Malcolm Macaskill, 51, had promoted himself to Tory colleagues as a successful businessman despite being a two-time bankrupt who was taken to court over unpaid income tax.
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As head of the Tories’ regional list in Glasgow, the justice of the peace had been almost certain to be the city’s next Tory MSP.
However, the CV he issued to party members ahead of an internal selection fight last year failed to disclose his chequered business career.
He is now understood to be consulting lawyers about his de-selection.
His exit meant Ruth Davidson, an aide to Scots leader Annabel Goldie, replaced him at the top of the list, prompting claims of a stitch-up.
One senior party source said: “Malcolm has been treated very badly. It also looks poor for the party that an ally of Annabel Goldie is the person who benefits from his departure.”
Besides being dropped from the regional list, Mr Macaskill also ceased to be a candidate for the constituency seat of Glasgow Anniesland.
It also emerged last night that a second Tory, Iain Whyte, had dropped out as the candidate in Maryhill & Springburn over a clash with his duties on Lothian Health Board.
Labour and the SNP said the Tories were in freefall, and claimed the candidate’s messy departure reflected Ms Goldie’s poor leadership.
Macaskill’s fate was sealed this week after The Herald confronted him about his CV and career.
After discussions between Mr Macaskill and party officials, he was told yesterday that he had been removed from the list of approved candidates.
A Tory party member for 34 years, Mr Macaskill was well-known in his local Rutherglen party, and this year helped secure a £1 million donation.
The £1m donor, Tom Cokley, is now understood to be unlikely to hand over the money.
A candidate three times previously, his break came when Bill Aitken announced he was retiring as Glasgow’s only Tory MSP, opening up a safe spot at the top of the party’s list.
As part of the internal selection process to rank candidates on the list, Mr Macaskill produced a CV saying he had founded and “owned a successful manufacturing business since 1984” and was ranked top of the list in December.
However, public records show he was sequestrated – the Scots term for bankruptcy – in 1987 and 1997.
In 1994, he and his wife Moya were also taken to court by the Inland Revenue over bills of more than £8000 – including £6664 unpaid income tax – run up by their sandwich firm Kwik Snax.
The court summons said the pair were “repeatedly called upon to make payment of the sums sued for but they refuse or delay to do so”.
Labour campaign director John Park said: “This is chaotic. Conveniently for Ruth Davidson she’s now moved into pole position in Glasgow, but the leadership of the party is all over the place.”
Scottish Tory chairman Andrew Fulton said the reason for Macaskill’s departure was “private”, and thanked him for his service.