Mr Schwarzman is one of the world’s richest men, with an estimated worth of more than £30bn, having founded Blackstone, one of the biggest investment funds in the world.
He has been renovating the 2,500 acre, 17th century shooting estate since he bought it in 2022 for an estimated £80m.
That involves an extensive redevelopment and constructing a new lake.
A statement from Blackstone said: “The suggestion that the new owners of Conholt Park violated water regulations is false and misleading.
“They have taken extraordinary care to ensure the restoration of the property complies with all local laws and regulations. Most recently, as construction winds down (expected to be completed very soon) a proportion of transported water has been used in connection with irrigation and the lake.
“The water has been sourced through licenced providers responsible for the lawful and proper extraction and delivery. Water has been sourced from multiple locations, largely outside the region. Any suggestion that the owners violated local water regulations would be false and misleading.”
Southern Water said it would be “having robust conversations with those using this water and the companies working on their behalf”.
Managing director Tim McMahon said: “While this disappointing occurrence is highly unusual and rare, I would like to reassure customers that I am leading a thorough review into how this happened, and how we can tighten up both our internal monitoring processes and any legal loopholes so that this cannot happen again.”