The state's corruption watchdog has recommended State Emergency Service Commissioner Murray Kear be sacked for corrupt conduct for deliberately failing to investigate allegations of misconduct against a "mate" and for dismissing a whistleblower.
In a report released on Wednesday, the Independent Commission Against Corruption said Mr Kear sacked his deputy, Tara McCarthy, as a "reprisal" for making allegations of corruption against her fellow deputy Steve Pearce, whom Mr Kear described as a "friend and mate".
Commissioner Megan Latham said Mr Kear had "improperly shown favour to Mr Pearce" and had deliberately failed to appropriately investigate a range of allegations against him, including credit card misuse, "because of his friendship with Mr Pearce".
"During all the events that were the subject of the inquiry, where Commissioner Kear dealt with complaints made by Ms McCarthy about the conduct of Mr Pearce, Commissioner Kear failed to disclose the friendship between them," she said.
The ICAC recommended that the Police and Emergency Services Minister Stuart Ayres consider taking action against Mr Kear "with a view to his dismissal".
It also recommended that the Director of Public Prosecutions consider charging Mr Kear with an offence under the Public Interest Disclosures Act for "taking detrimental action in reprisal for a person making a public interest disclosure", which is punishable by up to two years in jail.
Operation Dewar, which held public hearings last year before former commissioner David Ipp, QC, heard Mr Kear sacked Ms McCarthy in May last year in a meeting lasting between 30 seconds and a minute.
Ms McCarthy raised concerns about Mr Pearce using his corporate credit card for personal expenses, including electric brakes for towing a camper trailer on his car and roof racks for his surfboards. She also alerted Mr Kear to two SES contracts negotiated by Mr Pearce without a competitive tender.
Mr Kear and Mr Pearce, who are both former officers at Fire and Rescue NSW, had known each other since at least 2006 but Mr Kear did not disclose the friendship when he sat on the original interview panel when Mr Pearce applied for a job at the SES.
Commissioner Latham said the allegations that Mr Pearce had misused SES funds "were serious and required an appropriate investigation by Commissioner Kear to determine whether Mr Pearce had deliberately and knowingly misused SES funds for his personal benefit".
"Instead of causing such an investigation to be undertaken, Commissioner Kear informed Ms McCarthy that he intended to raise the matter directly with Mr Pearce," she said.
She added it was "difficult to accept" Mr Pearce's claims that he had mistakenly used his corporate credit card to pay for the roof racks and brakes, noting that he did not repay the money until 14 months and two years after they were purchased.
"The repayments were made only after Ms McCarthy had discovered the irregularities," the report said.
The inquiry heard that public sector auditor IAB uncovered another 154 claims on Mr Pearce's credit card that warranted further investigation, totalling $11,000, but concluded that disciplinary action was not warranted.
The ICAC did not make a corrupt conduct finding against Mr Kear for failing to take disciplinary action against Mr Pearce in relation to those expenses, but it noted that his actions formed part of a "general pattern of conduct...that tended to overlook misconduct by Mr Pearce".
Mr Kear took leave from his position pending the inquiry.
In a statement, Mr Ayres said he "welcomed" the ICAC's report.
"This is a serious matter and I am taking advice on the issues raised by the report and the courses of action available to me," he said.
"While this takes place, Commissioner Kear remains on leave. Mr Jim Smith will continue as Acting Commissioner of the NSW SES and has my full support."