Contract killer Rodney Collins claimed he was approached by then detective Paul Dale and asked if he would murder a police informer, an inquest has heard.
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Collins said Mr Dale approached him in a Melbourne bar and told him he needed Terence Hodson killed and that if he did so the then detective would one day return the favour, the Coroners Court heard on Monday.
Collins claimed he was approached by Mr Dale about two months before Hodson and wife Christine were killed in their Kew home, in May 2004, the court heard. The hitman declined the offer, the court heard.
Detective Senior Sergeant Sol Solomon, of the homicide squad, said in a statement read to court that Collins told him of meeting Mr Dale after offering to cooperate with police once the killer was arrested in 2008 for the unrelated 1987 double murder of Ramon and Dorothy Abbey.
Collins is now serving a jail term for those murders.
Mr Dale, a former drug squad detective, and Collins were in 2009 charged with the murder of Mr Hodson. Collins was also charged with killing Mrs Hodson.
The cases against Mr Dale and Collins collapsed after Carl Williams was bashed to death in prison in 2010. Williams told police he had ordered Collins to kill Mr Hodson on Mr Dale's behalf.
Mr Dale and Collins both deny any involvement in the Hodsons' murders.
Mr Hodson had agreed to give evidence about alleged police corruption before he died.
Detective Senior Sergeant Solomon said Collins told him he would give a statement against Mr Dale on the conditions the charges of killing the Abbeys were dropped, that he be guaranteed he wouldn't be charged with other offences and that his girlfriend be ruled eligible for a $1 million reward for information about the Hodsons' murders.
The killer also said he would provide information about a series of unsolved murders, the court heard.
Collins told police he had visited Mr Hodson at his home when buying cannabis from him, the inquest heard.
But Collins later turned hostile towards Senior Sergeant Solomon, the court heard, and police ultimately refused to strike a deal with him.
Earlier, the inquest heard Williams had been approved to be eligible for the $1 million reward, after the underworld boss wrote to Victoria Police's then chief commissioner, Simon Overland, and the state's then Director of Public Prosecutions, Jeremy Rapke, QC.
Former homicide squad detective Cameron Davey said in exchange for Williams' statement against Mr Dale and Collins, Mr Rapke and Mr Overland approved that the crime boss be immune from convictions over the Hodsons' murders and be eligible for the reward.
Mr Davey said police investigated the evidence Williams had given them and found telephone intercepts and phone records corroborated what he said.