The barrister acting for Liberal Senator Arthur Sinodinos at a corruption inquiry has gone head to head with a key witness, labelling him a "smart arse" in an extraordinary aside picked up by hearing room microphones.
Sydney silk Tony Bannon lashed out at witness Rod de Aboitiz at the Independent Commission Against Corruption on Wednesday after Mr de Aboitiz called Senator Sinodinos a "former" Assistant Federal Treasurer.
The comment was not intended to be audible.
"Mr Bannon called the witness a smart arse. That was heard all round the room," said counsel assisting the ICAC, Geoffrey Watson, SC.
Mr Bannon said he regretted the "disgraceful" comment and withdrew it.
"I'd like an apology from you as well," Mr de Aboitiz said.
A former chief financial officer of Rothschild Australia, Mr de Aboitiz gave damaging evidence last week that he had warned Senator Sinodinos, then the deputy chairman of Obeid-linked company Australian Water Holdings, that the company was running up huge debts.
There was previously a suggestion the debts may have included $20,000 in donations to the Liberal Party, but Mr de Aboitiz said he did not mention specific costs.
Senator Sinodinos, who stepped down as Assistant Treasurer last week pending the inquiry, has claimed he was unaware of the payments.
Commissioner Megan Latham told Mr Bannon: "I don't think anyone needs to be disrespectful."
Mr Bannon told Mr de Aboitiz to stop referring to his client as the former Assistant Treasurer.
"He's to be called Mr Sinodinos," the commissioner said.
Earlier, Mr Watson said he was "not backing off one inch" from asking questions about Senator Sinodinos' $200,000 salary as chairman of AWH.
Mr Bannon had complained Mr Watson's remarks in his opening statement about Senator Sinodinos' salary had the capacity to damage the reputation of his client.
Mr Watson said he was "trying to be kind" when he said Senator Sinodinos made $200,000 for 100 hours work a year and it was more like 50 hours.
Mr de Aboitiz told the inquiry that he raised "a number of very significant issues" with Senator Sinodinos at a meeting in May 2010.
He said he told the Liberal Party heavyweight, who was then working at National Australia Bank, that AWH was on the brink of insolvency and could not pay its tax or superannuation.
He said there were a range of "soft" or discretionary costs that needed to be reined in, but he did not refer to specific figures.
Mr de Aboitiz said he had already outlined the other costs to AWH's chief executive, Obeid associate and Liberal Party fundraiser Nick Di Girolamo, and had assumed this had been passed on to Senator Sinodinos in preparation for the meeting.
The commission is investigating allegations the family of corrupt former Labor minister Eddie Obeid had a secret 30 per cent shareholding in AWH.
Senator Sinodinos has denied he was aware of the Obeids' financial involvement in the company.
The inquiry has previously heard AWH was secretly charging the state-owned Sydney Water for millions of dollars in costs, including for limousines, political donations and legal fees.
Sydney Water contracted AWH to manage the rollout of water and sewerage infrastructure in the north-west and agreed to cover its administrative costs as part of the deal.
It tried to cut commercial ties with AWH when the costs ballooned from $200,000 a month to up to $800,000 a month without explanation.
The story Arthur Sinodinos' lawyer calls ICAC witness a 'smart arse' first appeared on The Sydney Morning Herald.