Tulisa, who worked as a judge on The X Factor, is currently on trial in London following a drugs charge and the claim of Simon's sexuality was heard by the jury yesterday (17 July).
Tulisa stands accused of being concerned in the supply of class A drugs, following a newspaper sting operation in June last year.
Yesterday, the jury sitting at Southwark Crown Court were shown an undercover video, filmed by the journalist involved in the sting, and in the footage he could be seen talking to Tulisa's manager Gareth Varey.
The court heard the journalist, who also goes by the nickname Fake Sheik, asking Gareth 'if Simon was gay'. in the footage, Gareth replied "Yes", before the journalist asked if he had slept with him.
"No," Gareth was heard saying, "I know people who have".
After the details of exactly what the court heard were made public, Simon's reps released a statement to The Mirror newspaper.
"We are bound by contempt of court rules so cannot respond to these claims in the manner we wish to," the spokesperson said. "We are speaking to the Attorney General's office - and we intend to make a statement in court as soon as possible."
Tulisa's trial began on Wednesday and the court has already been told that the journalist involved in the case was posing as a Bollywood film producer.
As part of the sting, the undercover reporter offered Tulisa a movie role - saying she would star alongside Leonardo DiCaprio - and she is alleged to have arranged to supply him with £820 worth of cocaine to help secure the part.
Tulisa denies the charge. The case continues.