Scotland Yard privately concluded in October 1998 that a key detective in the Stephen Lawrence investigation was corrupt, but failed to pass its finding to a public inquiry into why its officers bungled the murder case, a whistleblower has told the Guardian.

The conclusion about the detective, John Davidson, was reached by the Yard’s elite anti-corruption unit, known as CIB3, which was overseen by then deputy commissioner John Stevens.

On Thursday the Independent Police Complaints Commission announced it was investigating Stevens over claims that documents were not passed to the 1998 Stephen Lawrence public inquiry.

The failure by the Met to disclose the potentially relevant information came despite the chair of the inquiry, Sir William Macpherson, writing to Stevens asking that any information about Davidson be passed to him. Macpherson stressed how crucial such information could be to his public inquiry, where the murdered teenager’s parents claimed corruption was a factor.

A senior source serving inside the corruption command has told the Guardian an investigation into Davidson led to the conclusion he was corrupt, and involved in criminality, in October 1998, four months before the Macpherson inquiry reported and ruled out corruption as a factor in the investigation that left Lawrence’s killers free to walk the streets.

The inquiry into Davidson was led by then detective chief superintendent John Yates and began in 1998.

In October 1998 Yates was leaving CIB3 and wrote a briefing document about the investigation into Davidson. The source said the contents were passed up the chain of command.

The conclusions by Yates about the level of Davidson’s criminality were unequivocal, said the source.

“It said that Davidson was corrupt ... he was one of the biggest targets. The report was not shared with Macpherson.” He added that the “top brass in the Met were told Davidson was corrupt”.

The Macpherson inquiry would not report until February 1999, four months after the Yard reached its conclusion about Davidson’s corruption, which the officer vehemently denies.

Macpherson concluded that there was no evidence Davidson was corrupt.

The investigation into Davidson began in July 1998, when a colleague of his, Neil Putnam, was arrested for corruption. He confessed his own crimes and named other officers as corrupt, including Davidson.

Davidson’s home was raided in September 1998. At this stage Stevens wrote to Macpherson’s aide on 11 September 1998 that Davidson was the subject of corruption allegations. Thedeputy commissioner said there was no known link to the Lawrence case.

On 21 September 1998, Macpherson personally wrote to Stevens.

The chair of the inquiry set up by the then Labour government told Stevens that Davidson was a “central witness” and facing allegations at the inquiry about his integrity.

Macpherson added: “You will also appreciate that any wrongdoing would go to Mr Davidson’s credit.” Macpherson asked to be informed of any developments concerning Davidson and added: “Much may turn upon this as the inquiry proceeds,” emphasising how potentially vital the issue was to the inquiry he was chairing.

No further information was given to Macpherson by the Met about Davidson, who did not face charges.

The source said claims that a cover-up was the motivation to keep the material from Macpherson were untrue : “The last thing John Stevens would do is cover up. He might forget or rely on others to follow up [and tell Macpherson].”

The supergrass, Putnam, would go on to claim in 2002 to the Guardian, and in 2006 to the BBC that he told the Met of a corrupt relationship between Davidson and Clifford Norris, the father of one of the prime suspects. The Met denies ever being told this.

Imran Khan, solicitor for Doreen Lawrence, Stephen’s mother, said: “We should have been told about the Met’s conclusion about John Davidson in 1998, when the inquiry was sitting.

“That report by Sir William Macpherson could have been very different. We welcome any investigation into corruption and want to get to the bottom of it. Whether it is the officer on the beat or the commissioner, the inquiry needs to be conducted without fear or favours.”

The senior source agreed with part of the Lawrence lawyers’ assessment about the material not given to the Macpherson inquiry: “I think there is a requirement to tell them. It would have changed Macpherson’s verdict on Davidson.”

Claims about corruption in the first Met investigation into Lawrence’s murder have persisted since his death in 1993.

A review ordered by Theresa May, the home secretary, into claims of corruption in the Lawrence case found “defects in the level of information that the MPS revealed to the inquiry”. The review was carried out by Mark Ellison QC and reported last March, adding that there had been “a significant failure in the disclosure made by the MPS”.

The IPCC’s decision to independently investigate Stevens, who became Met commissioner in 2000 and who is now a peer, followed a complaint to the force on behalf of Neville Lawrence, Stephen’s father, last October.

Lawrence, then 18, was stabbed to death at a south London bus stop by a gang in April 1993. They hurled racist abuse at him before surrounding him.

Doreen Lawrence has said for years that corruption explains why police bungled the first murder investigation. That had been officially denied until Ellison’s report.

Davidson’s conduct during the initial murder investigation was heavily criticised by the Macpherson inquiry. He controlled much of the flow of information as head of the “outside team”. Macpherson’s 1999 report found no evidence the officer had acted corruptly and said: “We are not convinced DS Davidson positively tried to thwart the investigation.”

Davidson denies claims that he was paid by Norris. The former detective left the Met in 1998 for medical reasons and ran a bar in Spain called the Smugglers.

In March 2014, Ellison said: “The prominent feature of DS Davidson’s alleged corrupt activity in the Lawrence investigation revolved around his misuse of a relationship with an informant … It would also have been relevant to his ‘failings’ regarding the development of evidence from witnesses.”

The October 1998 report by Yates said the former detective had behaved improperly with informants.

A spokesman for Lord Stevens said the distinguished police chief had been passed questions and request for comment. The former Met commissioner had not responded at the time of publication.

On Thursday he said he had received a letter from Ellison saying he was not “culpable” in any way.