The council would not give details of the charges against Mr Innes. They are based on an internal report, written by chief finance officer Keith Gallagher, which questioned the terms under which Mr Innes was employed by Easington and his car-leasing arrangement.
Mr Innes' trade union representative Bill Miles, consultant to the Association of Local Authority Chief Executives, condemned the view taken by Easington's Labour group executive.
'This is quite outrageous, he will be vigorously defended and ALACE has no doubt that before an independent third party there will be no case for Mr Innes to answer because he has behaved honestly throughout the whole saga,' Mr Miles said.
This is despite two reports, concluded at the end of December by the district auditor and an independent employee relations consultant, which both cleared Mr Innes of any wrong doing.
The investigating panel is pushing for a disciplinary hearing after Mr Innes refused an offer of retirement made by the Labour leadership before Christmas.
The panel, made up of members of the Labour group executive, will argue at a meeting of the full council that Mr Innes should defend his case at a disciplin- ary hearing before an independent chair.
Mr Thompson and members of the investigating panel would not comment. Mr Innes also refused to comment.
Mr Innes joined Easington as general manager in 1992 on a four-year fixed-term contract. He led a thorough management shake-up, replacing eight departments and their director posts with four corporate directors and 26 business units.
According to council sources, the shake-up has split the strong Labour majority at Easington, a former mining district with high unemployment.
Negotiations for renewing Mr Innes' contract began nine months ago.
The personnel director presented members with two options - to give Mr Innes a new fixed-term contract or make him a permanent member of staff. He was offered a permanent contract.