Speaking from his base in the south of France, Bates said: "This is absolute rubbish. I know nothing about it. The only thing keeping me busy is unpacking my shopping from the supermarket."
Gerald Krasner said of the rumour: "I have never met Ken Bates, or spoken with him or any of his representatives. Whether he is talking with one of the two consortiums bidding for the club I don't know."
Sainsbury's consortium has been involved in lengthy talks regarding a proposed £25m takeover at Elland Road.
Bates, who received £17m when he sold Chelsea to Roman Abramovich in July 2003, could provide the financial backing for Sainsbury to finalise a deal.