Allegations that illegal donations from developers were used to bankroll the election campaign of a Liberal MP bring into question the validity of the poll's results, the Independent Commission Against Corruption (ICAC) has heard.
In his opening address, counsel assisting the inquiry Geoffrey Watson SC said there were serious irregularities in the funding of Liberal Newcastle MP Tim Owen's campaigns.
He also revealed that the funding of the neighbouring seat of Charlestown, which is now held by Government whip Andrew Cornwell, was being investigated.
"The evidence acquired so far clearly shows serious irregularities in the way those campaigns were conducted," Mr Watson said.
"Given what went on, a real question arises as to the validity of the result of the election in the seat of Newcastle."
In an explosive development, Mr Watson revealed Mr Owen's campaign manager and Newcastle lawyer Hugh Thomson had helped expose the corrupt motivation behind the campaign.
ICAC was told Mr Thomson admitted to being involved in an illegal donations scheme, in exchange for protection from prosecution.
Mr Watson also told the hearing that the former police minister Mike Gallacher knew about the illegal funding arrangements in Newcastle and in fact suggested some of them.
He says the former energy minister Chris Hartcher also knew what was going on.
Mr Watson told ICAC that the Government whip, Mr Cornwell, admitted Newcastle Mayor Jeff McCloy arranged a meeting in his car and handed over $10,000 in cash.
He said while there was no evidence Mr Cornwell gave any preferences to the Mayor, his actions were unwise but that was due to inexperience.*NSW Government whip to appear at ICAC over 'slush funds'*
Mr Cornwell, his property-developer father and a Liberal Party campaign manager are all due to appear in the witness box as ICAC resumes before Commissioner Megan Latham continues.
The corruption watchdog is investigating alleged Liberal Party slush funds and donations for political favours.
Operation Spicer had adjourned for two months after three-and-a-half weeks of explosive public hearings in May rocked the Government and claimed several political scalps, including that of then-premier Barry O'Farrell.
This next phase of the inquiry, which is expected to run for at least three weeks, will largely focus on alleged dodgy dealings in the seat of Newcastle in the lead up to the 2011 election.
It is examining whether Mr Owen's campaign was secretly bankrolled by donations from banned donors including Buildev and its majority shareholder Nathan Tinkler, Newcastle Lord Mayor and property developer Jeff McCloy and Hunter Land founder Hilton Grugeon.
Mr Owen announced during the last hearings he would not recontest his seat at next year's election because he now believed it was "highly likely" that prohibited donors had contributed to his campaign, although he insisted it was without his knowledge.
Among those scheduled to give evidence at the ICAC this week were Charlestown MP and Government whip Andrew Cornwell, who was the branch president of the Liberal Party in Newcastle before stepping aside to run for his seat in 2011.
His wife Samantha Brookes and father Brien Cornwell, who was a local property developer and a volunteer on Mr Owen's campaign, will also appear in the witness box.
Rodney Bosman, who ran the Liberal Party's Central Coast and Hunter campaigns in the 2011 election, is first on the witness list this morning.Former NSW ministers' actions under scrutiny
The spotlight will also once again be on former NSW energy minister Chris Hartcher and former police minister Mike Gallacher.
ICAC will examine whether the pair solicited and received donations from prohibited donors for use in the Liberals 2011 state election campaign, including in the seat of Newcastle.
It will also look at whether they used their power and influence, or attempted to use their power and influence, to do favours for Liberal Party donors.
This inquiry has already claimed the ministerial careers of both men.
Mr Gallacher resigned during the last hearings after counsel assisting the ICAC Geoffrey Watson SC said there was "strong prima facie evidence" implicating him in serious electoral funding irregularities.
Mr Hartcher quit the frontbench in December 2013 when the ICAC raided his Central Coast office.
His fellow Central Coast MPs Darren Webber and Chris Spence had already been sitting on the crossbench after their offices were raided earlier in the year.Operation focus on Buildev, Tinkler and Free Enterprise Foundation
Operation Spicer began as an investigation into an alleged Liberal Party slush fund Eightbyfive that was being run out of Mr Hartcher's office.
It has since broadened its scope to look at various ways Liberal Party figures were allegedly skirting laws that banned donations from developers in the lead up to the 2011 state election.
One of the organisations set for more scrutiny in the latest round of public hearings is the Liberal Party-linked Free Enterprise Foundation.
ICAC will examine whether members or associates of the Liberal Party used the Free Enterprise Foundation as a means of receiving and disguising banned donations in the lead up to the 2011 campaign.
It will also look at whether certain companies and persons, including Buildev and Mr Tinkler, used or attempted to use the Free Enterprise Foundation as a means of making donations to the Liberal Party with the intention of attempting to improperly influence certain members of Parliament.
The inquiry has previously heard evidence that the Free Enterprise foundation was used to "rinse" donations from banned donors, and that the NSW Liberal Party's finance director Simon McInnes and the former head of the party's chief fundraising arm, Paul Nicolaou, were in on the scheme.
In his opening address at the first set of hearings, Mr Watson ominously asked: "Who was responsible for this misuse of the Free Enterprise Foundation, who else knew about it inside the Liberal Party?"
He said he would try to get to the bottom of that question.