A group of young conservative power brokers in the New South Wales Liberal party under investigation by the corruption watchdog created a “shit sheet” on a minister from a rival faction, claiming he had an extramarital affair, an inquiry has heard.

The Independent Commission Against Corruption (Icac) held its third day of hearings as part of Operation Rosny into allegations of corruption against people associated with the NSW Liberal party on Wednesday.

The inquiry is investigating whether a group known as the Reformers allegedly solicited or accepted illegal donations to recruit or renew members to the party – a practice known as “branch stacking”. The group wanted more conservative policies on same-sex marriage, abortion and euthanasia.

Former Liberal staffer and associate of the Reformers, Dylan Whitelaw, finished giving evidence to the inquiry on Wednesday.

Wednesday morning’s hearing began focused on a document on former NSW Liberal minister, David Elliott, shared between the Reformers which was allegedly titled “David Elliott shit sheet”. The document contains a section alleging Elliott had an affair, which Elliott vehemently denies. Whitelaw accepted under cross examination from Elliott’s lawyer that no affair had taken place.

The inquiry is investigating the allegation that members of the Reformers took donations from Jean Nassif, a fugitive property developer in exchange for the pursuit of outcomes including damage to Elliott’s career and the removal of the-then building commissioner, David Chandler.

In response to questions from counsel assisting, Juliet Curtin, Whitelaw told the commission the Reformers – part of the Liberal hard right faction – had a “large distaste” for Elliott, part of the centre-right faction.

He said at the time he believed the document was part of the “standard factional warfare that occurs inside political parties”, but he had since come to believe it was prepared at Nasif’s instruction.

He said he did not recall a member of the Reformers, Jeremy Greenwood, asking him in December 2020 to prepare the document with negative stories about Elliott.

But Whitelaw accepted that messages between him and Greenwood showed he had been asked to write about a 2020 incident in which Elliott, as police minister, was criticised for firing a prohibited machine gun at a corrections facility.

He told the commission he did not recall writing a section of the document with the sub-heading “extramarital affair” but said he remembered being told by Greenwood and Reformer Christian Ellis they had photographic evidence of Elliot having an affair.

In a statement reported by the Sydney Morning Herald on Wednesday, Elliott said he rejected “all the accusations made by the young boy, Dylan, and his colleagues on the religious right of the Liberal Party”.

“As most of Sydney knows I’m a devoted husband of 30 years to a beautiful woman who doesn’t deserve to be treated like this by the party she has sacrificed so much for,” Elliott said.

“Needless to say I’m looking forward to the possibility of providing my own observations should the Commission see fit to invite me to give evidence.”

Questions about Angus Taylor

On Wednesday, Whitelaw was asked about payments the federal opposition leader, Angus Taylor, purportedly agreed to make to the Reformers. On Tuesday, the inquiry was read a message from Catholic Schools NSW chief executive, Dallas McInerney, in March 2021 which he allegedly said he would “shake down Angus for 10K”, followed by a message from Whitelaw in which he claimed Taylor had agreed to pay the group a “15k injection plus a 3k monthly donation”. Taylor has denied making any payments to the Reformers and is not accused of wrongdoing.

Curtin asked if monthly payments of $3,000 purportedly agreed to by Taylor were reflected in an increase around that time in the monthly retainer paid by Catholic Schools NSW to registered lobbyist Beckington, controlled by Reformers members Ellis and Jeremy Greenwood.

“I wouldn’t be able to talk to that,” Whitelaw told the commission. He said that a contract between Catholic Schools NSW and Beckington was “absolutely an agreement where Mr McInerney, Mr Ellis and Mr Greenwood knew that very minimal work would be conducted in exchange,” and that money was being paid for the Reformers work.

Whitelaw also gave evidence to the commission about working as a staffer in the office of the then-Liberal planning minister, Anthony Roberts.

He described an incident in which Roberts’ chief of staff, Chris Spence, claimed to have a potentially damaging video of the building commissioner Chandler, with Spence saying he planned to give it to the then-NSW fair trading minister and current Liberal shadow minister, Eleni Petinos, to use in a budget estimates hearing.

Whitelaw told the commission he was not aware if Spence had spoke to Petinos about the video, saying the two “were very close”.

He said he never saw the video, which he alleged included the imputation Chandler was racist, and included reference to a list of “dodgy” developers or certifiers that the building commissioner had passed on to banks. He said Spence never told him where he had received the video from.

Asked if he knew if Spence’s alleged plan to discredit Chandler at budget estimates “came to fruition”, Whitelaw told the commission he did not, and he did not know why Petinos would want to have Chandler removed.

“No, I don’t believe it did because I recall a subsequent conversation occurring … [Spence] walked into the office and said, ‘I can’t believe it, Eleni fucked it up’, excuse my language, or words to that effect.”

On Monday, the inquiry heard a phone call featuring Nassif in which he allegedly claimed he had paid for Chandler’s removal. He also allegedly claimed that “the fair trading minister is gonna to be one of my girls”.

The inquiry heard that two months after the call, the-then Liberal premier Dominic Perrottet, appointed Petinos as fair trading minister in a reshuffle. In July 2022, Chandler handed in his resignation after an investigation into his conduct that had been requested by Petinos, which later cleared him of any wrongdoing.

The watchdog heard evidence would determine if Nassif’s call was “an incidence of wishful thinking that serendipitously came to pass” or the result of work by the Reformers.

Spence and Petinos, who is now on maternity leave, are not accused of any wrongdoing. On Tuesday, NSW Liberal leader, Kellie Sloane, said she had checked in on Petinos. She has not asked Petinos to stand aside from shadow cabinet during the inquiry.