Mr Pisasale has told associates that he was merely acting as a courier as a favour for his good friend, Brisbane barrister Sam Di Carlo.

Mr Pisasale's account to friends is that he was in Melbourne visiting a developer when the colourful barrister, a former police officer, asked him to collect a cash payment from a Victorian client as it was needed to urgently settle a law case being run by Mr Di Carlo in Brisbane.

Just why the AFP had Mr Pisasale under surveillance that day is not clear, but on Monday they executed search warrants on the mayor's Queensland home and office.

The following day, clad in a dressing gown and red-and-white pyjamas, Mr Pisasale held a press conference in the local hospital to announce he was stepping down because of ill health

The popular mayor, who has run Ipswich council since 2004, denied that the raid by the federal police the previous day had anything to do with his resignation.

"I would be astonished if it is not legit," Mr Di Carlo said to Fairfax Media about the $50,000 in cash. "I regard him as a very good mayor, a true friend, and honest ... the idea that he would take a bribe is ridiculous and I am so sad that he has resigned."

When asked about Mr Pisasale's suggestion that the money was intended as a court settlement for Mr Di Carlo, the barrister said he had "no comment", but that he hoped to be in a position in the near future where he could "make everything clear".

Documents seized during a 2014 inquiry by the NSW Independent Commission Against Corruption, indicated that Mr Pisasale had connections to the Obeid-linked water infrastructure company Australian Water Holdings.

Eddie Obeid jnr, the youngest son of the now jailed former Labor minister Eddie snr, was trying to open doors for AWH to land water infrastructure contracts in Queensland.

"I was going to get a success based ah, arrangement of 3 to 5 per cent on any work that I, or opportunity I created in Queensland," Mr Obeid jnr told the inquiry.

"So it could have made a fortune for you?" he was asked. "For me personally, absolutely," he replied.

Mr Obeid and his close friend Nick di Girolamo, who was running AWH, met the Ipswich mayor on numerous occasions. They wined and dined the mayor and donated $7500 to his election campaign.

On February 16, 2011, Mr Pisasale was the guest of honour at a fundraiser organised by the Sydney Italian Chamber of Commerce fundraiser, of which Mr Di Girolamo was the head.

The mayor was snapped in the now famous photo flanked by soon-to-be NSW premier Barry O'Farrell and Mr Di Girolamo.

Mr O'Farrell told ICAC he had "donated" himself as a dinner guest for "a Queensland flood appeal fundraiser for the Mayor of Ipswich, Paul Pisasale, one of the great characters of Australian local government politics".

It was AWH who paid $30,000 at the fundraiser for the O'Farrell dinner.

Only a month after the fundraiser, the newly elected premier Mr O'Farrell accepted a $3000 bottle of Grange from Mr Di Girolamo. His denial, while giving evidence at ICAC, that he received this gift led to his resignation as premier.

While no contracts with Ipswich council eventuated with AWH, Sekisui House Australia (SHA), which had links to the Obeids, did win contracts for a major housing development in the Ripley Valley, about five kilometres from the Ipswich centre.

Documents tendered at ICAC show that in 2010 Mr Obeid jnr was negotiating a five-year agreement, at $1 million per year, for consultancy work for SHA.

SHA director Steve Williams is not only a close friend of Mr Pisasale's, but through his development company Wingate he has also been a major donor to the former mayor.

An email sent to AWH's solicitor, dated November 25, 2010, said "Eddie [jnr] has requested that you do not forward the draft back to Sekisui direct as wants to discuss it with Steve Williams in person when he delivers it by hand".

While the corruption inquiry did not delve into Sekisui House, Eddie Obeid jnr confirmed he "had a bit to do with" Mr Williams.

SHA also has close links to Brian and Gary Boyd, whose NSW development company Payce made a $25,000 to Mr Pisasale in 2012.

For five years up until 2013, lawyer Mark Morgan, who is a director in other Boyd companies, was a director of SHA.

The Boyd brothers were secret shareholders in Moses Obeid's flagpole company Streetscape. Their shareholding was held via a $2 shelf company of which Mr Morgan was the director.