Sponsorship scandal

The sponsorship scandal, AdScam or Sponsorgate, is a scandal that came as a result of a Canadian federal government "sponsorship program" in the province of Quebec and involving the Liberal Party of Canada, which was in power from 1993 to 2006. The program was originally established as an effort to raise awareness of the Government of Canada's contributions to Quebec industries and other activities in order to counter the actions of the Parti Québécois government of the province that worked to promote Quebec independence.

"Adscam" redirects here. For the American sting operation, see Abscam.

The program ran from 1996 until 2004, when broad corruption was discovered in its operations and the program was discontinued. Illicit and even illegal activities within the administration of the program were revealed, involving misuse and misdirection of public funds intended for government advertising in Quebec. Such misdirections included sponsorship money awarded to Liberal Party-linked ad firms in return for little or no work, in which firms maintained Liberal organizers or fundraisers on their payrolls or donated back part of the money to the Liberal Party. The resulting investigations and scandal affected the Liberal Party of Canada and the then-government of Prime Minister Paul Martin. It was an ongoing affair for years, but rose to national prominence in early 2004 after the program was examined by Sheila Fraser, the federal auditor general.

Here are some of the major findings reported by Auditor General Sheila Fraser[1]:

  • More than $100 million was paid to various communications agencies in the form of fees and commissions; In most cases the agencies did little more than hand over the cheques.
  • The sponsorship program was designed to generate commissions for private companies, while hiding the source of the funding, rather than providing any benefit for Canadians.

Fraser said, "I think this is such a blatant misuse of public funds that it is shocking. I am actually appalled by what we've found."

Fraser's revelations led to the Martin government establishing the Gomery Commission to conduct a public inquiry and file a report on the matter. The official title of this inquiry was the Commission of Inquiry into the Sponsorship Program and Advertising Activities; it is commonly referred to as the "Gomery Report". In the end, the Commission concluded that $2 million was awarded in contracts without a proper bidding system, $250,000 was added to one contract price for no additional work, and $1.5 million was awarded for work that was never done, of which $1.14 million was repaid. The Commission found that a number of rules in the Financial Administration Act were broken. The overall operating cost of the Commission was $14 million.[2]

In the national spotlight, the scandal became a significant factor in the lead-up to the 2006 federal election when, after more than twelve years in power, the Liberals were defeated by the Conservatives, who formed a minority government that was sworn in February 2006.

Involved parties
  • Jean Chrétien – Prime Minister of Canada at the time the Sponsorship Program was established and operated. The Gomery Commission, First Phase Report which assigned blame for the Sponsorship scandal cast most of the indemnity for misspent public funds and fraud on Chrétien and his Prime Minister's Office (PMO) staff, though it cleared Chrétien himself of direct wrongdoing. On June 26, 2008, the Federal Court quashed the Gomery inquiry's conclusions that Chrétien and Pelletier bore responsibility for the sponsorship scandal. This decision was later upheld by the Federal Court of Appeal.[3]
  • Chuck Guité – bureaucrat in charge of the sponsorship program. Arrested for fraud by the Royal Canadian Mounted Police (RCMP) - convicted on five counts on June 6, 2006.[4]
  • Jean Pelletier – Chrétien's chief of staff 1990-2001 and chairman of Via Rail 2001-2004. Pelletier served as Chief of Staff at the PMO between 1993-2001. Guité testified that he regularly received instructions from Pelletier during his time at the PMO about what programs to spend sponsorship money on and how much, a claim that Justice Gomery found to be truthful.[5] Via Rail was accused of mishandling sponsorship deals, though mostly not under Pelletier's tenure.
  • Alfonso Gagliano – Minister of Public Works between 1997-2002, and thus in charge of the program. Also the Quebec lieutenant between 1999-2002, making him in charge of Liberal Party operations in Quebec.
  • André Ouellet – member of Prime Minister Chrétien's Cabinet, longtime Liberal politician and later head of Canada Post, who was also accused of violating sponsorship rules.
  • Jean Carle – Long-time close associate of Chrétien's going back to the 1980s, and generally viewed as Chrétien's "surrogate son".[6] Carle served as the chief of operations at the PMO between 1993-1998 and as a senior executive at the Crown-owned Business Development Bank of Canada (BDC) between 1998-2001. Guité testified that besides for Pelletier that he sometimes also received his orders from Carle during his time at the PMO.[7] During his time at the BDC, Carle testified at the Gomery commission that he created a $125,000 phony paper trail to hide a sponsorship deal, a tactic that Gomery compared to money laundering.[8]
  • Jean Brault – head of Groupaction Marketing, one of the companies to which deals were directed. Arrested for fraud by the RCMP, he pleaded guilty to five counts of fraud and on May 5, 2006, was sentenced to 30 months in prison.
  • Jacques Corriveau – Liberal organizer and head of Pluridesign to which millions in sponsorship dollars were directed.
  • Paul Martin – former Prime Minister of Canada. He was Minister of Finance, and Senior Minister from Quebec during most of the years the program occurred. When he became Prime Minister in December 2003, he claimed that he put a halt to it. He also set up the Gomery Commission which later cleared him of formal responsibility by Justice Gomery in his November 2005 'First Phase Report' of the Gomery Commission. The Gomery findings found that Martin, as finance minister, established a 'fiscal framework' but he did not have oversight as to the dispersal of the funds once they were apportioned to Chrétien's Prime Minister's Office. A report on the issue by the Auditor General's Office of Sheila Fraser came to the same conclusion. Nonetheless, Martin was accused of tying Gomery's hands and using the sponsorship scandal as an excuse to purge the Liberals of members who supported Chrétien. The scandal played a factor in the federal election of 2006 and the fall of the Liberal Government. Shortly thereafter, Martin resigned from the liberal party leadership.
  • Joe Morselli – Liberal Party fundraiser. Jean Brault testified that the money exchanges were with Morselli.
  • Jean Lafleur – former CEO of Lafleur Communication Marketing Inc. One of the advertising executives that accepted money from the federal government. Pleaded guilty to 28 counts of fraud.
  • Allan Cutler – former civil servant and whistleblower who reported anomalies in the Canadian sponsorship program, triggering the Scandal.

