Liam Fox's close friend Adam Werritty was interviewed today by officials looking into allegations surrounding links between them.
Sources close to the inquiry said that a conversation between Mr Werritty and Cabinet Office officials took place today at an undisclosed location away from Whitehall.
Dr Fox apologised to Parliament yesterday for allowing lines between his personal and ministerial life to become "blurred" after it emerged that he met Mr Werritty 40 times over the past 18 months in the Ministry of Defence and during visits abroad.
Prime Minister David Cameron said the Defence Secretary had made "serious mistakes" and asked the UK's top civil servant, Cabinet Secretary Sir Gus O'Donnell, to join in an inquiry into their links.
Dr Fox's political career may depend on whether the inquiry finds that Mr Werritty benefited financially from their links.
Questions were mounting over Mr Werritty's financial affairs, as The Times reported that his three known consultancies have earned him little more than £20,000 in four years.
Downing Street said the inquiry by Sir Gus - who took over the investigation from MoD permanent secretary Ursula Brennan - would address the "remaining questions" surrounding the case.
"There is a process under way. The Cabinet Secretary is leading it. He will address the remaining questions people have been asking," the Prime Minister's official spokesman said.
"The objective is to establish the facts and get the full picture. That is what we will do."
Meanwhile a senior Tory backbencher warned that the controversy was in danger of becoming a "distraction" for the MoD.
Patrick Mercer, a former Army officer, said that MoD staff needed to be able to get on with running campaigns in Afghanistan and Libya without having to worry about "non-defence issues".
"The Ministry of Defence has been distracted by this," he told BBC Radio 4's The World at One.
"The last thing that busy civil servants and busy uniformed staff need inside the Ministry of Defence is this sort of distraction with their boss.
"It is not helping having the Secretary of State for Defence thoroughly distracted by non-defence issues.
"The Ministry of Defence has got a difficult job to do, it is under a great deal of pressure, it needs its boss - who has my full support and respect - to get on with the difficult job that he has to do."
Dr Fox has so far enjoyed strong support from Conservative MPs - particularly the Tory right - but Mr Mercer's intervention suggests that could slip away if he continues to generate damaging headlines.
Defence experts questioned why Mr Werritty had access to such high-level meetings - including talks with the Israeli ambassador and dinner with the new head of international forces in Afghanistan - when he did not have proper security clearance.
"I think our worry at the moment is that it seems that we are lifting the lid on a much bigger issue," Amyas Godfrey, an associate fellow at the Royal United Services Institute told The World at One.
"The sort of access that he seems to have had really should be (for) someone who is part of the Ministry of Defence or part of the Government.
"There is a process in place where people who attend these sort of meetings need to have a level of security clearance and clearly he has not gone through this process.
"It really safeguards against things like potential for blackmail, potential for that information leaking out through your family."
In the Commons, Labour deputy leader Harriet Harman demanded to know why the investigation into Dr Fox's links with Mr Werritty was not being carried out by independent adviser on ministerial standards, Sir Philip Mawer.
Speaking at Deputy Prime Minister's Questions she said the Ministerial Code of Conduct made clear it was not the role of the Cabinet Secretary to enforce the code.
"Doesn't this show that they are prepared to sacrifice high standards in public office to protect the Secretary of State?" she said.
"There is clearly a need for investigation, not least into whether Mr Werritty profited by his association with the Secretary of State. This goes to the heart of trust in government."
However Deputy Prime Minister Nick Clegg said Sir Gus should be allowed to complete his work "so that the full facts can be made available to the Prime Minister and then decisions can be made".
Businessman Harvey Boulter, who spoke with Dr Fox in Dubai in June in a meeting set up and attended by Mr Werritty, said he believed at the time he was an official adviser to the Secretary of State.
Mr Werritty boasted of his first-class lifestyle to the extent that eyebrows were raised over how the Ministry of Defence could afford such perks, said Mr Boulter, chief executive of Porton Group.
The revelation that he was not, in fact, an official left Porton concerned that sensitive commercial information may have been exposed to whoever was paying him.
"To me he was the route to Liam Fox, without a doubt," Mr Boulter told BBC News. "He was presented as the route to Liam Fox and he delivered on what he said he could do."
He added: "He seemed like a nice guy. He seemed like an adviser to the minister, because the MoD folks do have a habit of fitting a certain mould, and he seemed to fit that bill.
"He did disclose to me that he liked to travel first class and I remember a conversation with some of my colleagues when we were thinking 'Wow, the Ministry of Defence is having budgetary cuts and at the same time their advisers are flying around first class'. I thought that might be politically dicey, but my comment to them was 'Perhaps that's a perk of the job'."
It was only after The Guardian approached him about the meeting that he realised that Mr Werritty was not an official adviser, he said.
"This appeared to be a friendship between Fox and Werritty and I think Werritty perhaps overstepped the friendship into an official role," said Mr Boulter. "I don't understand the motivation of Dr Fox allowing him to do that. Clearly, it was not an isolated incident, so there is clearly a motivation but I can't speculate what it is."
Mr Boulter said that the key issue was who was paying Mr Werritty to travel.
"I think that's the biggest question and I would quite like to know the answer myself as to who was actually paying him," he said.
"There are many rumours but the facts need to emerge on who was paying Werritty. That would tell me also if our information has been compromised.
"If he was employed by a commercial company or another commercial entity, could he have a conflict of interest? Could he have been working for a competitor to one of our technologies?
"I have no clue who he was working for, but if he had been working for the MoD it would have been reasonable to assume that he wouldn't have had any conflict of interest, but clearly he isn't and so he is being paid by somebody.
"Depending on who that person is you would determine whether there was a conflict of interest there or not."
Asked if he was satisfied by Dr Fox's account of events, Mr Boulter said: "I think he has got more explanations he clearly needs to make. I think his statement produced more questions than it did answers.
"Clearly there are many other locations where they have travelled together. There may be similar experiences to my own. I think there are many more answers he will have to produce before he can brush this away."
Mr Boulter said it was a "half-truth" for Dr Fox to suggest that their meeting was the result of a chance encounter with Mr Werritty in a restaurant.
He had a meeting with Mr Werritty in April, following which the "clear intention" was that the "adviser" would arrange for him to see Fox, the Porton chief executive told the BBC.
It was "coincidence" that he happened to bump into Mr Werritty in a Dubai restaurant on the eve of Dr Fox's arrival in the Gulf emirate, said Mr Boulter.
But he added: "It is not right to characterise the meeting as an accidental occurrence. You don't get to meet ministers over a glass of wine in a restaurant and that wasn't the case here."