Paul Dubois recounted a conversation he had in the 1980s with his brother Garry Dubois - who was later convicted with O'Dempsey of murdering Barbara McCulkin and her daughters.
Garry Dubois claimed he had nothing to do with the Whiskey fire that killed 15 people, but Tom Hamilton who was known to the brothers had been there, Paul Dubois told the inquest on Thursday.
"He said O'Dempsey had set it up so the place would burn down with people in it. He wanted nothing to do with that," Mr Dubois said.
"He said he couldn't understand why that was going to happen.
"He said it was beyond his comprehension that that was even thought about."
Mr Dubois said his brother referred to the men later convicted of the Whiskey attack - John Andrew Stuart and James Richard Finch - as "a couple of clowns".
"He said they were set up a long time before the fire to take the fall for it and they were too stupid to wake up to it."
Mr Dubois said his brother, who died in jail last year, knew a lot of other people including police were involved but didn't name anyone.
The Whiskey inquest was reopened after the firebombing was mentioned in trials in which O'Dempsey and Garry Dubois were convicted of killing the McCulkins.
The trials heard the killings may have been motivated over fears Barbara McCulkin would try to implicate O'Dempsey in the firebombing.
Only Finch and Stuart were convicted over the Whiskey attack.
The evidence came as lawyers called for former police officer Roger Rogerson, who is behind bars in NSW for murder and was part of the initial investigation into the attack, to be called to testify.
Rogerson is the only person still alive who signed Finch's confession made days after the firebombing, O'Dempsey's lawyer Chris Minnery told the inquest.
He said Rogerson could also be asked about the possibility of any involvement by Sydney-based criminals.
The application was supported by some legal representatives, but counsel assisting Stephen Keim said information like details of a conversation between detectives and Rogerson had already been provided to the court.
Rogerson's lawyer had also instructed that his client would not consent to giving remote evidence.
"We don't think it's an exercise logistically or financially justified," Mr Keim added.
Coroner Terry Ryan is expected to rule on the request on Friday.
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