Dubbed the 'Alastair Campbell of the North' by friends and colleagues, the council last week suspended him from his position as assistant executive director (media) following an investigation into a 2005 Best Value Review audit.
Finnegan - who has been with the local authority since 1999 - was escorted out of the council's offices because of 'procurement irregularities involving information from three to four years ago', according to the Liverpool Daily Post.
But his sudden departure is still shrouded in mystery, with the council declining to comment on what it describes as a 'personal matter'. Finnegan could not be reached for comment as PRWeek went to press.
Finnegan's departure comes after a row at the council between leader Mike Storey and CEO Sir David Henshaw, over Henshaw's pension, according to the Liverpool Daily Post.
The authority has also been dogged by a row over the proposed Merseytram.
It was forced to U-turn over its proposal to extend the tram to Liverpool Airport, and has also come under fire from a scrutiny committee investigating the failed Forth Grace project.
The committee blamed the council, as well as regeneration body Liverpool Vision - a consortium of private developers and the North West Development agency - for the failed 'cloud building' project, proposed for the waterfront.
Finnegan was at the helm of the council's comms arm when the city won its European Capital of Culture status and was leading comms at the Liverpool Capital of Culture Company, set up to deliver the programme up to and beyond 2008.
It is not known what has happened to his position at the comms arm, set up and managed by the council.