Paul Pisasale told a Sydney taxi driver he was allegedly trying to extort that he was a private investigator because it was better than admitting he was the mayor of Ipswich.
Pisasale, now former mayor of the southeast Queensland city, has conceded lying to Xin Li and seeking to gain "leverage" over him.
But, in testifying before his Brisbane District Court trial on Thursday, he has denied trying to extort him.
Xin was the former partner of Yutian Li, a Singaporean friend of Pisasale's he met in early 2017 to get "two hours of massage" from.
The pair formed a friendship in which she confided about being heartbroken by Xin, Pisasale testified.
"I was trying to find out the truth (from Xin) and I really didn't want to say I was the mayor of Ipswich," Pisasale said from the witness stand.
"That would have been intimidation and it had nothing to do with Ipswich.
"I just wanted it resolved and I thought the best way was to be an investigator."
Prosecutors claim Yutian told Pisasale she wanted to punish Xin after learning he was married during their relationship.
Pisasale then allegedly posed as a private investigator in a series of phone calls in which he told Xin he needed to pay Yutian between $5000 and $10,000, saying she has "a very, very good case" against him and "could go after you".
The money, Pisasale said, was reimbursement for Yutian's private investigation fees.
"She was so upset. You could just see her whole world had been destroyed," he told the court.
"She was a beautiful person. She was a very caring person and she would have given her 100 per cent to this bloke.
"She was broke, she was in Australia and she had nowhere to turn.
"All he had to do was reimburse her and let her start again but he was so determined not do."
Pisasale conceded he lied to Xin about being a private investigator but denied it was extortion or blackmail because the money was "rightfully owed" to Yutian, which is disputed by the Crown.
"I was just trying to get leverage to make him see what he did was wrong," he said.
"I wanted him to do the right thing by Angela. She was the victim in all this."
Yutian, who Pisasale says he was introduced to by Brisbane barrister Sam Di Carlo, has also pleaded not guilty to extortion.
When Xin didn't pay, Pisasale allegedly engaged Ipswich solicitor Cameron James McKenzie to write a letter to Xin demanding money and threatening court action.
McKenzie, in an interview with corruption investigators played to the jury on Thursday, said the letter was on the right side of the "very fine line" between what constituted a letter of demand and extortion.
"(Pisasale) does want to scare the shit out of this guy," McKenzie told investigators.
"To Paul this might seem like a bit of fun."
McKenzie has also pleaded not guilty to extortion.
Australian Associated Press