Until he was "basically slapped in the face" by a lawyer, Kevin McCarthy was unaware of the Nigerian-style swindle his good mate used to "borrow" $428,000 from him.
The NSW Independent Commission Against Corruption (ICAC) heard on Thursday that Mr McCarthy then initiated bankruptcy proceedings against his once-close friend, former RailCorp executive Joseph Camilleri, and his daughter Jessica Adouni.
The ICAC is investigating whether the people who contributed to the $1.5 million Mr Camilleri and his sister Carmen Attard raised for his gambling-addict daughter received any personal or professional benefit.
Ms Adouni told her father she was being blackmailed and had her identity stolen, but would be able to repay the money when she was awarded $90 million in damages from banks that had falsely accused her of fraud.
Mr McCarthy had made several loans to help Mr Camilleri, starting with an instalment of $20,000 in October 2012.
At the time, his then friend was involved in the awarding of a $1.4 billion RailCorp contract to Mr McCarthy's company, UGL.
In December 2012, he gave Mr Camilleri a further $110,000 to help his daughter.
Mr Camilleri was fired from RailCorp for misconduct in February 2013, and Mr McCarthy subsequently initiated bankruptcy proceedings.
When questioned by counsel assisting the commission Nicholas Polin, Mr McCarthy denied launching the action because Mr Camilleri was no longer of use to him.
"It was because I took on legal advice and the first time that I met with my lawyer he said, `This is obviously a Nigerian bank scam'," Mr McCarthy said. "(He) basically slapped me in the face and I woke up."
"But he's your friend," Mr Polin countered. "He's told you he'll pay you out of his superannuation."
"I severed our friendship fairly quickly when I understood that all of the trust that I had put in him, that everything I understood him to be, had been falsely applied over a period of time," Mr McCarthy said.
"I felt betrayed."
Mr McCarthy never followed through with the proceedings.
"Why not?" Mr Polin asked.
"We used the bankruptcy process to get access to information and when we found out he was selling his house, we took action directly to subpoena the money that came from the sale of his house," Mr McCarthy said.
The house sold for about $700,000.
After banks, lawyers and fees were paid, the remainder was split between Mr Camilleri's wife, who co-owned the house, and Mr McCarthy and his wife.
The inquiry continues.
