The O'Farrell government has been dragged into the scandal surrounding the family of former Labor powerbroker Eddie Obeid, with two major corruption inquiries featuring three of its MPs starting in the next two months.
The Independent Commission Against Corruption has announced it will hold a public inquiry, starting on March 17, into allegations of corrupt conduct by public officials and "persons with an interest" in the Obeid-linked company Australian Water Holdings.
A second inquiry will be held from April 28 into allegations that former energy minister Chris Hartcher, The Entrance MP Chris Spence and Wyong MP Darren Webber "corruptly solicited, received and concealed payments from various sources in return for favouring the interests of those responsible for the payments".
Australian Water, which became one of the largest donors to the NSW Liberal Party in the months before the 2011 election, was allegedly one of the sources of the payments.
ICAC says the first inquiry, codenamed Operation Credo, will look at whether, between 2004 and 2012, interests in Australian Water Holdings, its predecessors and subsidiaries benefited by inflating charges to state-owned Sydney Water corporation.
It will also examine allegations that "public officials and others" were involved in falsifying a cabinet minute relating to a public-private partnership proposal by Australian Water Holdings to mislead a budget committee of cabinet.
Mr Obeid and his fellow former Labor ministers Joe Tripodi and Tony Kelly are alleged to have "misused their positions as members of Parliament" to try and influence public officials over the proposal for the public-private partnership.
As well, the inquiry will consider allegations that in November 2012 the prominent Liberal party identity Nick di Girolamo and Eddie Obeid jnr tried to mislead ICAC's investigation into whether Mr Obied snr tried to use his position as an MP to influence public officials over the deal.
The second inquiry, codenamed Operation Spicer, will look at whether between April 2009 and April 2012 Mr Harcher, Mr Webber and Mr Spence, along with two former staff of Mr Hartcher – Tim Koelma and Ray Carter – corruptly solicited payments in return for political favours.
It will also examine whether between December 2010 and November 2011 the MPs and Mr Carter solicited banned political donations.
Finally, the inquiry will consider allegations that Australian Water Holdings, through Mr di Girolamo, its chief executive, made "regular payments" to Eightbyfive, a company owned by Mr Koelma - a former policy adviser to Mr Hartcher - in return for Mr Hartcher favouring Australian Water Holdings interests.
Mr Hartcher suddently resigned from the cabinet in December after ICAC raided his office.
In 2012, Fairfax Media revealed the suspension of two of Mr Hartcher's staff - Mr Carter (a senior electorate officer) and Mr Koelma - after the Liberal Party referred allegations they had breached donations laws to the Election Funding Authority.
Mr Koelma resigned from Mr Hartcher's office shortly afterwards, while Mr Carter remained suspended on full pay.
It was subsequently revealed a $5000 payment to Eightbyfive, from Wyong builder Matthew Lusted, sparked the referral by the Liberal Party.
Mr Lusted was a preselection candidate for the federal seat of Dobell on the central coast. Fairfax Media has since been told Mr Lusted was approached for the payment by Mr Carter shortly before the March 2011 state election.
It is understood Mr Lusted's name and others were given to Mr Carter by Wyong mayor Doug Eaton. Mr Eaton has previously refused to comment due to ICAC secrecy provisions.
Property developers have been prohibited from donating to candidates in NSW elections since 2009.
The ICAC has previously heard evidence that the Obeids agreed in November 2010 to buy a 30 per cent stake in Australian Water for $3 million. The family claims the agreement was later converted to a loan arrangement.
Liberal Senator Arthur Sinodinos, then treasurer of the NSW Liberal Party, was appointed chairman of Australian Water Holdings a day before Mr Obeid's sons, Paul and Moses, signed the agreement to buy shares in the company. A month after his appointment, on December 3, 2010, it made its largest donation to the party with a payment of $30,000. Senator Sinodinos has insisted he was unaware of the donations and of the Obeids' alleged links to the company.
Sydney Water signed a 25-year agreement with Australian Water in January 2012.