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Sept. 10, 2014, 1:35 a.m.

Liberal Senator Bill Heffernan has called for party operatives who knowingly channelled banned property developer donations through the Canberra-based Free Enterprise Foundation to face draconian punishment.

Liberal Senator Bill Heffernan has called for party operatives who knowingly channelled banned property developer donations through the Canberra-based Free Enterprise Foundation to face draconian punishment.

One of Prime Minister Tony Abbott's key enforcers and a former party president in NSW, Senator Heffernan is among a growing number of Liberals, including former NSW Premier Barry O'Farrell, appalled at the revelations coming out of the Independent Commission Against Corruption.

He told a recent party room meeting that anyone who has "desecrated" the reputation and purpose of the Free Enterprise Foundation "should have their nuts cut off".

On Tuesday, he told Fairfax Media the Free Enterprise Foundationwas established with honourable intent but it had been "besmirched".

But he declined to name who exactly had besmirched the fund-raising body, which ICAC has heard washed illegal donations from NSW property developers after Labor changed donations rules in 2009.

"The Free Enterprise Foundation was set up to collect money from generous people who didn't want to be harassed by publicity of their generosity. It was to fund election campaigns at a federal level and was quite legitimate," Senator Heffernan said.

"These people have besmirched the reputation of the foundation and, yes, whoever agreed to do that should have their nuts cut off."

ICAC has heard a number of party officials in NSW, including chief fund-raiser Paul Nicolaou, former state director Mark Neeham and current senator Arthur Sinodinos attended meetings at which the use of the FEF to channel developer donations back to the state party was discussed.

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Heffernan lashes Liberals who oversaw illegal donations