A man accused of murdering journalist Lyra McKee claimed the shots were fired by the son of a member of dissident republican party Saoradh, a court has heard.
A witness alleges that is what Paul McIntyre claimed when asked if he was involved in the killing of the author in Derry in April 2019, a prosecution barrister said.
Public Prosecution Service barrister Robin Steer was appearing before a judge in Belfast High Court to appeal against a decision taken by a district judge last week to grant bail to the 52-year-old accused.
Ms McKee, 29, was shot dead by dissident republicans while observing a riot in Derry's Creggan area.
An extremist group styling itself the New IRA said it carried out the killing.
While police and prosecutors do not believe Mr McIntyre was the gunman, they contend he was involved in murder by joint enterprise, by escorting the gunman to the firing point and collecting four spent shell cases afterwards.
Urging Mrs Justice Keegan to overturn a decision to grant bail, Mr Steer said prosecutors believed Mr McIntyre could interfere with witnesses and commit offences if released from custody.
He said a witness had provided a statement that describes Mr McIntyre being challenged about Saoradh, and about his potential involvement in the murder, the day after the shooting.
The lawyer said the witness claims he allegedly replied: "It wasn't me, it was one of our members' sons."
The barrister said that evidence pointed to McIntyre's "intimate knowledge" of the crime.
Police chiefs believe Saoradh is closely aligned with the New IRA.
Mr McIntyre, from Kinnego Park in Derry, is also charged with possession of a firearm with intent to endanger life, and belonging to or professing to be a member of, a proscribed organisation.
The PPS barrister told the court that Mr McIntyre is allegedly a member of the New IRA and, as such, was likely to commit offences if released.
"The prosecution essentially says that this person is a member of a terrorist organisation, a member of the New IRA, and that by reason of his involvement with the New IRA there is a substantial risk that he'll commit further offences," he said.
Mr McIntyre, dressed in a grey jumper, watched proceedings via videolink from Maghaberry high-security prison while members of Ms McKee's family observed from the public gallery of the court.
The prosecution case is, in part, based on analysis of the clothing worn by McIntyre when he was apparently filmed by an MTV crew earlier in the day, and that worn by a masked man who was captured in a mobile phone video picking up bullet cases following the shooting.
The barrister told Mrs Justice Keegan there were "17 points of reference" on the clothing worn by Mr McIntyre earlier in the day, with that worn by the masked man.
He said 16 police officers had identified Mr McIntyre as the man in the MTV footage, while two officers had identified him as being a masked man who exited a hijacked vehicle on the night of the Creggan rioting.
Mark Mulholland QC, representing Mr McIntyre, questioned the strength of the video analysis.
He said a judge involved in a separate trial in Northern Ireland had ruled that another report by the same analyst could not be treated as "expert" evidence.
"That's the same expert and the same methodology applied," he said.
The judge adjourned the hearing until tomorrow, when Mr Mulholland will resume his submissions.