"What's a university doing owning a pub?": The Tattersalls Hotel in Armidale.

"What's a university doing owning a pub?": The Tattersalls Hotel in Armidale.

Darrell Hendry used to joke with his long-term business associate John Cassidy, the former chancellor of the University of New England, that he'd ''buy a pub'' when he retired.

Now a deal in which the pair bought the university-owned Tattersalls Hotel in Armidale is at the centre of an inquiry by the Independent Commission Against Corruption.

On Tuesday, Mr Hendry gave evidence that Mr Cassidy called him in November 2005 and told him to ''have a look'' at the art deco hotel, on the main street in the Armidale CBD, because ''he thought it would be a good investment''.

Former chancellor of the University of New England John Cassidy.

Former chancellor of the University of New England John Cassidy.

''I can recall saying to John 'what's a university doing owning a pub?' '' Mr Hendry said.

ICAC is investigating allegations that Mr Cassidy, the former boss of construction firm Abigroup, acquired inside information about the sale of the hotel in the course of his official functions as chancellor and used that information ''for the benefit of himself and Mr Hendry''.

The allegations at the centre of ICAC's investigation were the subject of a Fairfax Media investigation last year.

''Joked he'd buy a pub'': Darrell Hendry.

''Joked he'd buy a pub'': Darrell Hendry.

Phone records reveal Mr Cassidy made a number of phone calls to Mr Hendry on December 1, 2005, a day before bids for the hotel closed. One of the calls lasted half an hour.

Mr Hendry said he could not recall what was discussed.

But Commissioner Megan Latham said there was an inference ''very strongly available'' that the men were discussing the level of the bid Mr Hendry would make for the hotel and the ''discussion took place with the expectation that Mr Cassidy was going to be a partner in the purchase''.

''I think that's a fair enough inference,'' Mr Hendry, a former financial director of Abigroup, said.

ICAC has previously heard Mr Cassidy obtained confidential information in November 2005 that rival bidders for the hotel were willing to pay between $2.2 million and $2.5 million.

On December 5, Mr Hendry's $2.65 million bid – in his name only – was accepted by the university and contracts were exchanged the next day.

He said ''it could be possible'' Mr Cassidy told him in the phone call that he knew how many tenders had been submitted. It was also ''possible'' he told him the amounts of the tenders, Mr Hendry said, but he did not recall.

A self-described ''crusty old accountant'', Mr Hendry said he had told Mr Cassidy, whom he regarded as an optimistic ''rainbow man'', after their initial telephone conversation that he would put in a tender but he needed investment partners.

Asked if he thought Mr Cassidy would be one of the partners, Mr Hendry said it was ''all too early for that'' but his ''reading of the situation, rightly or wrongly, was if I wanted partners, John was going to be an ideal partner for this hotel''.

He did not approach anyone else to be a partner in the investment.

The minutes of a December 5 meeting of the board of Services UNE, which considered the tenders, recorded Mr Cassidy told one of the board's directors he had ''no ongoing connection with Mr Hendry''.

The two men negotiated Mr Cassidy's stake in the hotel in December but it was not until January 20, 2006, that the then chancellor told the university he had decided ''as of the day before'' to invest in the hotel.

ICAC is examining whether Mr Cassidy's conduct amounted to misconduct in public office.