ICAC hears Australian Water Holdings a 'bunch of crooks'

Former NSW premier Nathan Rees called a company in which the Obeid family had a secret shareholding "a bunch of crooks", a corruption inquiry has heard.

Kerry Schott, the former chief executive of Sydney Water, told the Independent Commission Against Corruption on Monday that the state-owned utility had a "fraught" relationship with Australian Water Holdings.

The ICAC is examining 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.

Dr Schott said a contract between Sydney Water and AWH to manage the installation of water and sewerage infrastructure was "very sloppily drafted".

The ICAC has heard she became suspicious about millions of dollars in expenses AWH was charging to the public utility, including for chauffeur-driven limousines and donations to the NSW Liberal Party.

"Sydney Water was not a bottomless pit of money," Dr Schott said.

Dr Schott said that Mr Rees, who was then water minister, "used to refer to them [AWH] as a bunch of crooks".

"A bunch of crooks? What was his thinking there?" counsel assisting the inquiry, Geoffrey Watson, SC, asked.

"I think the thinking was partly based on advice from Sydney Water to our minister for water that the company was over-charging him, over-charging us.

"It's not the sort of advice we would normally bother with but, because he was being frequently visited by them, we needed to make sure that he knew what was happening within Sydney Water with that company."

Mr Obeid allegedly told a colleague to "sack that bitch", in a reference to Dr Schott.

The inquiry has heard Mr Obeid predicted a corruption complaint would be made against her by Liberal MP Chris Hartcher.

An anonymous complaint was made to ICAC, and the lawyer for Mr Hartcher's former adviser Tim Koelma said on Friday that Mr Koelma was "the source" of the letter.

At the time of the complaint, Dr Schott and senior colleague Ron Quill were standing in the way of a lucrative public-private partnership between the NSW government and AWH.

Earlier, the ICAC heard that former NSW treasurer Michael Costa was "acutely aware" AWH was running up huge bills when he was chairman and tried to rein in costs.

Peter Canaway, who is now the chairman of Australian Water Holdings, told ICAC on Monday that Mr Costa "didn't like the word insolvency" but knew the company was in financial trouble by early 2012.

Mr Canaway said the former Labor treasurer was "one of the most capitalistic socialists I've ever met" and made efforts to rein in the extraordinary expenses of the infrastructure company, including the million-dollar plus salaries of some of the company's directors.

The ICAC has heard the family of Mr Obeid had a 30 per cent "secret shareholding" in AWH but there is no suggestion Mr Costa was aware of their interest.

"When Michael was chairman, the board was acutely aware of the cashflow issues," Mr Canaway said.

"He tried very hard to get the company going in [the] right direction."

AWH has a contract with Sydney Water to manage the installation of water and sewerage infrastructure in Sydney's north-west.

The ICAC has previously heard the company was billing Sydney Water for millions of dollars in "administrative" costs, including chauffeur-driven limousines and political donations.

Mr Canaway said that, when he brought in auditors to look at AWH's books, they noticed that an AWH director had written two cheques to himself, totalling $57,000, in late 2010.

The auditors noted that there were no receipts for these payments and they were booked as Queensland business development expenses.

The inquiry has heard that AWH had also submitted these bills to Sydney Water for payment.

Mr Canaway said he had earned "zip" since he was installed as the chairman of AWH, after Mr Costa stepped down in late 2012.

Mr Canaway and three associates invested $500,000 in the company in mid-2011 under an agreement structured as a loan, the inquiry heard.

They later provided millions more to prop up the company. When word got out in late 2012 that the ICAC was interested in the Obeids' interest in AWH, any potential "white knights" suddenly found they had other things to do, Mr Canaway said of attempts to sell the business or find investors.

His accountant wrote in February 2012 that AWH was "currently insolvent and living in an overhead world they can't afford".

Due diligence also revealed "some personal usage of the company account for limousine services".

The inquiry heard Mr Costa resigned after Mr Canaway and his associates threatened to call for the repayment of their investment rather than take shares in the company.

Mr Costa is not accused of any wrongdoing and Mr Watson has said "his role seems to have been a positive one".

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