On February 25, 2002, The Age reported that the royal commission was investigating events surrounding the payment of about $250,000 by a big contractor to a company that solved awkward industrial relations problems.

The fee was allegedly paid by construction giant Baulderstone Hornibrook to a subcontractor working at the company's National Gallery of Victoria re-development site in 2000.

The subcontractor, known as P.W and E.J Contracting Pty Ltd, subsequently enlisted the services of Domenic "Mick" Gatto and David "the Rock" Hedgcock as so- called "industrial trouble-shooters".

The stocky and unofficial king of Melbourne's nightclub bouncers, Mr Hedgcock, is a director of a company called Pro-Tect Securities, which provides guards and crowd controllers to Melbourne's nightclub industry.

The former boxer has firearms, theft and assault convictions.

He ran a gymnasium in the city and went on to train awesome Melbourne boxer, Sammy Solimon.

Hedgcock was known as a man to be reckoned with in Melbourne's rugged business underbelly.

He received $189,750 in 2001 for helping to ensure industrial peace on a major city project.

Building giant Baulderstone Hornibrook was so worried about a potential industrial dispute at its $95 million refurbishment of the National Gallery it was prepared to pay $100,000 for peace.

But a company executive lost his job when he made an unauthorised payment of almost three times that sum to a small sub-contractor, P.W and E.J Contracting Pty Ltd, in January 2001.

Commissioner Terence Cole, QC, was told Mr Hedgcock and Mr Gatto operated in tandem solving industrial relations problems in the industry.

In December 2000, P.W and E.J Contracting's owner, Peter Barker, a convicted armed robber and, like Gatto and Hedgecock, a former boxer, had approached them about problems at the gallery site.

Mr Barker had been authorised by Baulderstone to negotiate a site agreement with the Electrical Trades Union.

The commission was told the ETU's insistence that its preferred shop steward work on the site threatened to scupper a crucial site agreement.

Baulderstone was adamant the shop steward would not work on the site, blaming him for disruption during construction of Colonial Stadium.

Mr Barker approached Mr Hedgcock, whom he had known for 30 years, and Mr Gatto, who had done industrial relations consulting for him.

The ETU signed the site agreement after meetings between Mr Barker, Mr Gatto and ETU state secretary Dean Mighell.

Mr Barker invoiced Baulderstone for $250,000 plus GST -- more than twice what Baulderstone executive Graham Milford-Cottam had been authorised to pay.

Baulderstone's southern region director, Hedley Davis, told Mr Cottam he could not make the payment.

"His response was that we should pay it and . . . he expressed some concerns about his safety, that people associated with this deal were the sorts of people that break legs, were his words," Mr Davis said.

Mr Cottam was dismissed after he made the payment anyway.

Counsel assisting the royal commission, Dr James Renwick, said Mr Barker spent $79,500 on his home loan and a new car for his son, while $189,750 was paid to a company controlled by Mr Hedgcock.

Mr Hedgcock cashed a cheque for $150,000 in $100 bills, which the commission's investigators have been unable to trace.

Baulderstone may have spent its $275,000 in vain.

By the middle of 2001, the oral agreement with the ETU had unravelled as the union intensified industrial action to have another shop steward employed on the site.

That industrial action only stopped after the steward began work.

Outside the commission, Mr Gatto's and Mr Hedgcock's solicitor, George Defteros, said they rejected any implication they had used threats or intimidation within the industry.

He said his clients would co-operate fully.

"They have absolutely nothing to hide," Mr Defteros said.

Mr Mighell said he hoped that the $250,000 payment by Baulderstone would be fully investigated.

On Wednesday February 28, 2002, Mick Gatto, in an emotional outburst, claimed he was being made a scapegoat by the inquiry and strenuously denied he was a standover man.

He said the commission had damaged his reputation and caused his family enormous stress, vowing to commissioner Terence Cole QC,  "I will fight you all the way, tooth and nail".

Mr Cole suggested Mr Gatto "keep calm", and said that anyone who disrupted the commission faced heavy fines and jail for up to three months.

After being asked about money paid to his children Mr Gatto became agitated saying he had been "branded" for a week.

"My mother is hysterical, my children, their girlfriends and partners want to leave them. I hope one day you're in this position....I'm not a standover man. I'm not a man off ill repute. Fair enough I've got a chequered past....bit I paid for...whatever I have done wrong.

"I don't appreciate this nonsense that you are looking for someone to blame to justify your existence here today., to justify 300 investigators and teams of lawyers. You won't be justifying your existence with me. I promise you. I will fight you all the way, tooth and nail.

In an interview published in the Melbourne Age on March 2, 2002, Gatto furiously denied being a standover man or "king of the underworld".

He said that he put the accusations down to jealousy because he "dresses well" and "drives a nice car", and he notes that he "mixes well" with people throughout Australia.

Melbourne's Lord Mayor, John So sent him a Christmas card last year for instance. "It's not right that they seem to think I'm king of the underworld......all this nonsense is not right for my family or my children", Mr Gatto said.

Gatto admitted to being involved in controversy in the past but said that the publicity he was now receiving was of a far greater magnitude," he said of accusations bought against him the previous week.

"I shy away from the spotlight and don't like to be in the public arena."

"Unfortunately this time they (his accusers) have roped me into something they thought was a bonanza. They were looking for a scapegoat, a guinea-pig, and they thought it was going to be me and the union.

"Mate, I'll join arm in arm with the union and fight them all the way. The people of the union are beautiful people".