NSW Labor general secretary Kaila Murnain has been suspended from her role after she revealed knowledge of an alleged illegal donation to the party by a Chinese property developer.
Ms Murnain gave evidence to the Independent Commission Against Corruption (ICAC) on Wednesday that she discovered the party received a prohibited donation but received advice to keep quiet.
NSW Labor Leader Jodi McKay released a statement saying she had asked the party to convene a meeting to suspend Ms Murnain from her role.
"I no longer have confidence in her judgement," she said. "Pat Garcia will act in the role of general secretary".
Ms Murnain had been suspended "until further notice" under the party rules, the ALP's NSW branch said following the meeting.
"The NSW ALP is doing everything it can to assist the Commission with its inquiries", the statement said.
Ms McKay said she was "appalled by the evidence" of the past three days and is "taking steps to clean up the mess at the ALP head office".
ICAC is investigating whether NSW Labor received an illegal $100,000 cash donation disguised as smaller donations at a Chinese Friends of Labor dinner in 2015.
Ms Murnain told the inquiry that former Labor MP Ernest Wong contacted her in a distressed state in 2016 to tell her billionaire Huang Xiangmo had made a large donation to the party.
This would be illegal as property developers are prohibited from making political donations in NSW.
Ms Murnain told the inquiry she was very upset and rang former Labor senator Sam Dastyari who advised her to contact Labor Party lawyer, Ian Robertson.
She said Mr Robertson told her to keep quiet on the donation issue.
"He said 'there's no need to do anything from here'," Ms Murnain said.
"[He said] don't put this in your diary, forget the conversation with Ernest, I won't be billing you for this either."
Mr Robertson's legal firm Holding Redlich tonight released a statement confirming its support for him.
"Our partner Ian Robertson is a highly experienced legal adviser and he has the firm's full support," the statement said.
"We note that Ian will be providing his evidence to the hearing next week and that his counsel has sought leave to cross-examine Ms Murnain next week.
"It is inappropriate to make any further comment on this matter at this time."
On Tuesday, Ms Murnain's colleague Kenrick Cheah said Ms Murnain knew that a plastic Aldi bag full of cash had been delivered to headquarters just before the state election in 2015.
The inquiry also heard this week from a witness who said his property developer bosses made a "fake" donation to NSW Labor under his name.
Former project manager at Wu International, Steve Tong, said he was shocked and angry when he received a tax invoice for a $5,000 donation to NSW Labor.
Mr Tong said he had never in his life made a donation to any political party and had no interest in politics.
Both Ms Murnain and Mr Cheah are expected to be recalled to ICAC on Thursday.
