The case against Dominique Strauss-Kahn is in doubt following reports of major holes in the credibility of the woman who alleges the former head of the IMF attacked her in May

The prosecution case against Dominique Strauss-Kahn, the former head of the International Monetary Fund and French presidential hopeful accused of sexually assaulting a hotel maid, is close to collapse, a report in the New York Times has claimed.

The newspaper reports allegations that significant problems have emerged with the case against the former IMF boss that could see the conditions of his house arrest in New York being relaxed with immediate effect.

Based on interviews with two unnamed law enforcement officers, it says that "major holes" in the case will be admitted to a federal criminal court in Manhattan as early as Friday. New York Police Department had no comment last night.

At the centre of the potentially dramatic turn in the case, the New York Times reports, is lack of confidence on the prosecution side in the witness's testimony about herself and what she says happened to her in Strauss-Kahn's room at the Sofitel hotel in Manhattan on 14 May. After she alleged that he sexually assaulted her, New York authorities swept into action, arresting Strauss-Kahn as he waited to take off on a flight to Europe.

Separately, the Associated Press reported that prosecutors have raised issues about the woman's credibility, citing an official who is familiar with the case saying the issue was not necessarily about the rape accusation itself, but rather questions surrounding the alleged victim's background that could damage her credibility on the witness stand.

Lawyers in the defence team for Strauss-Kahn have suggested that they had evidence calling into question the veracity of the housekeeper's account, but until now the nature of the doubts have not been revealed.

Lawyers for the maid - who is not being named - were unavailable for comment last night. She has already testified before a grand jury about the charges in New York and convinced them of the merits of her case. When stories first emerged that Strauss-Kahn's lawyers intended to argue the woman had consensual sex with Strauss-Kahn, her former lawyer Jeffrey Shapiro said: "There was nothing about any aspect of this encounter between this young woman and the defendant which was remotely consensual or could be construed as consensual, either physical contact or sexual contact."

The sexual nature of the encounter between the French politician and the maid has never been questioned by either side. But the New York Times report now suggests that police and prosecuting lawyers have concluded that the 32-year-old Guinean immigrant has lied repeatedly.

The newspaper says that police tape recorded a telephone conversation between the woman and a man in prison made on the day of the alleged rape in which the woman talked about the possible financial benefits that could come to her as a result of pursuing charges against Strauss-Kahn. The New York Times also reports the investigation has also found deposits made into her bank account totalling $100,000 over the last two years, some of which came from the man, a convicted drug dealer.

If the case against Strauss-Kahn does collapse, it is likely to raise questions about what has happened to him and his future prospects. Strauss-Kahn was expected to make a bid for the French presidency after stepping down from his post as managing director of the IMF, one of the most important roles in world finance. But after his arrest he was forced to resign. The job has just been filled by the French finance minister, Christine Lagarde. His incendiary demise left a gaping hole in domestic French politics.

The development will also play to the scepticism of the French public. When the allegations of a rape first surfaced, polls showed that 60% of French voters thought it was a political conspiracy against him.

The news comes after weeks of speculation in which some legal experts had said the woman's case has started to look shakey. Her original lawyer, Jeffrey Shapiro, and renowned civil rights lawyer, Norman Siegel, are no longer working with the woman and have declined to comment about the background to the decisons.

Harvard law professor Alan Dershowitz told Newsweek earlier this month that he believed the woman's lawyers were working with Strauss-Kahn's lawyers and looking to broker a deal.

Dershowitz said: "Clearly the defendant wants to avoid trial and wants to see if he can work out a deal that's acceptable to him. And my sense is that the victim would like a big payday. Why does she want to make a deal now? Why not wait until the conviction, and then sue? [Because] the defendant doesn't have much money. All the money is his wife's money. And if you win a suit-let's assume she wins a $10m judgment against him. She's not going to collect it. He'll go bankrupt. Whereas if she settles the case, the wife pays up. So the difference is between getting, say, a million right now from the wife, or $10m from the husband which the lawyer has to spend the rest of his life chasing."

Making any such deal would threaten charges of obstruction of justice. The woman has no power to stop the criminal case being brought by New York district attorney Cyrus Vance and could be compelled to testify even if she decided no to co-operate, said Stuart Slotnick, a white collar crime expert with New York's Buchanan Ingersoll & Rooney.