A veteran Sinn Fein figure has been expelled by the party which accused him of being a "British agent".
Mr Donaldson (front) appeared at a party news conference last week
Charges of involvement in an alleged IRA spy ring against the party's former Stormont head of administration, Denis Donaldson, were dropped by the Crown.
Party leader Gerry Adams claimed he was about to be "outed" by the same "securocrats" who set him up as a spy.
The government said the October 2002 Stormont raid was solely to prevent paramilitary intelligence gathering.
Northern Ireland's power-sharing executive collapsed following the arrests of three men, who had all charges against them dropped last week.
The Northern Ireland Office said in a statement on Friday that they "completely reject any allegation that the police operation in October 2002 was for any reason other than to prevent paramilitary intelligence gathering".
It said "the fact remains that a huge number of stolen documents were recovered by the police".
SEQUENCE OF EVENTS
4 October 2002: Three men arrested following raid on Sinn Fein's Stormont office. Power-sharing executive collapses and government restores direct rule to NI a week later
8 December 2005: Charges against three men dropped "in the public interest"
16 December 2005: Sinn Fein says one of the men was a "British agent" and expels him from the party
Government and police reject the party's claim raid was politically motivated
At a news conference on Friday, Mr Adams claimed Mr Donaldson had been approached by police officers earlier this week and told he was about to be "outed" as an informer.
Mr Adams said he contacted Sinn Fein and at a meeting at the party's Belfast headquarters on Thursday, he admitted that he had been working for the British authorities.
He said Mr Donaldson was not under any threat from the republican movement.
There has been no comment yet from Mr Donaldson.
Last week, Mr Donaldson appeared alongside Mr Adams at Stormont after the charges were dropped.
Mr Donaldson told the news conference that the "charges should never have been brought".
"It was political policing and political charges and the fact that we were acquitted today proves that," he said.
The police said on Friday that it was a matter of policy to neither confirm nor deny whether any individual is or had been an informant.
Police sources reiterated that the "Stormontgate" affair began because a paramilitary organisation was involved in the systematic gathering of information and targeting or individuals.
Irish Prime Minister Bertie Ahern said Mr Donaldson had been known to the Irish government and if "one of Sinn Fein's top administrators in Stormont turns out to be a British spy, this is as bizarre as it gets".
The BBC understands that the mole whose information prompted the Stormont raids was not Mr Donaldson, nor was it the other two men against whom the charges were dropped.
DUP leader Ian Paisley said the people of Northern Ireland "will never again be surprised at anything that happens in the political world" and that the prime minister must make a statement.
"There must be no attempt at further cover-up," he said.
"The democratic right of the people to be informed must be honoured."
Last week, the Director of Public Prosecutions would not be drawn on why the charges were dropped, only saying that it was "in the public interest".
Other parties have demanded that Northern Ireland Secretary Peter Hain or Attorney General Lord Goldsmith must clarify what were these public interest reasons.
The three men were arrested following a police raid on Sinn Fein's offices at Parliament Buildings on 4 October 2002, when documents and computer discs were seized.
Following the arrests, Ian Paisley's Democratic Unionists and the Ulster Unionists, led at that time by then First Minister David Trimble, threatened to collapse the executive with resignations.
The British government then suspended devolution in the province, embarking on direct rule for the last three years.