Thousands of dollars worth of roading materials destined for a ratepayer-funded project were delivered to home renovations of a senior council manager, a whistleblower claims.
The truck driver said he was ordered to deliver the materials to the homes of a senior official at the former Rodney District Council and a roading manager.
He said he was ordered to falsify documents so ratepayers would be charged for materials.
When the driver raised concerns with the manager, he said he was told to shut his mouth or he would be "chopped off at the knees".
The driver also alleges tens of thousands of dollars worth of materials were diverted from one project contract to another job.
It comes as a third Auckland Transport employee has left after being investigated during an ongoing inquiry into potential misuse of public money.
The Herald on Sunday understands the employee was from the northern area road maintenance.
The Serious Fraud Office is examining hundreds of millions of dollars worth of contracts awarded by Auckland Transport.
The Serious Fraud Office (SFO) is assessing the latest claims made by the driver as part of the office's investigation into allegations of corruption involving Auckland Council roading contracts.
Auckland councillor Wayne Walker said, if true, the driver's claims were at the "extreme end of inappropriate behaviour". He said the claims alleged "certain people were being looked after and it was the ratepayer that was paying for it".
There was also widespread speculation roading contracts had been manipulated, and suggestions council employees were taken on all-expenses-paid trips to exotic locations such as Bali and Thailand to sweeten deals.
Walker praised the truck driver, and encouraged more whistleblowers to come forward.
The driver, 42, a family man, said his career had been severely affected by his daring to raise the issue with his bosses.
"They've destroyed my career. Every job I've applied for they've run me down. They've cost me personally $50,000 since that case."
He has provided documents to the Herald on Sunday, which were passed to the SFO. He said investigators would be able to verify his claims by examining the truck's hubometer, which measures daily distances travelled.
Explaining his conversation with his manager, he said: "After we delivered the metal, I phoned up and said, 'What are we putting this down to'? I could hear he was starting to panic and he said, 'Put it down to [another job]'. I said that's a different job number.
"Everything had to be job coded even to the point of exactly where that metal went on the road. Of course, that's when the threat was made."
The driver said he made the complaint, work dried up and he was transferred. He took out a personal grievance claim in 2007 which was settled before it reached the Employment Court.
When contacted, the manager accused of misappropriating materials said he had been cleared by an internal investigation. "Everything that was delivered to my house was paid for. It was constructed and paid for through another contractor.
"If the SFO want to talk to me, that's fine. There was no proof of anything there," he said.
An SFO spokeswoman said: "We appreciate the significant contribution that information from the public makes to our investigations."