THE former head of Sydney Water who was the victim of a smear campaign will lead an expert panel to look at ways of reforming political donation rules in NSW.
Premier Mike Baird said on Tuesday the independent expert panel would be led by "respected businesswoman and senior public servant" Kerry Schott to consider whether full public funding of election campaigns should be introduced in NSW.
The panel will also look at what the appropriate cap on election campaigns should be.
The measure is part of the government's response to the Independent Commission Against Corruption's (ICAC) probes into political donations in NSW.
The corruption watchdog has heard allegations that illegal donations were funnelled back into the NSW Liberal Party.
"This is about the public's confidence in our democracy over the long term," Mr Baird told parliament during question time on Tuesday.
Mr Baird said the ICAC inquiries showed the current donation system in NSW was broken.
"We need to change the culture of hidden influence and misplaced expectations of access that appear to follow even modest political donations in this state," he said.
The ICAC has heard Dr Schott was the subject of a false and anonymous corruption complaint lodged by the brother of Eric Koelma, a former staffer for ex-NSW minister Chris Hartcher.
It has also heard that crooked former Labor MP Eddie Obeid demanded that a NSW minister "sack the bitch", referring to Dr Schott, when she began asking questions of Australian Water Holdings (AWH).
AWH allegedly corruptly charged Sydney Water for luxury hotel stays and limousine rides.
Dr Schott demanded justification for the company's "ballooning" expenses.
The three-member panel will also include former Labor deputy premier John Watkins and former Liberal shadow attorney-general Andrew Tink.
It will report back to the premier by December 31 with options for "long term" reform of political donations.
Baird's government will face a tight deadline to enact any reforms before the March election.
The panel will also look at whether penalties for breaching donations law were sufficient and whether tighter rules around disclosure should be introduced.
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