City of Newcastle confirmed the referral to the ICAC after the Newcastle Herald began investigating why Cr Clausen had told a May council meeting he wanted a house on Parkway Avenue kept on the council's heritage register even though council staff had recommended it be deleted along with four other demolished properties.

The demolition and the new "Mexican villa" style house, which features two replica cannons on its roof, were approved by council staff under delegated authority in November 2017.

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In the debate Cr Clausen described the property as "item 29" on the heritage register. It was only when Independent Councillor Kath Elliott asked if it was "Jeff McCloy's wife's" house that its owner was clarified.

Mr McCloy was lord mayor from 2012 to 2014 when he resigned at the height of ICAC inquiry Operation Spicer that found in 2016 he was one of more than a dozen people who "acted with the intention" of evading election donation laws.

He was not charged but a legal battle to clear his name was lost in the High Court.

"You've got to be kidding me," he said yesterday when told of the ICAC referral.

"This is petty, vindictive behaviour. So what he's saying is I've corrupted all of these people - the heritage architect, the environmental consultants and the council planning staff who approved it?" Mr McCloy said.

"These are highly respected ethical people.

"Barney Collins is the best heritage architect in Newcastle.

"He saw the old house should never have been on the heritage register.

"It was on there as Victorian [pre-1904] when that area wasn't subdivided until the 1920s and the house wasn't built until 1948. And then it was divided into four flats soon after and stayed that way the whole time.

"It's bizarre. Whoever's behind this are idiots."

Mr McCloy said he believed Labor was unhappy that the project had not been "called up" to be voted on by the elected councillors.

Cr Elliott said: "Labor constantly backs the staff, as do I.

"So I find it strange that they are questioning a planning matter so long after the event.

"We have very professional planning staff.

"That's why I asked whose house it was during the debate."

It is understood that the planning staff who signed off on the project no longer work for the council, having parted ways in the course of a restructure announced by the present administration in March 2018.

In the council meeting of May 25 this year, council staff recommended an updated Newcastle heritage register that "aims to correct various anomalies, errors and mis-descriptions" in the existing document.

Heritage architect Barney Collins, who wrote the heritage report supporting the demolition of the original Parkway Avenue house, said the property had been built by the Whitaker's Jewellers family, was converted into flats soon after it was built and did "not fulfil the criteria for local heritage listing".

A Statement of Environmental Effects written for the project by consultants City Plan Services acknowledges the roof terrace of the new building "exceeds the height limit", but says it's "a reduction in scale and height from the existing building", since demolished.

When the Herald asked Cr Clausen why he had wanted the building kept on the register, he said: "I had concerns with the way a heritage listed property was demolished without proper process and didn't wish to endorse that process by approving it.

"I have raised my concerns with the appropriate authorities.

"I don't wish to make a public comment."

Pressed again, Cr Clausen said: "It's a matter for the ICAC."

Told of the findings of the consultants' reports, Cr Clausen said: "If the Herald has information that it believes supports the decision to demolish a heritage listed property outside of the normal process then it should disclose this to ICAC."

The council said it had "been advised that the matter is with ICAC and as such no further comment can be made at this time".

The Labor/Green majority voted on May 25 to support Cr Clausen's move to keep the demolished house on the heritage register.

The council's online DA tracker shows plans were lodged on September 5, 2017, and approved "under delegation" on November 22.

On December 9, 2017, the Herald reported the McCloy purchase and the planned demolition to make way for a "Spanish mission" style house.

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