Newtown Local Area Command officers Steven Rapisarda, Christian McDonald, Shane Housego and Christopher Sheehy were covertly investigated for six months in 2015, suspected of drug use.

The probe, which found nothing, was set up after their superintendent, Simon Hardman, complained that two of the "tight-knit group of like-minded homosexual" men were notorious for their promiscuity and drug taking may be linked to their "indiscriminate sexual encounters".

Mr Hardman said two of the officers had shaved their hair, possibly to avoid drug testing, and had suspicious sick leave patterns.

One of the group now arguing a claim of homosexual discrimination before the NSW Civil and Administrative Tribunal, Mr Sheehy, launched a claim for workplace compensation after learning of the investigation and sustaining a psychological injury.

He met with a police insurance investigator to discuss his claim on January 13, 2016, and made allegations against Mr Hardman, who remains employed with the NSW police.

A day after Mr Sheehy made his statement, Mr Hardman authored a complaint alleging that Mr Sheehy may have secretly recorded him in conversation, which is a criminal offence in NSW. Mr Hardman said the insurance investigator had noted Mr Sheehy had "very accurate quotes" regarding their conversation, raising the possibility he was relying on an audio file.

The officer charged with investigating the allegation, Detective Sergeant Anthony Volpe, said he did not interview Mr Hardman or Mr Sheehy. He said that in an interview with the insurance investigator, she told him a "miscommunication" must have led to Mr Hardman's impression. There was then no reason to believe Mr Sheehy had made covert recordings with his phone.

Satisfied that a mistake had given rise to the complaint, Mr Volpe said he did not pursue the investigation into the alleged surveillance any further. On Monday, he told the barrister acting for the four men, Brett Eurell, that when he realised there was no recording, it did not occur to him that the superintendent's complaint could have been "deliberately false".

He said he did not know Mr Hardman had received a copy of the statement accusing him of discrimination the day before making his complaint.

Commissioner Mick Fuller, who was then Mr Hardman's direct superior in the Central Metropolitan Region, has said in a statement he has "zero tolerance" for discrimination by police.

"A Professional Standards Command investigation was undertaken to resolve this issue and subsequently cleared all four officers," Mr Fuller said. "I was satisfied with this given the matter had the full oversight of the Ombudsman."