SENATOR Arthur Sinodinos was at a NSW Liberal Party finance committee meeting when the proposal was put to use the Free Enterprise Foundation as a means of accepting money from illegal donors ahead of the 2011 state election, an inquiry has heard.

The process, allegedly used to "wash" the "tainted" money, was described by party finance director Simon McInnes yesterday as not "in the spirit of the law" that banned property developers from supporting state campaigns and one he had expressed his "discomfort" about to the party's then chief fund-raiser, Paul Nicolaou, and state director, Mark Neeham.

Mr Sinodinos, who stood aside as federal Assistant Treasurer during the Independent Commission Against Corruption, was the chairman of the finance committee when Mr Nicolaou raised the idea of using the Canberra-based trust to channel the money, in light of the laws introduced in 2009 banning developer donations to state campaigns.

The inquiry was told the legal change had been estimated to wipe $500,000 from the total funds the Liberals could expect to raise in an election year, and the trust had long been used to accept money for the federal party from donors who wanted to remain anonymous to the public.

"I advised the committee of the Free Enterprise Foundation and what it does and I assumed that the finance committee would have taken legal advice to ensure that what we would then do [with the foundation] was above board," Mr Nicolaou said in evidence yesterday.

But he "wasn't the lawyer or anyone who could make the final call" and it would "have to be the finance committee and Mark Neeham" who made that decision.

The inquiry has heard about $700,000 went through the scheme, where money was referred to the foundation with a request from Mr Nicolaou that it be donated to the party, with a "substantial" amount coming from property developers.

Mr Nicolaou said the idea arose from donation cheques sent from Ray Carter, the electorate staffer of former minister and sidelined Liberal MP Chris Hartcher, because the donors wanted to remain anonymous.

Mr McInnes told the inquiry about $180,000 in donations solicited by "someone in Chris Hartcher's office" flowed through Free Enterprise.

He said he believed the arrangement was technically legal but he couldn't understand "the rationale".

When he raised his "discomfort" with Mr Neeham and Mr Nicolaou he was told, likely by Mr Nicolaou, that "what Hartcher wants Hartcher gets".

Mr Nicolaou said he "didn't trust Ray Carter" and didn't realise some of the donations were from developers but admitted "the only test I did . . . was to look at the name on the cheque".

Company Brickworks was also solicited to provide about $150,000 over 2009 to 2011 towards the cost of a researcher in former premier Barry O'Farrell's office, Mr Nicolaou said, a move he believed Mr Neeham discussed with Mr O'Farrell.

The inquiry has heard Nathan Tinkler company Boardwalk Resources gave to the Free Enterprise Foundation, allegedly at the behest of part Tinkler-owned developer Buildev.

MIKE Baird has rejected an offer to visit Newcastle and endorse a community group’s calls for an independent audit of all projects ‘‘tainted’’ by the involvement of elected officials caught up in the Hunter’s corruption scandal.

Last month a community group led by activist Tony Brown held a Stop the Rot meeting, calling on the state government to review controversial planning decisions like the truncation of the heavy rail line.

It also asked the premier to oppose former Newcastle lord mayor Jeff McCloy’s High Court challenge to laws banning developers from donating to politicians.

The meeting  passed a resolution calling on Mr Baird to visit the city to endorse the recommendations.

But yesterday the group was told by the premier’s office that Mr Baird wasn’t available, and upper house backbencher Scot MacDonald would  attend on his behalf.