Nigel Farage has said he is "deeply shocked" over bogus expense claim allegations which have led to the suspension of a UKIP MEP and General Election candidate.
The party leader said a full disciplinary hearing would be held on Monday into the claims a member of Janice Atkinson's staff had attempted to defraud EU expenses.
Meanwhile, Kent police have confirmed they have received a report of fraud and are reviewing the allegation.
Ms Atkinson was due to stand at the General Election in the Folkestone and Hythe seat - one of UKIP's top election targets.
But she has now been stripped of the party whip and removed as a candidate while a UKIP panel investigates the allegations.
Mr Farage said he had spoken to Ms Atkinson late on Thursday night but "did not get a clear answer".
He was speaking after The Sun newspaper claimed it had filmed a member of Ms Atkinson's staff "apparently plotting to make a substantial bogus expenses claim" in relation to a UKIP party in Margate.
The newspaper said the person told the manager of the restaurant: "The idea is we overcharge them slightly because that's the way of repatriating (the money)."
Mr Farage said the disciplinary hearing would establish whether Ms Atkinson had been aware her staff member's alleged behaviour.
Speaking on his LBC radio phone-in show, Mr Farage said: "I was deeply shocked when I saw it (the film footage).
"It was one of the most incredibly stupid and dishonest things I have ever seen in my life.
"This was a member of staff. Exactly what the relationship between that member of staff asking for a false bill and Janice Atkinson is, I don't know.
"On the evidence of what that member of staff did, it doesn't look very good."
He added: "I am not going to prejudge this.
"But certainly as far as the member of staff is concerned, they have asked a commercial enterprise to do something that as I understand it is against the law."
Mr Farage went on: "I actually wasn't angry, I was just shocked.
"I just couldn't believe we could find ourselves potentially in this position."
The Sun said it had handed the footage to Kent Police and the European Parliament.
In a statement announcing the MEP's suspension, a UKIP spokesman said: "The party is incredibly disappointed with Ms Atkinson, who appears to have exercised extremely poor judgment in acting in a way that the party has never, and would never condone.
"The party has acted swiftly and immediately. We always maintain a zero-tolerance attitude towards acts of this nature."
Ms Atkinson caused controversy last year after being caught on camera referring to a Thai constituent as a "ting tong from somewhere".
The 52-year-old - elected to the European Parliament last year - said she was "incredibly sorry" and had not intended any malice.
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