A town planner has become embroiled in scandal after she allegedly demanded sex in exchange for approving millions of dollars of unlawful developments.

Undercover corruption investigators exposed a series of liaisons between developers and Beth Morgan, a 32-year-old divorcée, who is said to have approved A$135 million (£63 million) of buildings in return for gifts and sexual favours.

The affair, which threatens to engulf Australia’s biggest state government, has also drawn in five New South Wales state ministers, with some accused of receiving donations from developers.

In revelations that inspired the headline “Mile High Rise Club” in a popular tabloid, Ms Morgan has given testimony to the powerful Independent Commission against Corruption that she had affairs with three wealthy developers in Wollongong, an industrial city south of Sydney.

In the witness box one denied having an affair with Ms Morgan but was presented with e-mails exchanged between them in which she described him as “my favourite, sexy, delectable, gorgeous Greek”. Michael Kollaras said by way of explanation that she was an “extremely close friend”.

In an e-mail that Ms Morgan sent to Mr Kollaras on August 20, 2004, she wrote: “I had a great night. Again. And the funny look I had last night at the boat trip suggestion . . . was more about your Turkish wife finding out than the other. However, I am sure a night away with you would be wonderful.”

The two other developers have admitted to liaisons. Glen Tabak told the inquiry that Ms Morgan was possibly “on a mission for sex” and that he believed that she “wanted to be surrounded by successful people” by liaising with developers.

All four regularly attended morning meetings of local heavyweights – known as “the table of knowledge” – at a Wollongong kebab shop.

Ms Morgan, who has attended hearings wearing large dark glasses, said in evidence that she received gifts and cash from Frank Vellar, one of the developers, and Mr Tabak, including overseas holidays, a Swiss watch, perfume and hand-bags. Asked why she had not declared the gifts, the mother of one said: “I don’t know what I was thinking at the time.”

The inquiry into wider corruption at Wollongong Council, which began this week, has left the state government in crisis. Morris Iemma, the premier, promised yesterday to change laws on political donations as he gave warning that “heads will roll” if any of his front bench were found to have acted improperly.

He has conceded that he could lose his ports and waterways minister, who appointed a friend, Joe Scimone, a former council officer and Labor Party heavy-weight, to a plum A$200,000 a year role within his department. The Education Minister was drawn into the scandal yesterday when it emerged that Mr Scimone was appointed as a special adviser to her department.

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