Liberal Party heavyweight Arthur Sinodinos was warned by top public servants to be careful of the company he was keeping as chairman of Obeid-linked company Australian Water Holdings because ''they may be dishonest'', a corruption inquiry has heard.
In a devastating day of testimony for Senator Sinodinos, former Sydney Water chief executive Kerry Schott told the Independent Commission Against Corruption on Monday that she told him AWH was charging expenses to the utility that were ''not appropriate''.
Senator Sinodinos remained as chairman for another year.
The commission is investigating allegations that AWH secretly charged millions of dollars in expenses to Sydney Water, including for chauffeur-driven limousines, donations to the NSW Liberal Party and legal fees. ''Too much money was being spent,'' Dr Schott said. ''We were not aware what it was being spent on.''
Prime Minister Tony Abbott has refused to say if he was warned about the Senator's dealings. ''I just do not comment on scuttlebutt,'' he said in question time. The inquiry heard Dr Schott and the head of Sydney Water's audit committee, John Brown, met Senator Sinodinos soon after he became AWH chairman in 2010.
''Did you … raise with Mr Sinodinos on a personal level the effect that his association with the company might have?'' counsel assisting ICAC, Geoffrey Watson, SC, asked.
''We suggested to Mr Sinodinos he might be careful with the company he was keeping,'' she said. ''We thought that they may be dishonest.'' Asked how Senator Sinodinos responded, Dr Schott said: ''There was no reaction to that.''
Senator Sinodinos, who denies any wrongdoing, stood aside as Assistant Treasurer last week.
He joined the AWH board in 2008 and became chairman in November 2010 on a salary of $200,000 a year plus bonuses. He resigned a year later to take up a Senate position.
The inquiry has heard Senator Sinodinos stood to make up to $20 million if AWH entered into a lucrative public-private partnership with the incoming Liberal state government and he was recruited to ''open lines of communication with the Liberal Party''.
Dr Schott said former NSW premier Nathan Rees, who was then water minister, ''used to refer to them [AWH] as a bunch of crooks'', apparently based ''on advice from Sydney Water … that the company was overcharging him, overcharging us''.
ICAC has heard allegations the family of corrupt former Labor minister Eddie Obeid had a 30 per cent ''secret shareholding'' in AWH and that Mr Obeid corruptly lobbied colleagues on behalf of the company. Senator Sinodinos has consistently denied he was aware the Obeids were financially involved in the company.
Sydney Water contracted AWH and agreed to cover its administrative costs under an agreement Dr Schott said was ''very sloppily drafted''.
