Over the past four years, Fred Allen* has received tens of thousands of dollars from at least 10 Sydney metropolitan councils in exchange for evidence that is required, in court, to help close underground parlours.

But in October the investigator was accused, by Sydney-based consultancy firm Brothel Busters, of having "deliberately omitted" important details from a brief of evidence to "protect" an illegal sex worker, with whom he had become "enchanted", while working covertly inside an underground vice den.

In the lead-up to the 2011 state election, the O'Farrell government vowed to introduce a "new licensing authority" – as an "early priority" – to oversee an industry spiralling out of control. But four years on – and eight weeks out from the next state election – there is still no sign of any remedy to the crisis.

The Sun-Herald previously identified at least 34 illegal premises operating within a five-kilometre radius on the north shore. Today, the last line of defence available to councils is a handful of middle-aged, male private investigators who pose as everyday clients and have undercover sex – at the ratepayer's expense.

Keith Rhoades, president of Local Government NSW, said the government's broken promise had forced Sydney councils to "pick up the bill".

"Quite clearly the current system is not working ... it's time the state government introduced tougher legislation that eliminated the need for councils to engage private investigators."

In September last year, Mr Allen, a 60-year-old former taxi driver who has been commissioned to sleep with more than 60 prostitutes, said he was finding it difficult to keep up. "The jobs flow in, on average, once every three weeks. If it spreads out that way, it's perfect," he said.

"But there are occasions when they all arrive at once. For instance, I was given three jobs to complete, for the same council, in the same week ... and I'm not as young as I used to be."

In a letter dated October 23, Brothel Busters head Chris Seage wrote to Mr Allen, and warned: "It is my view you may have breached the code of ethics for private investigators in Australia.

"Let me be clear on this;  I hold very seriously the withholding of information from your reports.  You said yesterday the sex worker, Sophie, provided you with her phone number so you could contact her outside the establishment to have sex with.  You said … you wouldn't mind taking her up on that.  Further, you said you didn't want to get her in trouble ... you withheld this information to protect the sex worker who you took a liking to."

Wishing to forward the report onto the Department of Immigration, Mr Seage ordered the investigator to refile his report, adding: "You must agree to be 100 per cent honest." But Mr Allen refused to return phone calls or emails.

When approached for comment, Mr Allen said the girl, Sophie, did hand him her private details so they could meet away from the brothel, but denied seeing her again.

"I did not provide the phone number as I was not aware of who else was involved in having access to this report and was concerned for the safety of both her and myself."

Mr Seage, however, confirms that Mr Allen was hired to make two undercover visits to the premises that week and in his first report, "willingly provided" the private contact details of another illegal sex worker, Amy, with whom he had "engaged" onsite.

NSW Special Minister of State Anthony Roberts said the government was continuing to monitor "this very complex issue".

*not his real name