Andy Burnham’s team said they would refer the Sun newspaper to the regulator Ipso after an undercover reporter from the tabloid posing as a potential donor recorded him saying Jeremy Corbyn would be a disaster for the Labour party.

Burnham has been expected to take a senior job in the shadow cabinet if Corbyn is elected Labour leader this weekend, but he was caught on tape saying of his rival: “Privately, it is a disaster for the Labour party. I mean, publicly, he is a nice man, a nice individual. He believes in the things he campaigns on so he’s not a fraud in any way. But I think the public will think Labour has given up on ever being a government again.”

The sting reflects the Sun’s hostility to Burnham due to his refusal to forgive the newspaper for its coverage of the Hillsborough disaster. He has refused to speak to the paper during his campaign.

Burnham’s remarks underline the dilemma facing senior Labour MPs as they work out whether they will be credible working alongside Corbyn in the shadow cabinet.

During the Sun’s sting, an undercover journalist posing as a wealthy foreign donor gave £5,000 to Faiz ul Rasool, a businessman and Labour party donor, who arranged for him to meet Burnham.

The newspaper said the journalist, using the name Mr Arshad was invited to a reception two days later, on Monday, at the Labour party’s London HQ where he was introduced to the Leigh MP.

At the reception, another donation of £3,000 was handed to a campaign aide by someone posing as Arshad’s British wife, reported the newspaper.

A spokesman for Burnham said that Rasool had previously donated money to his campaign, but he had no role in his team.

A source in the Burnham camp said the leadership campaign had no knowledge of the £5,000 reportedly handed over in cash in a Mayfair casino. “Faiz ul Rasool has had no role, formal or informal, within the Burnham campaign. He made a donation in July of £5,000, which was declared in accordance with standard compliance rules.

“Arshad was not invited to the reception held at campaign HQ on Monday evening and the event organisers were not notified that another guest was planning to bring him along. He asked for a photograph next to Andy, with people he claimed were his wife and baby.

“During the event, [the donor] Arshad – who was not introduced under that name – presented an unsolicited cheque to a campaign staffer in the names of Mr A Ali and Miss N K Khan. Our routine due diligence threw up a number of discrepancies and, as a result, the cheque was never cashed.”