Premier Mike Baird has asked Liberal MP Marie Ficarra to step aside as parliamentary secretary advising the premier after a dramatic opening morning of an Independent Commission Against Corruption inquiry into abuse of electoral funding laws.
The inquiry heard on Monday that former state energy minister Chris Hartcher and other Liberal MPs corruptly solicited hundreds of thousands of dollars in illegal political donations and used a law firm to launder some of the cash.
Counsel assisting the inquiry, Geoffrey Watson, SC, said investigators had uncovered evidence of the "systematic subversion of the electoral funding laws of NSW".
He said upper house Liberal MP Marie Ficarra, the former parliamentary secretary to then premier Barry O'Farrell, was part of the scheme and had solicited a $5000 donation from property developer Tony Merhi just days before the March 2011 state election. The inquiry heard her explanations about the donation were not credible.
Since 2009, developers have been prohibited from donating to political parties.
Mr Baird immediately asked Ms Ficarra to step aside from her duties as a parliamentary secretary, and there is speculation she may be asked to sit on the cross benches for the duration of the inquiry.
Speaking at ICAC, Mr Watson said some donations were "merely an attempt to buy access to politicians, and the size of their donation is no more than [the donor's] best guess at the price to purchase a politician's attention".
The money was channelled into Eightbyfive, an alleged slush fund set up by Mr Hartcher's former adviser Tim Koelma, and was used to pay salaries to prospective Central Coast MPs Chris Spence and Darren Webber.
Embattled coal mogul Nathan Tinkler's Patinack Farm horse stud paid $66,000 to Eightbyfive, a slush fund linked to Mr Hartcher and his central coast colleagues Chris Spence and Darren Webber.
Gazcorp, the proponent of the controversial Orange Grove shopping centre development in Liverpool, paid $137,000 to the slush fund, while the Obeid-linked infrastructure company Australian Water Holdings paid $183,000.
Orange Grove was given the green light after the Liberal Party won the state election.
The inquiry heard that Mr Hartcher was close to Gazcorp directors Nabil and Nicholas Gazal, the sons of the late Sydney businessman Nabil Gazal.
"Mr Hartcher was wont to holiday aboard the Gazals' yacht Octavia at Hamilton Island," Mr Watson said.
The inquiry heard that in 2007, the Liberal member for Lane Cove, Anthony Roberts, sailed the Whitsundays with Mr Hartcher and the Gazals.
Mr Roberts took over as energy minister after Mr Hartcher resigned following an ICAC raid of his office last year.
Mr Watson said Mr Hartcher "repeatedly granted favours" to Australian Water Holdings and Buildev, which is controlled by Mr Tinkler.
Mr Koelma is alleged to have run what he desribed as a "black ops" mission to destroy the head of Sydney Water, Kerry Schott, who was standing in the way of a lucrative public-private partnership for Australian Water.
This involved making false allegations to ICAC about Dr Schott.
One of the nation's largest developers, Harry Triguboff from Meriton, is alleged to have hidden his donations to the Liberal Party via the Free Enterprise Foundation.
Mr Watson said the use of the foundation in this way was "a serious breach of the law, and a serious breach of trust with the voters of NSW".
Chief Liberal fundraiser Paul Nicolaou has agreed in private evidence that the foundation was used to hide money from prohibited donors.
It is also alleged that Mr Nicolaou, on the letterhead of the Liberal Party's fundraising arm the Millennium Forum, urged 2GB broadcaster Alan Jones to use his radio program to destroy her career.
Delivering the opening address in Operation Spicer, the Independent Commission Against Corruption's inquiry into political fundraising in the NSW Liberal Party, Mr Watson said the inquiry would show that "a group of persons have engaged in sophisticated, well organised and systematic subversion of the electoral funding laws".
Mr Hartcher allegedly used a law firm, Hartcher Reid, and his own nephew to launder $4000 in donations, dragging them "unwittingly into an illicit enterprise".