Arthur Sinodinos

Australian Water Holdings under scrutiny ... former chairman Arthur Sinodinos. Photo: Wolter Peeters

THE Independent Commission Against Corruption has begun to make formal inquiries into the affairs of Australian Water Holdings, a company linked to the family of the ALP kingpin Eddie Obeid, the Herald has learned.

Government sources have confirmed the corruption watchdog has seized all files concerning the company that were held by Sydney Water Corporation.

On Saturday, a Herald investigation revealed the company had granted shares worth as much as $3.75 million to the former treasurer Michael Costa three years after he stopped a public tender that threatened the company's future.

It also reported that late last year, Mr Obeid and his son Eddie Obeid jnr had urged Mr Costa to become the company's chairman, a position that came with 5 per cent of the water services company, and that Mr Obeid snr had lobbied extensively on the company's behalf.

Mr Costa strongly denies any link between decisions he made as a minister affecting Australian Water Holdings and his later appointment as the company's chairman, saying his decision in 2008 to stop a public tender was based on legal advice of the solicitor-general. He also disputes the $3.75 million valuation of his shares, saying they were initially worthless and are now worth no more than $500,000.

The majority owner of Australian Water, Nick Di Girolamo, has had a relationship with Mr Obeid jnr since his school days. He claimed that he had employed Mr Obeid jnr for 12 to 18 months to meet with developers in Queensland and scout for new business prospects.

He said he was hired at ''market rates'' and attended the office a couple of days a week during that period. Mr Di Girolamo also said that in late 2010 he had received a personal loan from Mr Obeid jnr for an undisclosed sum.

Mr Di Girolamo has denied that any of the Obeids had any interest in Australian Water: ''I have never been involved in a transaction with the Obeids, I have never had anything to do with the Obeids.''

Australian Water Holdings has extensive connections with the Liberal Party. In the past five years it has donated at least $80,000 to the Coalition, and has used Michael Photios, a member of the NSW Liberal Party's state executive, as a lobbyist.

Mr Di Girolamo said he had also held meetings with other members of the NSW cabinet, including the Water Minister, Greg Pearce, and the Treasurer, Mike Baird.

For a time, a director on the board of the company's Queensland subsidiary was Santo Santoro, a former minister in the Howard government who resigned in disgrace for failing to properly declare his shareholdings.

The company also employs John Wells, a spin doctor with extensive Liberal Party connections.

For almost three years until November last year, the federal senator and former finance director of the Liberal Party, Arthur Sinodinos, was the chairman of Australian Water Holdings.

Last week, Mr Sinodinos said he, too, had 5 per cent of the company as part of his role, and he has recorded a shareholding in the company in his parliamentary pecuniary interest register.

But Mr Sinodinos's name is absent from the company's official share register filed with the Australian Securities and Investments Commission. Instead, Mr Sinodinos said, Mr Di Girolamo was holding the shares on his behalf.

Asked why the shares are not publicly registered with the corporate regulator, Mr Sinodinos said: ''Because it was on a gentleman's agreement.''

He said his agreement was that the trigger for the shares to be registered in his name was ''some realisation event''. He also said it would not be inaccurate to say a successful PPP was one such event.

Since 1992, the company has been paid $580 million to roll out infrastructure to new housing estates in Sydney's north-west on behalf of Sydney Water Corporation.

Mr Di Girolamo has already had a significant win since the Coalition took government in March last year.

In January this year, his company and Sydney Water entered a new 25-year exclusive agreement to give it the sole right to project manage the remaining half-a-billion dollars of water infrastructure work in the north-west growth centre.

A spokesman for the Premier, Barry O'Farrell, said: ''Any agreement Australian Water Holdings has with Sydney Water was negotiated and agreed by Sydney Water at arm's length from government, as is appropriate.''

Since about 2004, the company's main goal has been to convince the state government to sell it Sydney Water's activities in the north-west growth centre, though the O'Farrell government said it had not received a formal bid from the company.

This would be a deal worth billions of dollars, according to a senior government source.

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