NSW MP Garry Edwards confessed to a party colleague that he had been given a bundle of cash by Newcastle property developer Jeff McCloy before his surprise win at the 2011 polls.
But he assumed it was just money for raffle tickets or a Bunnings voucher, the sidelined Liberal told the state's corruption watchdog.
The member for Swansea was forced onto NSW parliament's crossbenches after Mr McCloy - who sensationally told the Independent Commission Against Corruption (ICAC) he handed out so much cash to politicians he felt like "a walking ATM" - testified that he had handed Mr Edwards an envelope containing about $1500 before the March 2011 election.
Mr Edwards admitted at the ICAC on Wednesday Mr McCloy had given him an envelope, but he never looked inside it.
"I think it's a reasonable assumption that there was some money it," Mr Edwards said.
He said he believed it would only be "a pittance" and handed it off to a staffer without investigating further.
That staffer had since died, he said.
But Liberal party adviser John Macgowan has told the commission Mr Edwards admitted to him in a late-night meeting last month that the envelope contained cash.
On Wednesday afternoon, Mr Macgowan followed Mr Edwards into the witness box.
Mr Macgowan said he had come forward after urgings from the premier's department.
"I said to him how much are we talking, and he said it was far less than $10,000 that the person had received," Mr Macgowan said in a tendered statement.
"I understood that he was referring to (ex-MPs) Andrew Cornwell and Tim Owen. He said it was a small envelope."
Counsel assisting the ICAC, Geoffrey Watson SC, has accused Mr Edwards of concocting a "bunch of lies to fool ICAC".
Mr Edwards admits he had a late-night conversation with Mr Macgowan in his office on or around August 12 this year.
"At no time, at no time, did I open the envelope to check its contents," Mr Edwards said.
"I wasn't involved in organising raffles or anything else ... I didn't think that he couldn't contribute to a raffle."
Property developers have been barred from making political donations in NSW since 2009.
Earlier, Mr Edwards said that former NSW energy minister Chris Hartcher had called him to ask how he would feel about doing a favour for Buildev.
The company is part-owned by former coal mogul Nathan Tinkler and has been at the centre of the ICAC's unfolding cash-for-favours probe.
"He just simply said how would I feel about ... an extension for Buildev for the proposal of a marina at Swansea," Mr Edwards said.
"I said tell them to f*** off."
He also dismissed an email sent by Mr Owen's campaign manager Hugh Thomson and obtained by the ICAC, which suggested Buildev had paid for "the lion's share" of Mr Edwards' campaign, as "ludicrous nonsense".
Mr Macgowan said he urged Mr Edwards to come clean.
"I told him my experience was that ICAC would find out," he said on Wednesday.
The inquiry continues.
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