Gareth Varey said he was very drunk when he said the X Factor boss was gay during a video recording which was played in court last week.
Cowell's lawyers issued a statement on Monday - following the collapse of Contostavlos's trial over drug supply allegations - denying the claims made against him, which they said had made him appear to be not telling the truth about his sexuality.
On Wednesday Varey said that he does not know why he made the comment to undercover reporter Mazher Mahmood, which he conceded was "not true".
In a statement, Varey said: "On 10 May 2013 in the course of seeking to entrap Tulisa, Mazher Mahmood supplied Tulisa, me and others with a lot of alcohol.
"I can no longer recall all of the details of that evening but I have listened to the recording made by Mahmood. I was clearly very drunk.
"At some point and utterly out of the blue Mahmood asked me if Simon Cowell was gay. I said he was. This is not true. I do not know why I said it, but assume it is because I was so drunk and felt that I was giving Mahmood the type of information he was seeking. I am very sorry for this."
The trial was halted on Monday after the judge said there were "strong grounds to believe" that Mahmood - known as the "fake sheikh" - had "lied" at an earlier hearing.
Contostavlos had vehemently denied brokering a drugs deal, which had been reported in The Sun on Sunday last year.
Cowell's legal representatives spoke out after the case was stopped to clarify that the music and TV boss was not gay.
They added: "The issue was the false suggestion made by Mr Varey that Simon - who is renowned for his honesty and candidness - had thus not been truthful in the public arena and this is what we have been obliged to clarify."