Rules on ministers and senior civil servants bagging private sector jobs need urgent reform, a Government ethics chief said.
It has also emerged David Cameron and ministers face six inquiries into the Greensill Capital lobbying storm.
Lord Pickles, chair of the Advisory Committee on Business Appointments, said he was “really unhappy” with the rules and had been “warning of the possibility of a scandal” for some time.
He told MPs there did not appear to be “any boundaries at all” between civil servants and the private sector.
The fallout from former Prime Minister Cameron’s lobbying on behalf of his ex-employer, Lex Greensill, spilled over into Whitehall as it emerged a top official also worked for the financier.
Bill Crothers, an ex-chief commercial officer, began a part-time role at Greensill in September 2015 – with Cabinet Office approval –- despite not leaving his civil service role until November that year.
Last night, Mr Crothers was found to have broken ACOBA rules by failing to declare an unpaid role in 2016.
Lord Pickles wrote to Cabinet Office Minister Michael Gove to alert him to the breach and ask him to take “appropriate action”.
In a letter to ACOBA, Mr Crothers apologised for his “honest mistake” in failing to notify the watchdog about his role on the Global Board of Trustees of the Chartered Institute of Procurement and Supply from 2016 to 2018.
It comes as civil service boss Simon Case demanded all senior mandarins declare any second jobs by today amid “acute concern” in Downing Street.
Lord Pickles warned the “revolving door” of top officials joining firms has created the assumption they will be “looked after” by colleagues.
He told the Public Administration and Constitutional Affairs Committee yesterday that ACOBA scrutinised just 108 appointments out of 34,000 people quitting the civil service last year.
Lord Pickles said the revelation about Mr Crothers’ second job requires “a full and transparent explanation”.
He said it was not an isolated matter, adding: “I think it also highlights anomalies in the system which I think require immediate address.”
Former Home Office permanent secretary Sir David Normington was “absolutely amazed” by the news.
“I thought it was absolutely baffling. I’ve never come across anything like it in my over 40 years in Whitehall,” he told the BBC.
“I’m absolutely amazed that Bill Crothers should be allowed to work for Greensill while he was still in the civil service.
“But worse, I think, this enabled him to evade scrutiny of his appointment after he had left the civil service, and that is completely unacceptable.”
It comes as Mr Cameron agreed to cooperate with inquiries from MPs over the Greensill scandal, which centres on his attempts to lobby ministers for Covid support for the firm.
He started working as an adviser for the firm in 2018, two years after leaving Downing Street.
The ex-PM privately texted Chancellor Rishi Sunak to appeal for support for the firm, as well as two other Treasury ministers.
However Greensill’s request was ultimately refused by officials and the firm went bust in March, putting thousands of British steel jobs at risk.
Mr Sunak is also expected to be summoned to give evidence to MPs about the affair.
Boris Johnson has commissioned a probe by lawyer Nigel Boardman into links between Greensill Capital and the Government.
Several other parliamentary committees will also scrutinise the affair.
“Increasingly we’re seeing a murkier and murkier picture, whether it’s the way contracts are handed out, the lack of due process, or the lobbying, which is not a revolving door but now an open door into Government,” he said yesterday(THU).
Mr Johnson backed Lord Pickles over the need to clarify blurred lines between Whitehall and the private sector.
On a visit to Devon, he told reporters: “I think the most important thing is for us to get to the bottom of it properly.
“And I want all ministers and civil servants to be making the information that needs to be known known to Mr Boardman and let’s see what he has to say.
“You’re absolutely right that we need to understand completely what’s gone on here and I agree thoroughly with Lord Pickles.”
The Prime Minister was also facing scrutiny himself after No10 admitted he asked for a progress check on a Saudi bid to buy Newcastle United.
Crown Prince Mohammed bin Salman reportedly warned the PM that the row over the sale of the Premier League club could damage diplomatic relations.
The Prime Minister’s official spokesman said: “This was a commercial matter for the parties concerned and the government was not involved at any point in the takeover talks.
“The PM didn’t intervene. The government was not involved at any point of these takeover talks.”
But when pressed, the spokesman added: “The PM asked [top aide] Lord Lister to check on the progress of the talks as a potential major foreign investment in the UK – he didn’t ask him to intervene.”
Meanwhile, questions are mounting for other senior figures, including No10 deputy chief of staff Simone Finn, who reportedly owned a stake in a company advising governments, including Saudi Arabia, Bahrain and Kazakhstan.
She resigned her directorship of the firm, founded by ex-minister Francis Maude, when she started work in Downing Street.
A Government spokesperson told The Times: “Baroness Finn has declared all her relevant interests to the House of Lords, and in addition, complied with the Cabinet Office requirements for special advisers to declare outside interests.
“The Cabinet Office has a formal process to avoid conflicts of interest arising from such declared interests.”
Ex-Met Police chief Lord Bernard Hogan Howe reportedly also worked as a paid advisor for Greensill while acting as a non-executive director for the Cabinet Office.
It also emerged that ACOBA member Andrew Cumpsty runs his own lobbying firm Cumpsty Communications.
The Mirror previously revealed that Mr Cumpsty chaired and founded the Enterprise Forum, which acts as a link between businesses and the Conservative Party.
But Lord Pickles defended his appointment, saying his nomination was a ministerial decision that he supported.
“I think it was sensible to get someone with experience. He has proved very useful on these issues,” he added.