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By Matt Siegel
SYDNEY, April 16 (Reuters) - The premier of Australia's New South Wales state, Barry O'Farrell, resigned from his position on Wednesday after it was revealed that he had misled a corruption inquiry about accepting a A$3,000 ($2,800) bottle of wine as a gift.
O'Farrell is the latest official to be caught up in a wide-ranging investigation into corruption in the state that has also ensnared his fellow Liberal Party Senator Arthur Sinodinos, who stood aside as assistant treasurer last month.
The resignation is likely to embarrass conservative Prime Minister Tony Abbott, who came to power last year promising an end to the dysfunction of the previous Labor government.
O'Farrell took the decision after investigators unveiled a handwritten thank you note for the bottle of 1959 Penfolds Grange a day after he had denied any knowledge of it.
"I still can't recall the receipt of a gift of a bottle of 1959 Grange, I can't explain what happened to that bottle of wine," O'Farrell told reporters.
"But I do accept that there is a thank you note signed by me and as someone who believes in accountability, in responsibility, I accept the consequences of my actions."
New South Wales, on Australia's east coast, is the state with the largest economy and home to its major financial centre, Sydney. It is also the most populous state with more than seven million residents.
O'Farrell received the bottle of wine from Nick Di Girolamo, a businessman and lawyer connected to disgraced former NSW lawmaker Eddie Obeid, who is being investigated by the New South Wales Independent Commission Against Corruption.
Obeid was a power broker in the NSW branch of the Labor party, which is in opposition to Abbott's government at the national level.
State opposition leader John Robertson from the NSW Labor Party said the incident was emblematic of a government that had lost its way.
"Today we've seen a Liberal government in New South Wales that has allowed donors and lobbyists to reach into the heart of public administration in this state," he told reporters.
"We now see a Liberal government in complete disarray, losing a premier in its first term."
Abbott defended O'Farrell, arguing that his resignation was a sign of integrity, not corruption.
"Obviously, as we now know, he innocently, inadvertently misled ICAC yesterday and he has taken the utterly honourable step of resigning as Premier," Abbott told reporters.
"This is an honour and an integrity at a very high level. We are seeing an act of integrity, an act of honour, the like of which we have rarely seen in Australian politics." ($1 = 1.0689 Australian Dollars) (Reporting by Matt Siegel; Editing by Michael Perry and Ron Popeski)