The former chairman of the Co-operative Bank resigned as a councillor in Bradford two years ago after "inappropriate" content was found on his computer, the council has revealed.
Reverend Paul Flowers, a Methodist minister who chaired the Co-operative Bank for three years from 2010, is alleged to have bought illegal drugs as part of a Mail on Sunday sting.
He left the city council in September 2011, having served on it for almost a decade, citing personal reasons and increased responsibilities at the Co-operative Banking Group.
But a spokesman for Bradford Council said: "Inappropriate but not illegal adult content was found on a council computer handed in by Councillor Flowers for servicing. This was put to him and he resigned immediately."
Reverend Flowers, who has already apologised for doing things that were "stupid and wrong" in relation to the drugs claims - but without elaborating - has been suspended from the Methodist Church and by the Labour Party.
Len Wardle joined the Co-op's board in 2002. Pic: Co-op The substances said to be at the centre of the claims include cocaine and ketamine - a horse tranquilliser - used as a party drug.
The allegations against Reverend Flowers, which are the subject of a police inquiry, exacerbated pressure on Britain's biggest mutual which is having to explain the background to the bank's financial difficulties - largely a result of its merger with Britannia in 2009.
The Co-operative Group's long-standing chairman Len Wardle announced on Tuesday he was resigning with immediate effect after he admitted "serious questions" were raised by the drugs scandal.
Mr Wardle, who has held the position since 2007, announced last month that he was due to leave next May but he said it was now right for him to go straight away, having led the board that appointed Reverend Flowers.
Paul Flowers is being investigated following the Mail On Sunday's claims Mr Wardle said in a statement: "The recent revelations about the behaviour of Paul Flowers, the former Chair of The Co-operative Bank, have raised a number of serious questions for both the Bank and the Group.
"I led the Board that appointed Paul Flowers to lead the Bank Board and under those circumstances I feel that it is right that I step down now, ahead of my planned retirement in May next year.
"I have already made it clear that I believe the time is right for real change in our operations and our governance and the Board recently started a detailed review of our democracy.
"I hope that the Group now takes the chance to put in place a new democratic structure so we can modernise in the interests of all our members."
The Co-op confirmed Mr Wardle would be replaced by Ursula Lidbetter, currently Group deputy chair and chief executive of the Lincolnshire Co-operative Society.
Mr Wardle's decision was announced hours after The Co-op Group launched a fact-finding probe and a root-and-branch review of its structure after "serious and wide-ranging" allegations about Reverend Flowers, who resigned in June after a £1.5bn black hole was discovered in its finances.
The Co-op Bank discovered a massive gap in its finances following the purchase of Britannia Building Society in 2009 and abortive attempts to take on hundreds of Lloyds branches.
It faces a rescue which will see 50 branches close and investors including US hedge funds take control of 70% of the business, leaving the wider Co-operative Group with just 30% - described as a "tragedy" by former group chief executive Peter Marks.
The former Co-op bank chief executive who steered through its ill-fated merger with Britannia told MPs today it was years before anyone believed it was a "daft" idea.
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