The claim has been made by former party colleague Khal Asfour at a parliamentary inquiry on Monday investigating allegations of poor conduct in his office.
The probe was sparked in 2022 when MP Tania Mihailuk used parliamentary privilege to allege Mr Asfour had property links with disgraced NSW Labor powerbroker Eddie Obeid.
Mr Asfour denied any wrongdoing.
The mayor of southwest Sydney's Canterbury Bankstown council and withdrew a bid to run for state parliament after separate reports surfaced in January he used ratepayer funds to pay for designer clothing.
He told the hearing on Monday he believed information handed to the committee had been selectively leaked.
"Before I had the opportunity to answer any of your questions, a deliberate and calculated leak aimed at damaging my reputation ... derailed my political ambitions," he said.
Mr Asfour said he was left with no option but to withdraw as Labor's upper house candidate.
He called on One Nation MP and member of the investigating committee Mark Latham to resign, citing a January press conference held by the MP with Ms Mihailuk.
"(Mr Latham) accused me of claiming everything on the ratepayer except my underpants," he said.
Ms Mihailuk was booted from the Labor Party in 2022, and later announced she intended to run as an upper house candidate for One Nation at the March state election.
"My challenge to Mr Latham before this public inquiry is that he gives an undertaking to do some due diligence on the newest member of his racist party," Mr Asfour said.
He then made a series of sensational claims about Ms Mihailuk.
"She spent tens of thousands of dollars of ratepayers money on things like bottles of Johnnie Walker scotch, Bailey's Irish Cream, slabs of beer, Russian vodka," he said.
"There weren't too many local outlets that didn't know her order."
"She was also good on the tooth, claiming for takeaway Chinese meals for her family from local outlets and the occasional late night fine dining experience.
"Not to forget the chicken nuggets, chips and flavoured milk for her kids when they finish school."
Mr Latham dismissed the comments from Mr Asfour when contacted by AAP on Monday.
"He's so guilty he had to quit the Labor ticket in disgrace," he said.
Chair of the inquiry, Liberal MP Aileen MacDonald urged Mr Asfour not to make adverse comments, however he insisted his comments were appropriate.
At an earlier hearing, Mr Asfour said the inquiry was politically motivated and lacked transparency.
"It is no secret I've got under the skin of this government when I stood up for my community and many other residents of western Sydney during the harsh lockdowns and overzealous policing during the COVID pandemic," he told the inquiry in December.
"I've had a political target on my back ever since, and this is pay back."
Mr Asfour was cleared of any wrongdoing in a separate, independent inquiry set up to investigate the allegations made by Ms Mihailuk.
That investigation, led by Arthur Moses SC, found there was no evidence or any corrupt or unlawful acts or breaches of the Code of Conduct/Local Government Act by Mr Asfour.
AAP has contacted Ms Mihailuk's office for comment.
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