BURNABY, B.C. -Jack Layton tried to do damage control Sunday after a Toronto Sun story sent shock waves through his surging campaign a day before.

The NDP leader said he has been the subject of a smear campaign. QMI Agency published a story Saturday that said the former city councillor was found at a suspected Chinatown bawdy house in Toronto in 1996, according to an unnamed retired police officer.

The ex-cop told QMI Agency that Layton was warned to stay away from the suspected bawdy house.

The former Asian crime unit officer, who requested anonymity, detailed a prior police raid on the "premise currently ID as a bawdy house" looking for underage Asian sex workers, and a subsequent follow-up visit to the two-storey brick storefront on Jan. 9.

Layton was found at the business during that follow-up visit.

The story became the centerpiece of a press conference following the biggest rally the campaign has seen in Burnaby, B.C. on Sunday.

"There was no wrongdoing all," said Layton. "I have no idea how it all came about. I do know this is the kind of politics that Canadians don't appreciate."

Layton said he went to the parlour simply for a massage after a late-night workout.

The ex-cop told QMI Agency that Layton was found at about 9:30 p.m., EST, lying naked on his back on a bed in a second-floor room.

Layton said he was not aware of any police raids on the business.

"I just went for a massage," said Layton. "The police said it wasn't a great place to go. I left and I've never gone back."

The NDP leader's lawyer threatened to take legal action prior to the story's publication, but Layton told reporters he has not moved forward with proceedings. He said this would be looked at following the May 2 election.

Liberal Leader Michael Ignatieff refused to commenton the story when asked by reporters at a rally Saturday.

"We want to run a postive campaign," he said. "We want to appeal to the best in Canadians and that's what we'll do."

Conservative Leader Stephen Harper also refused comment.

The Ontario Provincial Police is set to conduct a criminal breach of trust probe into the leak.