Police have searched the home of former Co-operative Bank chairman Paul Flowers.
West Yorkshire Police is investigating Mr Flowers, a Methodist minister who led the bank for three years, after he was filmed allegedly buying and using illegal drugs including crystal meth, crack cocaine and ketamine.
A spokesman for the force said: "Officers executed a search warrant at an address in Hollingwood Lane, Great Horton, (Bradford) yesterday as part of an investigation into alleged drugs offences arising from a national Sunday newspaper story."
Labour leader Ed Miliband is facing growing questions over his party's links to the former bank chairman, who has also been accused of incompetence.
Co-operative Group chairman Len Wardle has already quit amid the deepening scandal.
Mr Wardle brought forward his plans to retire by six months, acknowledging that he led the board that had appointed Mr Flowers.
Tory chairman Grant Shapps has now demanded to know when Mr Miliband and shadow chancellor Ed Balls were aware that Mr Flowers resigned as a councillor in Bradford after adult material was found on his computer.
"Will you instruct your MPs not to accept any more money from the Co-operative Group until the current investigation is resolved?" Mr Shapps insisted.
Labour has said Mr Flowers was "neither influential nor important" and the 63-year-old has been suspended from the party for bringing it into disrepute.
A source said: "It's true that there was a private meeting with Ed in March of this year. There were two informal dinners - three meetings that we can find records of in the space of three years.
"This shows that Mr Flowers was neither influential nor important."
During an appearance before the Commons Treasury committee earlier this month, where Mr Flowers stumbled over the basic facts and figures relating to the ailing bank, he was pressed on whether he had approved a £50,000 donation to Mr Balls' from the Co-operative Group in 2011/2012 while a member of the board.
"My recollection is that we paid for a particular researcher to assist the shadow chancellor in the work that he needed to do, and that we believed to be a legitimate and proper use of resources," he replied.
A spokesman for Mr Balls said: "The Co-op Group, not the bank, donated £50,000 to the shadow chancellor's office which was declared in the normal way at the time.
"Ed has never discussed the donation with Paul Flowers. Ed's been to a few events which Rev Flowers has also been at, but he's never had a meeting or phone conversation with him."
When he resigned from Bradford council in September 2011, Mr Flowers cited personal reasons and increased responsibilities at the Co-op.
But a spokesman for Bradford Council said: "Inappropriate but not illegal adult content was found on a council computer handed in by Cllr Flowers for servicing. This was put to him and he resigned immediately."
It also emerged that the Methodist minister was convicted of gross indecency in 1981, reportedly over a sex act in a public toilet. A church spokesman said that at the time he went through the "usual procedures" before being allowed to continue in his role.
"He was very contrite, and he continued his work," the spokesman said.
Labour Co-op MP and former Treasury select committee chairman Lord McFall urged an "open and transparent" response to the controversy over Mr Flowers' appointment.
"There is no way out of that," he told the BBC's Newsnight programme. "That was a serious, serious error on behalf of the Co-operative Party.
"What the Co-op needs to do is be very open and transparent about how we arrived here and how we are going to take it forward."
Lord McFall said he was "surprised" Mr Flowers had been employed, describing the regulatory checks as a "paper" exercise.
Asked if Ed Miliband had been wise to appoint Mr Flowers to his business advisory group, Lord McFall replied: "Who knew he was dodgy?"