The former deputy chief whip at the centre of groping allegations was suspended from the Conservative Party on Friday, after Downing Street admitted it was warned not to appoint him.
Chris Pincher had the whip removed following claims that he drunkenly groped two men at a private members’ club in London on Wednesday evening.
Number 10 is now braced for another by-election as pressure grows on Mr Pincher, the Tamworth MP, to stand down.
Last week, the Tories suffered a historic double by-election defeat, losing the Red Wall constituency of Wakefield and the safe seat of Tiverton and Honiton.
The Telegraph has learned that Steve Barclay, the Downing Street Chief of Staff, raised concerns about the appointment of Mr Pincher as deputy chief whip.
On Friday, a Number 10 spokesman admitted that “unsubstantiated” allegations about Mr Pincher had been received, but a source said: “Under HR law, you are not allowed to deny someone employment on the basis of rumour or speculation. The bar is quite high for you to deny them the job. You can’t just do it on hearsay.”
Mr Pincher resigned from his role on Thursday evening, saying in a letter to Boris Johnson that he “drank far too much” at an event the night before and had “embarrassed myself and other people”.
The Telegraph has spoken to two Conservative MPs who were at the Carlton Club on Wednesday night, one of whom “threw out” Mr Pincher after seeing that he was “very drunk”.
The other witnessed Mr Pincher engage in “inappropriate touching” of a young man. Both MPs reported the behaviour to the Whips Office.
At the time of his resignation, a Tory source insisted Mr Pincher would not face any inquiry or disciplinary process, adding: “The PM thinks he’s done the decent thing by resigning. There is no need for an investigation and no need to suspend the whip.”
But less than 24 hours later, Downing Street performed a U-turn after a string of MPs urged more stringent action against him.
Mr Johnson spoke to “a number of” Tory MPs who were at the Carlton Club when the alleged groping took place on Wednesday night.
“The account given was sufficiently disturbing to make the PM feel more troubled by all this,” a Downing Street source said, adding that Mr Johnson wanted to wait for a formal investigation to begin before suspending the whip.
On Friday evening, the Independent Complaints and Grievance Scheme, the parliamentary harassment watchdog, announced that it had opened an investigation into Mr Pincher’s behaviour after receiving a formal complaint.
There are growing questions over why Mr Pincher was appointed to the role in the Whips Office in the first place.
Multiple Westminster sources said Downing Street officials were urged not to go ahead with the appointment in the February reshuffle. One former minister called the appointment “extraordinary”, adding: “Why on Earth did they make him deputy chief whip, responsible for the welfare of others in Parliament?”
Another MP said: “When it was put around that he was going to be made chief whip, some colleagues warned Number 10 of their own experience or of reputation. It ground to a halt. It was referred to the propriety and ethics team at the Cabinet Office.”
The officials then appeared to decide that “he was not suitable to be made chief whip, but was perfectly suitable to be made deputy chief whip”.
Speaking about Mr Barclay’s intervention, a source said: “When the appointment was made, Stephen had some reservations and that was why there was a delay in the process. He put a flag up, saying: just a second here.
“Coming from a law background, he wanted No 10 to be a very professional place, and he feared behaviours had been normalised.
“Stephen was part of the reshuffle initially so didn't have any say over appointments, but then he was then made Chief of Staff, which meant he was part of the vetting process. That's when he raised his concerns.”
It is not the first time Mr Pincher has faced sexual impropriety claims. In 2017, he was accused of making a pass at Alex Story, a former Olympic rower and Tory activist.
He was accused of massaging Mr Story’s neck, untucking his shirt and saying: “You’ll go far in the Conservative Party.” He denied wrongdoing, resigned from the Whips Office and referred himself to police. A Conservative Party investigation cleared him of wrongdoing.
Mr Pincher, who was not returning calls to close friends, declined to comment when approached by The Telegraph on Friday.