NSW police minister stands down

NSW Police Minister Mike Gallacher has stood down following evidence at a corruption inquiry. Source: AAP

NSW Police Minister Mike Gallacher has stood down from the ministry, pending the outcome of the NSW corruption watchdog's explosive inquiry into banned donations.

The announcement was made by barrister Arthur Moses SC at the Independent Commission Against Corruption hearing in Sydney.

He asked counsel assisting Geoffrey Watson SC to confirm he would pursue a corruption allegation against Mr Gallacher.

"Oh, yes," came Mr Watson's prompt reply.

"My learned friend has said that - I assume - having given it some thought," Mr Moses said.

"Having stated that, then the position of the minister, which will be announced shortly, (is that he) will stand aside as minister pending the outcome of the inquiry."

NSW Premier Mike Baird is expected to release a statement shortly.

The corruption watchdog earlier heard a top executive at Nathan Tinkler's Buildev group had Mr Gallacher and former Liberal frontbencher Chris Hartcher "on tap", thanks to tens of thousands in secret donations.

Mr Gallacher is the second cabinet minister and fifth Liberal MP to be sidelined as a result of the current inquiry, dubbed Operation Spicer.

The developments come only weeks after Barry O'Farrell's shock resignation as premier for providing misleading testimony at ICAC over an unregistered $3000 bottle of wine.

Mr Watson on Friday accused Mr Tinkler associate Darren Williams of hatching a corrupt scheme with Mr Gallacher and Mr Hartcher to funnel $66,000 from Buildev to the NSW Liberal Party.

Mr Williams is accused of arranging the payments in return for favourable decisions about a lucrative coal terminal proposal at Newcastle, which he agreed was worth "a fortune" to Mr Tinkler.

"You were paying good money to get good access to politicians," Mr Watson said, as phone records showing extensive contact between Mr Hartcher, Mr Gallacher and Mr Williams were flashed before the inquiry.

"I always had good access to politicians," Mr Williams replied.

"You had them on tap," Mr Watson pressed on.

"You could ring them any time for a favour."

It is alleged the controversial donations were funnelled via Mr Tinkler's stud farm Patinack and then through a slush fund set up by Mr Hartcher's staffer Tim Koelma.

It is alleged Mr Hartcher helped "work up" the crooked scheme but that Mr Gallacher was central to the plan.

Mr Baird is in Canberra for the Council of Australian Governments meeting.

The stunning new allegations came less than 24 hours after the emergence of a damning 2010 email exchange that implicated Mr Gallacher in the unfolding cash-for-favours scandal.

In one email, Mr Williams asked an associate of Mr Tinkler, David Sharpe, "which entity will I give Mike Gallagher (sic)".

Mr Sharpe replied: "Ask Nathan as I think it's best to come through patnack (in reference to Mr Tinkler's horse stud Patinack) get right away from property minning infristructure (sic)."

Developers have been barred from making political donations in NSW since 2009.

Another email sent by Mr Williams to Patinack Farm director Troy Palmer in November 2010 carried the subject heading: "Mate can you get the payments to Tim the Liberal Party please mate as there 2 months behind (sic)".

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