Former U.S. senator and presidential candidate John Edwards arrives at a memorial for U.S. Sen. Edward Kennedy at the John F. Kennedy Presidential Library August 28, 2009 in Boston, Massachusetts. Kennedy, youngest sibling to brothers President John F. Kennedy and Robert F. Kennedy, died of brain cancer August 25. View Full Caption Chris Hondros/Getty Images

MANHATTAN — A call girl working for alleged "Millionaire Madam" Anna Gristina told investigators she was paid to have sex with former U.S. Sen. John Edwards when he was in New York raising money for his failed presidential bid, DNAinfo has learned.

Edwards is the first big name to surface in connection to Gristina's alleged prostitution scheme run out of an Upper East Side apartment.

Edwards' lawyer declined to comment when reached Wednesday. On Thursday morning, his attorneys issued a statement to Politico and other news outlets saying their client "categorically" denied the allegation. Later Thursday morning, DNAinfo was contacted by Edwards' attorney, Abbe Lowell, demanding a retraction.

DNAinfo stands by its story.

According to “On The Inside” sources, Edwards allegedly hooked up with one of Gristina’s high-end hookers in 2007 when the dashing pol from North Carolina brought his then high-flying presidential campaign to the Big Apple.

The one-night fling allegedly took place at an Upper East Side hotel suite and was arranged by an aide with help from a New Yorker familiar with Gristina’s prostitution ring, sources said.

The prostitute claiming to have slept with Edwards provided a detailed, first-hand account of their encounter to investigators in the Manhattan District Attorney's office in 2008 after they began probing Gristina’s operation, sources said.

“Most of the women don’t have any idea about the identities of the men they sleep with,” a source explained. “How would they know a money man from Wall Street or the face of a lawyer or banker who shows up?

“But the face of the national politician?” the source rhetorically asked. “She knew.”

Investigators found the woman credible, but never notified federal authorities, seeing no reason to involve the feds in a low-level local infraction, sources told DNAinfo.

The New York Times published a story late Thursday saying that prosecutors later stopped using the prostitute as an informant because she was struggling with personal problems and drugs.

At the time, investigators were shocked at the allegation because Edwards was then considered the All-American persona.

"On The Inside” sources said investigators were able to substantiate that Edwards was in New York on a fund-raising tour at the time of the alleged encounter.

Records show the Edwards campaign spent thousands of dollars for near-monthly stays at the Loews Hotels Regency at 540 Park Ave. on the Upper East Side in 2007, along with stays at several other Manhattan hotels including a Comfort Inn on West 39th Street.

The Loews Hotels Regency is also where he reportedly met videographer Rielle Hunter, who bore Edwards a love child while his wife, Elizabeth, battled cancer.

No charges, however, were ever brought against Edwards because pay-for-play sex is difficult to prove.

Edwards, 58, is facing a federal trial in North Carolina for allegedly using nearly $1 million in campaign donations to cover up an affair he had during that same campaign season with Hunter.

In addition to the upcoming trial, Edwards has already agreed in a separate action involving the Federal Election Commission to repay the government $2.1 million that the campaign had been overpaid in federal matching funds.

Gristina’s reputed “black book” client list allegedly contains powerful, wealthy, politically-connected and influential players, according to sources familiar with her estimated $15 million New York prostitution empire.

Sources told DNAinfo that the “Millionaire Madam’s” list of patrons shelling out thousands of dollars for weekend getaways includes: a Middle Eastern sheik, an international billionaire financier, a nightclub impresario, dozens of Wall Street hedge fund and investment bankers, and a network of lawyers — all of which are burning up phone lines trying to find out if their names could surface.

“On The Inside” has also pieced together the inside account of the prostitution probe that has fascinated New Yorkers since DNAinfo broke the story earlier this month.

According to sources, the investigation of Anna Gristina, a sassy Scottish immigrant and mother of four, started in 2008 with the humble arrest of a 20-something woman hauled in on a criminal charge not related to prostitution.

The woman volunteered that she was secretly a high-end hooker working for a “Millionaire Madam” who repeatedly bragged of having law enforcement and a cadre of powerbrokers in her pocket.

The probe was assigned by then-Manhattan DA Robert Morgenthau to a corruption unit to determine if there were cops or other officials on the take.

Probers theorized that Gristina would likely need two important NYPD connections: one who could tip her off to raids, such as a cop in the Vice Unit, and another who would conduct instant background checks on new clients surfacing with hard cash and a pressing need to spend it.

“She could need protection from raids,” a source explained.

“But the real need is that it would be great for her have someone providing background history right away,” a second source explained.

“She would need it quickly to check someone being legit,” the source continued. ”Not in days, but within hours. Private eyes could not do it for her that fast with some guy holding thousands to spend and wanting to get laid.”

According to sources, there was also an allegation that Gristina was extremely close with the wife of an NYPD sergeant.

But the closest thing to official corruption that was initially uncoverd was Gristina's connection to Jonas Gayer, a disgraced former IRS agent who was convicted in 1989 in a $10 million tax fraud case touted then as the largest in U.S history.

They followed Gayer — and bugged his phones — tracking him as he opened bank accounts in branches near his Beekman Place office allegedly to hide Gristina's ill-gotten gains.

More than two years after the probe began, Gayer — who owns a home on Shelter Island and an art collection — was hauled in and charged with with money laundering and promoting prostitution.

He began to cooperate almost immediately, sources said, but his assistance has yielded little evidence of corruption, sources say.

Prosecutors have stepped up the pressure to bring the case to a climax, issuing a flurry of subpoenas to alleged prostitutes seeking their bank accounts, credits cards and other records. Two of those women are Mhairianglea Bottone and Catherine DeVries. Prosecutors have also investigated potential fake companies created to launder money in real estate or other ventures.

They have also arrested VIP matchmaker Jaynie Mae Baker and charged her for allegedly being Gristina's accomplice.

And last week cops raided the office of David Jaroslawicz at 225 Broadway seizing dozens of boxes of records. The lawyer is linked to the E. 78th St. building where Gristina allegedly operated and he owns a string of limited liability companies and nearly $4 million worth of property upstate near Gristina's home and 200-acre pig farm, where she was known as an animal rescuer.

Witnesses meanwhile will continue to shuffle into the grand jury room at 100 Centre St. Friday, including Gristina's private eye pal, Vincent Parco, but no new indictments are expected to be announced.

Jill Colvin contributed reporting.