A senior Australian team coach confronted Nugent with accusations that the men's 4x100m freestyle relay team had behaved inappropriately and harassed female swimmers with prank calls on the Friday night at the swim team's staging camp in Manchester.
The coach, who asked not to be named, said he and a senior swimmer had told Nugent about the incident the next morning, and before the team had even arrived in London, but the head coach had failed to take any action.
"He said, 'Your girls are flirting with the Dream Team,'" the coach said.
Swimmer Stephanie Rice swapped autographs with NBA star Kobe Bryant at the Manchester swim camp, then attended at Dream Team match at the Games.
Nugent yesterday admitted that an incident had been brought to his attention, but he simply dismissed it as "childish behaviour".
"It didn't raise alarm bells to me, but in hindsight it probably should have raised alarm bells," he said on ABC radio.
"My regret now is I didn't follow it up."