Former England spinner Swann was mentioned in Pietersen's new autobiography as a member of a clique led by wicketkeeper Prior, which also included pace bowlers Stuart Broad and James Anderson.
Pietersen was particularly scathing of Prior, who he claims led a culture of bullying, while he was also critical of former coach Andy Flower for failing to deal with the situation.
The South-African born batsman stated that those outside of Prior's supposed clique were "fair game for mocking, ridicule, bullying. That's what those guys did."
However, Swann - who retired from cricket after England's third Test defeat in the 5-0 Ashes whitewash - has dismissed that version of events and leapt to the defence of Prior.
"I expected it to be the biggest work of fiction since Jules Verne and that seems to have happened," Swann said at a NatWest awards ceremony.
"The one thing will say [is that] I immediately realised it was codswallop when I read the character assassination of Matt Prior."
In apparent reference to Pietersen's reintegration into the England side following controversy over disparaging text messages he sent about then-captain Andrew Strauss to members of the touring South African team in 2012, Swann added: "Tragically I don't think Kev realises the one person who fought tooth and nail to keep him in the side is the one person he is now assassinating: Matt Prior."
Swann does not believe that Pietersen's allegations will have an adverse affect on the current England team.
He said: "I think the players will be fine. They have just got to get on and play.
"Kevin has been quite clever because the guys still playing he has left alone and he hopes to get back in again one day. He has picked on people who he thinks can't answer back.
"If that [bullying] was the case a lot of people would have flagged it up before. We had a magnificent team ethos and team spirit until [Australia bowler] Mitchell Johnson took his blindfold off and then it all fell apart."