Catholic Schools Head Steps Aside Amid NSW Liberal Party Donation Probe

The head of the body governing the state's catholic schools will stand aside after he was named in a corruption probe investigating donations to the NSW Liberal Party.

The Independent Commission Against Corruption (ICAC) is investigating claims Catholic Schools NSW (CSNSW) chief executive officer Dallas McInerney arranged donations that were undeclared and over the legal limit, as part of a branch-stacking scheme.

In a statement, CSNSW said Mr McInerney would "temporarily step aside" from his day-to-day responsibilities as part of "interim governance arrangements".

"CSNSW respects the role of ICAC and will deal with the matters ICAC has raised in an appropriate and thorough manner," it said.

Mr McInerney resigned from the board of the NSW Education Standards Authority on Wednesday.

It comes as the heads of NSW's two major political parties moved to suspend current members implicated in the same investigation being undertaken by the corruption watchdog.

The ICAC's Operation Rosny named five people who allegedly sought improper donations to recruit or renew NSW Liberal Party memberships over a four-year period until 2023.

Former premier Dominic Perrottet was governing the state for some of that time, and among the people named in the allegations are his two brothers, Jean-Claude and Charles.

The allegations are also being made against Christian Ellis, Jeremy Greenwood and Robert Assaf.

It is alleged the men collectively sought or took donations that were either not declared, exceeded caps, or were from prohibited donors, including from Mr McInerney, fugitive property developer Jean Nassif, and hotelier Michael O'Hara.

Political leaders support investigation

Opposition Leader Kellie Sloane responded to the announcement by moving to suspend people named in the corruption investigation who remain members of the NSW Liberal Party; Mr Greenwood and Mr McInerney.

"I instructed the party to advise me of who were actual members of the party, who was not, and to suspend those that were," she told reporters.

"And if these allegations are proven correct, you know, it doesn't meet the standard I expect.

Ms Sloane expressed support for the investigation.

"It is important that the ICAC has the full powers to investigate, that the names are cleared, because for the sake of the really good members of my party, a party that I'm so proud to lead, for the sake of my parliamentary colleagues, we want this done," she said.

The watchdog is also investigating allegations against two Labor Party members elected to Strathfield Council.

Councillors Sharangan Maheswaran and Karen Pensabene are accused of dishonestly exercising their duties and breaching the public's trust, including by blackmailing or illegally spying on Councillor Matthew Blackmore.

NSW Premier Chris Minns instructed the Labor Party to suspend their memberships.

"I'm responsible for the Labor Party and unfortunately, and very regrettably, it looks as if two of our members have been named in that inquiry," he said.

"I think the appropriate process inside our party is for them to be suspended pending that investigation, which is what I've asked the general secretary of our party to do."

'Serious' allegations before watchdog

The ICAC launched Operation Rosny after allegations were referred to it — at least in part — by the NSW Electoral Commission.

It will hold eight weeks of public hearings to gather evidence from July 27.

The Centre for Public Integrity described the investigation as ambitious.

"It's one of the larger investigations that ICAC has ever undertaken, by the looks of it," Geoffrey Watson SC said, who appeared as counsel assisting during the ICAC inquiry into former NSW Labor minister Eddie Obeid.

"An eight week hearing is quite exceptional."

Mr Watson said the most serious allegation involved donations being solicited and taken from Toplace's Mr Nassif, to hurt the career of then-minister David Elliott, and remove building commissioner at the time, David Chandler.

Mr Chandler had ordered Toplace to repair apartment buildings, before the company collapsed owing about 600 creditors nearly $1.88 billion.

"All of the allegations look serious," he said.

Mr Watson said the allegations would hurt public confidence in the major parties.

"The votes are leaking from the major parties and going both ways probably because of this kind of thing which then leads to disillusionment," he said.