Former Liberal state energy minister Chris Hartcher asked a long-time staff member to take the fall for spending illegal donations that were allegedly laundered through his old law firm, a corruption inquiry has heard.
Ray Carter, a former electorate officer to Mr Hartcher, gave sensational evidence at the Independent Commission Against Corruption on Tuesday that Mr Hartcher met him in person "six months ago" to ask him to "take the responsibility".
The ICAC has heard that Mr Hartcher "laundered" $4000 in illegal Liberal Party donations through his old law firm, Hartcher Reid. He allegedly instructed the firm to pay the money into an account belonging to Mr Carter's partner in late 2011.
"He told me about the money and to give it back to him," Mr Carter said. "Mr Hartcher knows very well about that ... I gave it straight to him.
“I’ve been with Chris for 40-odd years. I don’t like doing this but I’ve got to protect myself."
Speaking outside the commission, Mr Carter said it broke his heart to give the evidence.
The inquiry has heard that Mr Hartcher diverted three cheques made out to the NSW Liberal Party to Hartcher Reid's trust account. The cheques totalling $4000 were allegedly given by a donor who had exceeded the $5000 cap on personal donations.
Mr Carter, who had to take a break during evidence when he felt ill, said he told Mr Hartcher he would not take the blame and "that was the end of it".
"I told him I wouldn’t because I knew it was Liberal Party funds," Mr Carter said, adding he was a loyal party member.
He "emphatically" denied the suggestion he had used some of the $4000 for his own benefit. However, he admitted in earlier evidence that he might have dishonestly used more than $1000 from two Sydney developers who paid into the same account.
In devastating evidence, Mr Carter said Mr Hartcher was aware that his office solicited and received illegal donations from property developers before the March 2011 state election.
The inquiry has heard that a shadowy Canberra-based organisation called the Free Enterprise Foundation was used to "wash" some of the illegal donations before sending them back to the state branch of the party.
Developers have been banned from donating to political parties in NSW since 2009 but there is no federal ban.
Mr Carter has admitted soliciting illegal donations. He told Liberal senator Arthur Sinodinos' barrister, Robert Newlinds, SC, that "everyone" in the senior ranks of the party knew about the Free Enterprise Foundation and that it was a "front".
Senator Sinodinos, a former president of the NSW branch of the Liberal Party, is expected to give evidence at the inquiry in August.
Mr Carter said the party's former chief fund-raiser, Paul Nicolaou, told him how to use the foundation.
Later on Tuesday, Mr Hartcher's former adviser Tim Koelma, who allegedly controlled another slush fund called Eightbyfive, was asked about tens of thousands of dollars paid to the company by property developers and other companies.
The ICAC has heard allegations that Eightbyfive was a "sham company" that billed Liberal Party donors for "fake" expenses to disguise the fact that they were making illegal donations before the state election.
Mr Koelma denied Mr Hartcher was instrumental in the establishment of Eightbyfive. He claimed he provided media and political advice to companies including Buildev, a Newcastle development company part-owned by Nathan Tinkler.
The inquiry has found not a single document proving that Mr Koelma provided any such services.
He has claimed that is because of a flood in his garage, prompting counsel assisting the inquiry, Geoffrey Watson, SC, to ask sardonically about the "great flood of 2011".
The inquiry has heard that because Buildev was a banned donor, Mr Tinkler's horse stud Patinack Farm appeared on the Eightbyfive invoices.
''You're lying through your teeth, aren’t you?'' Mr Watson put to Mr Koelma when he attempted to provide an innocent explanation. "Did you think the horses were developing properties, did you?”