French Prime Minister Dominique de Villepin denied on Friday that he was involved in a smear campaign against the man who could be his rival in next year's presidential race, Interior Minister Nicolas Sarkozy.
His second official statement on the scandal in as many days followed media reports that police might soon search his office as part of a judicial inquiry into the smear.
Le Monde newspaper quoted a senior intelligence official who is investigating the scandal as saying Villepin had told him that President Jacques Chirac wanted the confidential probe to focus on Sarkozy.
"As prime minister, I am profoundly shocked at how some things are being mixed up here and the state and its services are being questioned," Villepin said in his statement.
"We never spoke about Nicolas Sarkozy as a possible beneficiary of a foreign bank account," he said of the 2004 meeting when he assigned General Philippe Rondot to investigate.
Le Monde said investigators had found hand-written notes by Rondot at his home showing Sarkozy was the target of his probe.
Chirac's office also issued a statement denying the head of state had played any role in the affair: "The president categorically denies having asked for the slightest inquiry into the personalities....mentioned."
The scandal has damaged Villepin, already weakened by his recent failure to reform labour laws, and drowned out the good news on Friday that unemployment had fallen to 9.5 percent in March.
It began with anonymous charges in 2004 that Sarkozy and other politicians had accounts in a Luxembourg-based finance house, Clearstream, and linked them to a bribe-ridden sale of French frigates to Taiwan in 1991.
The list quickly proved bogus. A judicial inquiry has since concentrated on finding out who authored it and whether top government officials delayed clearing the accused left- and right-wing politicians' names as a way of discrediting them.
The dispute over the list has further poisoned relations between rival conservatives Villepin and Sarkozy.
In his statement, Villepin said Rondot's probe aimed to uncover corrupt "Mafia-like" networks and not to discredit politicians rumoured to have profited illegally from the deal.
The inquiry into the scandal has led to police searches of the Defence Ministry and foreign intelligence service premises.
Defence Minister Michele Alliot-Marie's diary was among items seized during raids on her office, and the minister on Thursday denied media reports she had failed to make a timely disclosure of all she knew about the case.
Searching the prime minister's office would be almost unheard of in France, although Socialist Prime Minister Lionel Jospin was interviewed in March 2002 over a party funding scandal while in office.
Villepin, who was interior minister when judges began their probe, has ensured all relevant material was handed over to the judicial authorities, his office said.
Sarkozy and former socialist finance minister Dominique Strauss-Kahn, another presidential hopeful, have made formal complaints which makes them parties to the judicial inquiry and gives them access to some of the case notes, via their lawyers.
French media have been awash with speculation about who was behind the letters, who were the intended victims of the smear campaign and how the scandal could influence the cut-throat competition between Sarkozy and Villepin.
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