Mr Fox's meetings.
The Daily Telegraph claims they were both guests at the fundraising dinner last year at the Mandarin Oriental hotel.
Mr Fox's spokesman said he had been attending the event in a "private capacity" while he was on annual leave and that taxpayers' money was not used.
Labour leader Ed Miliband has accused Mr Cameron of weak leadership for not reaching a swift decision on Mr Fox's future.
Cabinet Secretary Sir Gus O'Donnell is leading an inquiry into Mr Fox's conduct But Mr Cameron again said on Thursday that he would not make a decision on his minister's position until all the facts had been established and the questions answered instead of meeting an "artificial deadline".
Cabinet Secretary Sir Gus O'Donnell is leading an investigation into claims Mr Fox broke the rules on ministerial conduct by allowing his friend access to government business although the terms of reference of his inquiry have not been published.
The UK's most senior civil servant is not expected to complete his report until next week. After an interim report into Mr Fox's conduct was released on Monday, No 10 said serious mistakes had been made.
The BBC understands that details of meetings Mr Werritty had with other ministers are also likely be released early next week, possibly on the same day. Labour have called for them to be disclosed.
The Guardian reported that Mr Fox has been asked to address Conservative MPs on Monday evening in what it said was a sign of the strength of support for the defence secretary from the right of the party.
The paper said Mr Fox had been asked to speak to the foreign affairs subcommittee of the influential backbench 1922 Committee although party sources indicated this was a longstanding engagement.
Senior backbenchers - such as David Davis and Sir Malcolm Rifkind - have said he should stay in his job, arguing the Ministry of Defence needs stable leadership while UK forces are in action in Afghanistan and Libya.
But former Conservative defence secretary Michael Portillo, who left frontline politics in 2003, said that if the allegations in The Times turned out to be correct, they could "prove fatal" for Mr Fox.
"If it turns out that the adviser (Adam Werritty) has been flying around the world funded by private elements and it has not been declared anywhere, that seems to me unsustainable," he told BBC's This Week programme.
Friday, 14 October 2011
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