Disgraced former MI5 officer Mr David Shayler claimed today he was told that an IRA informer was a "bullshitter".
The informer, known only as Infliction, alleges Sinn Féin's Mr Martin McGuinness told him he fired the first shot on Bloody Sunday.
Mr Shayler (37) told the Saville Inquiry in London that when he worked for MI5 in the 1990s another officer told him Infliction was not reliable.
Mr Shayler was sentenced to six months in jail last year after he was convicted of breaking the Official Secrets Act by disclosing information to a national newspaper.He served seven weeks at an open prison and was released in December last year under a scheme in which prisoners are let out early and electronically tagged.
He told the inquiry he joined MI5 in November 1991, and in August 1992 began work in the section countering threats on the mainland originating from Ireland, T2.
Mr Shayler said he first came across Infliction in 1993 while he was dealing with another target and went to a source in Section T8, which ran agents to seek an assessment of his reliability.
"I cannot recall the name of the person I spoke to in T8 but in telling me about this source he used the phrase 'this guy's a bullshitter'," he said."I asked for more details which I could refer to in my assessment of my target. He told me that Infliction had at one time been totally believed and was regarded as reliable.
"Then there was a case where they had initially gone with Infliction, when his information was contradicted by another source and it was found that the other source had been accurate".
The Saville Inquiry is examining the events of 30th January 1972 when 13 civilians were shot dead by British army soldiers during a civil rights march in Derry. A 14th person died later.
A senior MI5 officer yesterday told the inquiry Infliction was a leading member of the Provisional IRA and was close to Mr McGuinness. Infliction claimed in 1984 the Sinn Féin MP told him he fired the first shot on Bloody Sunday from a Thompson sub-machine gun. Mr McGuinness has denied the allegation.
Infliction's MI5 handler, Officer A, has already challenged Mr Shayler's evidence, insisting the informer was generally honest and reliable.