One of the accused Satyanarayan Varma, who is named in the scam, has admitted before the Additional Chief Metropolitan Magistrate (ACMM) court and made allegations against the Criminal Investigation Department (CID).
The CID is protecting the accused and CID officers are pressuring to agree to whatever they say, sources added.
Varma has also told the court that the authorities have not given information to his family for four days after his arrest.
He also requested the court to allow him to make a statement in the court confidentially without the absence of CID officers.
The submission was made in the court when the CID produced him before the court, sources said.
State BJP President B.Y. Vijayendra has said that accused Satyanarayana Varma, had told the court that he was being threatened by the close aides of former Minister Nagendra.
"It is a serious charge. However, the Special Investigation Team (SIT) has not dared to question former Minister Nagendra till now," Vijayendra added.
The CBI has already started a probe since the alleged scam involving Rs 187 crore and is likely to summon former Minister Nagendra for questioning soon.
The probe agency has also recorded the statements of two of the accused who are lodged in jail.
Sources also said that the Enforcement Directorate (ED) is also investigating the matter.
The scam in the corporation came to light following the suicide of Chandrashekaran (50), who was working as an Account Superintendent in the Karnataka Tribal Welfare Board.
He was allegedly pressured to transfer large amount of money to various illegal accounts.
It was alleged that the funds were diverted to Hyderabad to be used by the Congress for the Lok Sabha election in Telangana and other states.
The Congress, however, has denied all the allegations.
Meanwhile, BJP MLC C.T. Ravi has demanded the resignation of Chief Minister Siddaramaiah over the state tribal welfare board scam.
"Chief Minister Siddaramaiah should take moral responsibility and the investigation has to be taken over by the CBI," he said.
"This is the scam which had taken place in the purview of the department under his portfolio. But, CM Siddaramaiah is diverting the issue," he added.
"We have doubts over the probe conducted by the government... but the Karnataka government is yet to handover the case to the CBI," Ravi said.
"Nagendra is protected by the state government for the fear of getting exposed to kickbacks from him. Eleven people have been arrested and just Rs 14.07 crore is seized so far. Where has the remaining money gone? Why is it not seized? The money has gone to 700 bank accounts. Where has the money gone after withdrawal?" the BJP MLC asked.