A company linked to the Obeid family with high-profile Liberal Party figures on its board gouged millions of dollars from the state-owned Sydney Water, including for limousines and political donations, the Independent Commission Against Corruption heard on Tuesday.
Assistant Federal Treasurer Arthur Sinodinos was on the board of the Obeid-linked infrastructure company Australian Water Holdings when it was stonewalling attempts by Sydney Water to inspect its books.
AWH had its expenses covered by Sydney Water under a lucrative contract to provide water infrastructure in Sydney's north-west. By late 2008, the utility was footing the bill for up to $800,000 in monthly expenses, including $7333 paid to a slush fund linked to former NSW energy minister Chris Hartcher and more than $75,000 in donations to the Liberal Party.
Fairfax Media can reveal AWH donated a further $10,000 to Treasurer Joe Hockey's campaign weeks before the 2010 federal election.
But the donation was returned in February 2013, after reports began to circulate about corruption concerns at AWH.
Documents at ICAC on Tuesday reveal the company also made a $2200 donation to the Queensland branch of the Labor Party.
Sydney Water, led by Kerry Schott, was trying to halt the massive bills that AWH kept submitting without explanation or proper documentation.
Senator Sinodinos, who was then treasurer of the NSW Liberals, was one of the recipients of a 2010 email from fellow AWH director John Rippon which read: ''If only the bitch [Dr Schott] was gone we could deal with these guys.''
The inquiry has previously heard that corrupt former ALP powerbroker Eddie Obeid tried to ''eliminate'' Dr Schott by making false corruption complaints against her. Mr Obeid unsuccessfully urged a fellow minister to ''sack the bitch'', and claimed that Mr Hartcher would make a corruption allegation against her.
Among the expenses being forced on Sydney Water were the exorbitant salaries the AWH directors were paying themselves.
Liberal Party fund-raiser and Obeid family associate Nick Di Girolamo was on a $1.1 million salary, plus a $250,000 ''sign-on'' fee and a bonus of the same amount.
Giving evidence on Tuesday, Mr Rippon was questioned about Mr Di Girolamo's salary package being charged to Sydney Water.
''Do you sense anything even slightly wrong with that?'' counsel assisting the inquiry, Geoffrey Watson, SC, asked. ''No,'' Mr Rippon replied.
Mr Rippon himself received a salary of $1.7 million for working two days a week.
When asked about the hundreds of thousands AWH secretly billed Sydney Water for its attempts to expand into Queensland, Mr Rippon agreed it was inappropriate.
''That would be nothing more, nothing less than a fraud?'' he was asked. ''Well, that's a harsh word but probably,'' replied Mr Rippon.
Senator Sinodinos' $200,000 salary and bonuses were also allegedly covered by Sydney Water.
The commission heard that AWH's monthly expenses escalated after Mr Girolamo was appointed chief executive in 2007.
Expenses which had averaged $160,000 per month had ballooned to $800,000 at the end of 2008.
Asked whether AWH had billed thousands of dollars for chauffeured limousines, including $1159 in June 2010, Mr Rippon said: ''I don't know. I don't whether it would have been appropriate.''
Mr Rippon's salary was paid to his company, which also owned a horse-breeding farm.
The commission heard that Mr Di Girolamo and Mr Rippon bought a racehorse, Partner in Crime, from the farm for $50,000. The pair had previously raced a horse called Perfect Crime.
Mr Rippon said Mr Di Girolamo was recruited because he was ''well-connected'' in Liberal circles. Senator Sinodinos was appointed because of his business connections.
Mr Rippon said he knew an ''Obeid entity was involved'' in buying a 30 per cent stake in AWH for $3 million. The family claims this is a loan rather than a shareholding.
Senator Sinodinos, who denies any wrongdoing, has insisted he was unaware of the Obeids' financial involvement in the company.
A badly worded contract Sydney Water signed in 1992 ended up giving AWH exclusive rights to deliver infrastructure in Sydney's north-west.
The story Liberal Party-linked company gouged millions from Sydney Water, ICAC hears first appeared on The Sydney Morning Herald.