The private investigator at the centre of allegations against MP Helena Guergis owed creditors more than $13 million as of August 2009, according to documents obtained by CBC News.
Court records reveal that Derrick Snowdy has filed for bankruptcy, with total liabilities of $13,313,976 and total assets of $11,379 as of Aug. 21, 2009. A decision by the court has not yet been made.
Snowdy is reported to be the source of the "serious allegations" that Prime Minister Stephen Harper said led him to request Guergis's resignation from cabinet and the Tory caucus last week.
Snowdy reportedly told a Conservative party lawyer last Thursday that his investigation into Toronto businessman Nazim Gillani had uncovered allegations of cocaine use and stock fraud involving Guergis and her husband, former Conservative MP Rahim Jaffer. The lawyer passed those on to the Prime Minister's Office.
The Toronto Star also said Snowdy told the lawyer that Gillani had boasted he had cellphone pictures of Jaffer and Guergis "partying" with high-class escorts when cocaine was being snorted.
Howard Rubel, a lawyer representing Guergis, vehemently denied the allegations, calling them "ridiculous boasts" by a businessman facing fraud charges. Gillani has been charged in an unrelated matter.
Gillani himself, according to spokesman Brian Kilgore, repudiates the tales of drugs and prostitutes, and has acknowledged being "over-enthusiastic" in his descriptions of his encounters with Jaffer. Kilgore told CBC News late Thursday that Gillani also denies he has any incriminating photos of the couple with cocaine or prostitutes.
Leaked bankruptcy details a 'smear': P.I.
Snowdy acknowledged Thursday in an email to the CBC that he filed for bankruptcy protection, but he said it was because a dodgy employee had stolen from his company and forced him to borrow more than $1 million to pay taxes.
In his email, he called the leak and spin about his bankruptcy a "smear" meant to divert attention and rejected any suggestion he was out for money while investigating Gillani.
"They want to smear me they can," he wrote.
"I was never an investor, I lost nothing with the company. I was privy to documents and meetings because Gillani believed I was a potential investor. That was some of how I gathered the documents and information. I never held any share in the company not even for a minute."
The revelations raise questions about whether the PMO did any due diligence on the Guergis allegations before she was turfed from cabinet and caucus.
The PMO initially called the accusations against the former status of women minister "serious and credible," and used that phrasing as recently as Thursday morning. But spokesperson Dimitri Soudas later said that Harper "made clear that the information was second-hand" when he referred the matter to the RCMP and Parliament's ethics commissioner for investigation.
Guergis, for her part, has decried the "innuendo from anonymous sources" that derailed her political career. She said she contacted the Mounties and the ethics commissioner to offer her full co-operation once she heard the prime minister had referred the case to them.
On Tuesday, the ethics commissioner, Mary Dawson, said she would not pursue an investigation.