In short:

A former Strathfield mayor has tearfully recounted to the NSW corruption watchdog hearing how he found out his children had been secretly recorded.

Matthew Blackmore alleges he and his family were subject to threats and blackmail when he reneged on a handshake agreement to leave the top job.

The Independent Commission Against Corruption is examining potential breaches of electoral donation laws.

Former Strathfield mayor Matthew Blackmore has tearfully recalled learning his children had been secretly recorded on a family holiday during a campaign of alleged threats and blackmail aimed at getting him to hand over the council's top job.

Mr Blackmore appeared before the Independent Commission Against Corruption (ICAC) on Monday as part of its examination into potential breaches of electoral donation laws.

The investigation, codenamed Operation Rosny, is examining allegations former Strathfield councillor Sharangan Maheswaran and current councillor Karen Pensabene blackmailed and spied on Mr Blackmore while he was mayor in 2023.

The inquiry heard Mr Blackmore angered Labor councillors Mr Maheswaran and Ms Pensabene when he reneged on a handshake agreement to hand over the mayoralty to Ms Pensabene part-way through his term.

He told the inquiry Ms Pensabene wanted to be mayor during the March 2023 state election, but he did not want to give up the job.

ICAC counsel assisting Hugo Wilesmith told the inquiry Mr Maheswaran then allegedly made a threat to Mr Blackmore, quoting him as saying: "What you've got to understand, Matthew, is anyone that crosses me, I've got a reputation in the party that if I don't like someone, they don't get away with crossing me, it would take me about six weeks to take you down".

The commission heard Mr Blackmore told Mr Maheswaran to "get f****d" in response.

The inquiry heard Mr Maheswaran and Ms Pensabene then ratcheted up the pressure, with Mr Blackmore believing the pair were behind the distribution of defamatory flyers and unfavourable stories being leaked to the media.

Ms Pensabene lobbied Mr Blackmore for a meeting, with Mr Wilesmith quoting a message from Ms Pensabene: "Matt, I think it's really important that we meet, I think things have gotten out of hand.

"I think they will escalate every moment we haven't met. I spoke to Sharangan, and he said everything so far is less than 10 per cent of what is coming."

'Draw a line in the sand'

Mr Blackmore said he later learned he was secretly recorded for five months, including on a family holiday outside Sydney, as part of the alleged campaign against him.

"The holiday thing was one of the worst things," an emotional Mr Blackmore told the inquiry.

Mr Blackmore told the ICAC he had asked his wife to take a photo of Mr Maheswaran's car on his street, near a brothel, because he was concerned he was stalking him.

"I was a bit intimidated as to is he stalking my house or what's he doing there?" Mr Blackmore said.

He eventually agreed to step down and support Ms Pensabene as mayor as her deputy.

Mr Blackmore privately notified ICAC of the alleged blackmail and surveillance and went on to resign as deputy mayor while speaking publicly about some of his concerns.

"I wanted to draw a line in the sand: I'm not working with you people after what you did," Mr Blackmore said.

He is scheduled to reappear on Tuesday.

Mr Maheswaran is scheduled to appear as a witness to the inquiry on Friday, while Ms Pensabene is expected to appear at a later date.