The Conservative Party vice-chairman has been arrested on suspicion of raping a teenager in the 1960s.
Alan Lewis, 75, who was appointed by David Cameron in 2010, was held by police after a woman claimed she was sexually assaulted by him when she was younger.
Mr Lewis, a self-made business tycoon who owns the Crombie luxury menswear chain, was released on police bail after his arrest by Manchester police.
The allegation comes as the Conservatives prepare for their party conference to begin in Manchester on Sunday.
A spokesman for Alan Lewis said: "An allegation has been made against Alan Lewis in respect of an event 46 years ago by a then adult female. He vigorously denies the allegation."
In his role for the Conservative Party, Mr Lewis, is responsible for business relations.
The Manchester-born businessman was made a CBE in 1990 for his services as chairman of the Confederation of British Industry's initiative to prepare British businesses for the single market.
Mr Lewis, who has reportedly amassed a fortune of between £220m and £260m, was appointed treasurer of a special committee dealing with the marginal seats campaign for the 1987 General Election under Margaret Thatcher.
A Greater Manchester Police spokesman said: "A 75-year-old man was arrested following a complaint received earlier this year of an historic rape that occurred in the Manchester area in the late 60s.
"The man was later bailed pending further inquiries. Specially trained officers are providing support and welfare to the victim."
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