Former Labor powerbroker Joe Tripodi arriving at ICAC earlier this year.

Former Labor powerbroker Joe Tripodi arriving at ICAC earlier this year. Photo: Rob Homer

Police "tracked down" corrupt Labor powerbroker Joe Tripodi and Nathan Tinkler's property development group as the source of a smear campaign that ousted former Labor minister Jodi McKay from office, a corruption inquiry has been told.

The Independent Commission Against Corruption heard on Monday that a close associate of Mr Tripodi, Ann Wills, confessed to her lawyer that she had "done something silly" after the police started asking questions about the anonymous leaflet campaign after the 2011 state election.

"The police have tracked it down to Joe Tripodi's printer and the pamphlets were funded by Nathan Tinkler," Ms Wills allegedly said.

Targeted: Former Labor minister Jodi McKay.

Targeted: Former Labor minister Jodi McKay. Photo: Chris Fowler

Ms Wills has been described as Mr Tripodi's "eyes and ears" in Newcastle.

She was also employed by Buildev, a property development company part-owned by Mr Tinkler, which was pushing plans for a billion-dollar coal terminal in the Newcastle suburb of Mayfield.

Ms McKay opposed the coal terminal and supported a rival plan for a container terminal, the ICAC has heard.

Allegedly funded pamphlets: Nathan Tinkler.

Allegedly funded pamphlets: Nathan Tinkler. Photo: Rob Homer

The pamphlets said "Stop Jodi's Trucks" and claimed that Newcastle streets would be clogged with 1000 trucks per day if the container terminal went ahead.

Ms Wills' lawyer, Bilbie Dan managing partner Nick Dan, said his client confessed that she was "involved with those pamphlets".

She texted Buildev co-owner Darren Williams on May 6, 2011: "Call me when you can ... Nick has spoken to the cops."

Ms McKay narrowly lost the election to the Liberals' Tim Owen, who quit parliament last week after admitting he took an illegal $10,000 donation from property developer Jeff McCloy, who quit as Newcastle mayor on Sunday.

The ICAC has heard that Buildev also helped to fund one of his campaign staffers, in breach of laws in NSW banning political donations from property developers.

A source told Fairfax Media: “When Jodi McKay went to the police initially about the pamphlets, Joe was very stressed and worried.

“On two occasions Joe and Vince Fedele [the printer of the pamphlets] went to Newcastle to try to get it sorted.”

The source also claims that Mr Tripodi instructed Mr Fedele to falsely claim to the police that his friend Mr Tripodi had nothing to do with the pamphlets.

Mr Fedele and former Tripodi staffer Rocco Leonello are listed to give evidence on Tuesday. 

Mr Tripodi regularly referred ALP candidates to Mr Fedele's company Mesh Media to print their campaign material.

In earlier evidence well-known restaurateur Peter Doyle, who listed his current occupation as unemployed, gave evidence about a $1000 per head fundraising dinner for then Opposition front bencher Mike Gallacher.

The 2010 New Year’s Eve function was in a private room at Mr Doyle’s then restaurant at Circular Quay. Mr Doyle said he played no part in compiling the guest list.

The inquiry has previously heard that attending Mr Gallacher’s exclusive fundraising dinner were executives from Buildev, a property development company co-owned by controversial coal magnate Nathan Tinkler.

Since 2009 property developers have been banned from donating to NSW political parties and it would have been wrong for Mr Gallacher and the Liberal party to accept their donations.

Mr Doyle said that when the matter was raised at the ICAC in May he asked John Hart, the head of the Restaurant and Catering Association, if the association had donated the dinner money to the Liberal Party. Mr Doyle said Mr Hart told him, “Yes, I gave $5000 to the Millennium Foundation (sic).”

The Millennium Forum is a Liberal Party fundraising entity. Its chairman Paul Nicolaou resigned following adverse evidence in the earlier part of this inquiry. He will be re-called to give further evidence in coming weeks.