Former planner Beth Morgan and developer Frank Vellar could face years in jail after the Independent Commission Against Corruption found the pair engaged in "serious corrupt conduct".
The commission found Ms Morgan, 32, schemed from within Wollongong City Council to ease the passage of Mr Vellar's multimillion dollar Quattro proposal.
In return, Mr Vellar, 41, showered Ms Morgan and her four-year-old daughter with gifts including a ski trip, a television, handbags and a lavish helicopter wine-tasting holiday in the Hunter Valley.
Planning Minister Frank Sartor took swift action yesterday, ordering a freeze on Mr Vellar's Quattro development on Flinders St, which is at the centre of the corruption allegations.
The move followed earlier action from the Land and Environment Court, which placed an injunction on further development on the Quattro site.
Yesterday, when the Mercury told Mr Vellar about the findings, he said: "I have no idea of what they are saying." Later in the day, he did not answer calls.
Ms Morgan, who no longer lives at her North Wollongong unit, is believed to be staying with her parents in Port Macquarie and did not want to answer questions.
At this stage the commission is not recommending charges be laid against the pair.
However, the commission has found their actions "could constitute ... criminal offences of aiding and abetting misconduct in public office, conspiring to commit the offence of misconduct in public office, and corruptly giving benefits".
If charged and convicted, the pair could face multiple jail terms of more than five years.
The damning 49-page report details how the love affair between the two led Ms Morgan to abuse her position within the council and smooth the path for Mr Vellar's ambitious Quattro development.
In four years, Ms Morgan managed to engineer the approval of the $100 million residential and commercial block - the largest proposal of its kind in Wollongong - while carrying on an adulterous affair with the applicant.
The sexual relationship between Ms Morgan and Mr Vellar began in 2004 - about the same time as she also began fraternising with developers and businessmen at the "table of knowledge" - a seaside meeting spot on North Wollongong's Bourke St.
According to the report, the affair with Mr Vellar lasted four years and ended in February 2008.
During this time, Mr Vellar furnished Ms Morgan with more than $21,000 in gifts which included holidays, electrical appliances and home renovations.
Ms Morgan hid the relationship from her council colleagues and, when asked about it, she lied.
It was also during this time that Ms Morgan was assessing Mr Vellar's Quattro development, which would have sat at the corner of Keira and Flinders streets.
If built, Quattro would have been by far the largest high-density residential development in the city - three times larger than its nearest rival.
The proposal's excessive size led to its initial rejection by the council in December 2003, but soon after the affair Ms Morgan was assigned to the proposal by then general manager Rod Oxley and development assessment manager John Gilbert, at Mr Vellar's request.
More than 2000 calls and messages were traded between the pair while the proposal was being considered. Some were flirtatious, while others included the leaking of sensitive information such as public objections to the Quattro proposal and draft council reports.
While assessing Mr Vellar's proposal, she was also planning to leave the council. According to the report, Ms Morgan was negotiating the lease of office space in one of Mr Vellar's buildings in preparation of her imminent departure from the council to set up a new private practice.
"I must leave the council for my own sanity ... I hate this place. I can't wait to leave!" she said in emails at the time.
Not long before ICAC hearings began, the affair ended. Following the damaging public hearings, the council has challenged each of Mr Vellar's developments, including the Quattro development, which it took to the Land and Environment court in March.
The third and final part of the commission's report is expected to be released within two months.
More stories inside Thursday's Mercury
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