The man who owns the property Baroness Warsi stayed in now considers himself "one of her targets", he has told politics.co.uk.
Wafik Moustafa said he allowed Baroness Warsi and her now-special adviser, Naweed Khan, to stay in his Acton home during late 2007 and early 2008, rent free.
Baroness Warsi claimed she paid "appropriate financial payment equivalent to what I was paying at the time in hotel costs" to Mr Khan, but Dr Moustafa said he was unaware of any payment.
"I read about the money in the paper this morning like everyone else," he told politics.co.uk.
"Naweed never paid any money and I never asked him for any money. She is trying to save her skin by any means."
Dr Moustafa also suggested Baroness Warsi was likely to have stayed at the property longer than the six weeks she has claimed.
"After they left my house, they turned against me," he said.
"I was one of her targets. They started spinning what I do, rubbishing me.
"But I couldn't do anything about it because it wasn't in writing."
The row over Baroness Warsi's expenses, which would not have come to light without Dr Moustafa's disclosure, also hints at the bitter battles for the Asian Conservative vote within Tory circles.
The Egyptian-born GP was angered when the Conservative Arab Network he founded was told to severe its connections with the party and threatened with legal action by Baroness Warsi.
"She tried to monopolise the Asian and Muslim voice," he said.
"She doesn't want anyone taking the limelight. She's very obsessed about image."
Mr Khan insists he received the payments from Baroness Warsi.
"I confirm she made a financial payment on each occasion, which compensated for the inconvenience caused and additional costs incurred by me as a result of her being there," he said.
Baroness Warsi has admitted failing to declare income from a rented flat she owned in north London to the Lords authorities.
"Due to an oversight, for which I take full responsibility, the flat was not included on the register of Lords' interests when its value and the rent received came to exceed the thresholds for disclosure," she said.
"When the discrepancy became apparent this week, I immediately informed the Registrar of Lords' Interests of its omission.
"At all times, my ownership of the flat and the fact that it was being let out was fully disclosed to Cabinet Office officials and HMRC, and was appropriately reported on the register of ministers' interests held by the government."
Shadow business secretary Chuka Umunna demanded an independent inquiry into the allegations on today's BBC's Sunday Politics programme.
"I don't think this is anything any politician from any political party can crow about. When you see these types of stories being reported, it is bad for politics generally," he said.
"I'm not happy to see this at all, I'm very surprised to see it in fact."
The row, which could lose the unpopular Tory chairman her job, creates a new headache for David Cameron just as he tries to spare media secretary Jeremy Hunt the sack.
Baroness Warsi stayed in the house after buying a flat in Wembley, north-west London, in September 2007.
The property transaction could not be completed until 2008, so she says she was forced to find alternate accommodation during the period.
During her stay she continued to pick up £165 per night subsistence allowance expenses.
Baroness Warsi then moved to the Wembley home in March 2008 and stayed there until June 2010, when she moved closer to parliament.
In total, it appears up to 18 months of rental income may have gone undeclared.