A business partner of the former University of New England chancellor allegedly had an ownership structure drawn up for a hotel the pair were seeking to buy from the university a month before the chancellor revealed his interest to his employer, an inquiry has heard.

The Independent Commission Against Corruption (ICAC) is investigating the 2005 purchase of the Tattersalls Hotel in Armidale on the NSW northern tablelands by Darrell Hendry, a former business partner of then UNE chancellor John Cassidy.

Mr Cassidy is facing allegations he used confidential information to help Mr Hendry win the closed tender for the hotel and misrepresented his own stake in the business.

Mr Hendry won the tender with a $2.65 million offer in December 2005.

Mr Cassidy revealed his investment in the Tattersalls Hotel to the university on January 20, 2006, telling acting vice-chancellor Robin Pollard he had decided only the day before to invest.

Mr Cassidy had allegedly previously told the directors overseeing the hotel sale he had no ongoing connection with Mr Hendry.

However, counsel assisting the commission Anna Mitchelmore told ICAC Mr Hendry would give evidence he had a call “out of the blue” from Mr Cassidy the previous November, “suggesting that he take a look at the Tattersalls Hotel” because it was a good investment opportunity.

The two men had not spoken for some months but were shareholders and directors of Vercot Pty Ltd, a company set up in the 1980s to effect a management buyout of construction company Abigroup, where they were senior executives.

In 2005, the UNE student union was forced to sell the Tattersalls Hotel – a 40-room business with two bars and 15 poker machines – as part of a liquidation of assets.

As chancellor Mr Cassidy had access to a confidential valuation pricing the hotel at $2.35 million – which he believed was below market value, the inquiry heard.

Mr Hendry would give evidence that Mr Cassidy alerted him to the opportunity and was prepared to be his partner in the purchase, Ms Mitchelmore said.

Ms Mitchelmore told ICAC tenders of $2.2 million, $2.375 million and $2.5 million were received before Mr Hendry posted a late bid of $2.65 million after receiving an extension on the offer deadline.

Evidence would also show that Mr Hendry, during the previous December, had engaged an accountant with Mr Cassidy’s knowledge to create an investment structure that would allow Mr Hendry to hold one-third of the hotel and Mr Cassidy to own two-thirds.

Mr Cassidy used Vercot to take up his stake, the inquiry heard.

Ms Mitchelmore said it would be alleged that Mr Cassidy misled the university about his involvement in the hotel purchase.

ICAC’s Operation Verdi is investigating whether Mr Cassidy complied with his obligations to act honestly and in the best interests of the university in his role as chancellor.

Ms Mitchelmore said the inquiry would also examine whether any of his behaviour involved misconduct in public office.

Mr Hendry is due to appear before ICAC on Tuesday, while Mr Cassidy is scheduled to appear on Thursday.

By Peter Trute