Senior Labour Party officials sent in to investigate the rogue council found prima facie evidence that one Labour councillor had been involved in election malpractices which resulted in the election of three Conservatives in 1994.
Further, they discovered that a caucus of Labour councillors, calling itself the Manifesto Group, was formulating policy in private to the exclusion of other members.
One such meeting, described as "wholly wrong and inappropriate", decided that support would be given to Bernard Crofton, Hackney's controversial housing director, who was described in an official report this week as a liar and a fraud. Frank Field, the Labour chairman of the Commons Social Services Committee, has said he backed Mr Crofton.
The Hackney report, which calls for the suspension of two senior councillors, found such a "basic failure to understand - and a lack of knowledge and respect for - the National Rules and Procedures of the Labour Party" that it even recommends making all Labour's 43 councillors re-sign their allegiance to the party and its rules.
Labour's Walworth Road headquarters is holding a series of interviews with councillors and is also seeking more written evidence.
The two councillors facing suspension from the party, pending a further inquiry by Labour's National Executive Committee, are David Phillips, the constituency agent, and Isaac Liebowitz, a member of Hackney's Orthodox Jewish community.
According to the report, Mr Phillips "participated in, assisted in the convening of, and was present at meetings of the Manifesto Group and thus played a key role in the functioning of an unofficial group of Labour councillors". This, it says, represented a "Group within a Group."
Further, it says he misled the party about his debts when applying to become a Labour candidate. He "claimed to have no ... outstanding obligations. In fact, he had a court order on payment of court costs on Community Charge Arrears".
The report's most astonishing findings, however, relate to Mr Liebowitz. It says: "There is strong prima facie evidence that Isaac Liebowitz was involved in two areas of malpractice surrounding the 1994 London Borough elections ... Cllr Liebowitz ... is allegedly implicated in membership packing and proxy vote fixing generally and in Northfield Ward in particular."
An affidavit by a senior Labour councillor, submitted to the NEC and obtained by the Independent, alleges that five wards in Hackney were "packed" with Orthodox Jews, many of whom were recruited by Mr Liebowitz and some of whom did not appear on the electoral register. In the Northfield Ward, established members were replaced by officers with no previous interest in politics, including a secretary who "vanished" after a couple of months.
When the elections came, all three seats in the ward - Labour-held for more than 20 years - were won by Conservatives in the only Tory gain in the whole of London. Subsequent examination of voting records showed an enormously high level of proxy votes.
The report says: "Some of the proxy voters/members did not and never had resided at the addresses used and even, possibly that they were people who did not exist at all. Others were children, or not British nationals."
Some time later, Mr Liebowitz sent a Jewish New Year card to Denise Robson, one of the Labour candidates denied victory in the Northfield ward. In it , he wrote: "I take this opportunity to ask you for forgiveness and apology for all the wrong I have done to you or spoke about you ... I hope you will find [it] in your heart to forgive me and we will be good friends again."
Ms Robson asked Mr Liebowitz to elaborate on his apology. She received no reply.
Mr Liebowitz rejected the allegations against him. "I will rigorously contest these charges," he said. "I categorically deny them. They are totally untrue, totally fabricated."
He said the apology he sent to Denise Robson related to his refusal to support her nomination on an Orthodox Jewish working party.
"She wanted to be chair of the committee and I would not support her. It was about politics."
He said the allegations were intended to discredit him, but he would not say who he believed was trying to discredit him.
Mr Phillips said: "I understand a report has gone to the NEC and they have set up a Disputes Panel that is having hearings at the moment. Until that has finished I can't comment on any of these matters and I am not at liberty to discuss the allegations about the Manifesto Group."