Timeline

1995
  • Allan Cutler first attempts to raise concerns about bid-rigging and political interference to the attention of senior management at the Department of Public Works and Government Services Canada.

1996
  • Ernst & Young conducts an audit of contracting and tendering practices. The initial draft, which identified recurring problems and the risk of legal action, was altered in the final report. Ernst & Young representative Deanne Monaghan later indicated that she did not recall why the report had been changed to remove those references.[9]

2000
  • February – An internal audit reveals that none of the recommendations of the 1996 Ernst & Young audit have been implemented.
  • September – Minister Alfonso Gagliano receives the 2000 audit and suspends the Sponsorship Program. Later that year, the Office of the Auditor General of Canada begins investigating the program.

2002
  • May 8 – Auditor General Sheila Fraser issues a report accusing Public Works bureaucrats of having broken "just about every rule in the book" in awarding contracts worth $1.6 million to the Groupaction ad firm.[10] Fraser promises a follow-up report on the sponsorship program due in early 2004.

2004
  • February 10 – Auditor General Sheila Fraser's report reveals up to $100 million of the $250 million sponsorship program was awarded to Liberal-friendly advertising firms and Crown corporations for little or no work.
  • February 11 – Prime Minister Paul Martin orders a Commission of Inquiry into the Sponsorship Program and Advertising Activities. The Commission of Inquiry will be headed by Justice John H. Gomery. Martin fires Alfonso Gagliano from his post in Denmark. Martin asserts that he had no knowledge of the scandal prior to the Auditor General's report.
  • February 13 – The National Post newspaper publishes a 2002 letter leaked to it by an unidentified third party, between the Liberal Party's then National Policy Chairman and Paul Martin, urging Martin to stop partisan financial abuses in the Sponsorship Program, thereby casting doubt on Martin's defence of personal ignorance.[11]
  • February 24 – Martin suspends Business Development Bank of Canada president Michel Vennat, Via Rail president Marc LeFrançois and Canada Post president André Ouellet giving each an ultimatum to defend themselves or face further disciplinary action.
  • February 27 – Past Olympic gold medallist Myriam Bédard reveals she was pushed from her job at Via Rail for questioning billing practices. Via Rail chairman Jean Pelletier publicly belittles Bédard and calls her pitiful.
  • March 1 – Pelletier is fired.
  • March 3 – Jean Carle, a close confidant of Chrétien and his former director of operations, surfaces in close connection to the sponsorship initiative.
  • March 5 – LeFrançois is fired.
  • March 11 – Allan Cutler, former public works accountant, testifies before the Commission of Inquiry. He places responsibility for the program and its irregularities with Chuck Guité.[12]
  • March 12 – Vennat is fired.
  • March 13 – An unidentified whistle-blower reveals that high-ranking government officials, including Jean Pelletier, Alfonso Gagliano, Don Boudria, Denis Coderre, and Marc LeFrançois, had frequent confidential conversations with Pierre Tremblay, head of the Communications Coordination Services Branch of Public Works from 1999 until 2001. The claim is the first direct link between the scandal and the Prime Minister's Office. Coderre and LeFrançois denied the allegation.[13]
  • March 18 – Gagliano testifies in front of the Public Accounts Committee, a committee of the House of Commons chaired by a member from the Official Opposition. Gagliano denies any involvement by himself or any other politician; he points blame at bureaucrat Chuck Guité.
  • March 24 – Myriam Bédard testifies at the Public Accounts Committee. In addition to repeating her earlier assertions, she also claims that Formula One driver Jacques Villeneuve was given a secret $12 million payoff to wear a Canadian flag logo on his racing suit (however, Villeneuve sharply denies this allegation, calling it "ludicrous"). Bédard also testifies that she once heard that Groupaction was involved in drug trafficking.
  • April 2 – Previously confidential testimony from a 2002 inquiry into suspicious Groupaction contracts is made public. In it, Guité admits to having bent the rules in his handling of the advertising contracts but defends his actions as excusable given the circumstances, saying, "We were basically at war trying to save the country... When you're at war, you drop the book and the rules and you don't give your plan to the opposition."[14]
  • April 22 – Guité testifies. He claims Auditor-General Fraser is misguided in delivering the report, as it distorts what actually went on; he claims the office of then-Finance Minister Paul Martin lobbied for input in the choice of firms given contracts; and he denies that any political interference occurred, because his bureaucratic office made all final decisions. Opposition MPs decry his comments as "nonsense" and claim he is covering up for the government.[15] The French language press gives a very different account of Guité's testimony; a La Presse headline states that Guité is involving the Cabinet office of Paul Martin.[16]
  • May 6 – An official announces the inquiry deadline is set for December 2005.
  • May 10 – Jean Brault, president of Groupaction, and Charles Guité arrested by the Royal Canadian Mounted Police for fraud in connection with the sponsorship scandal.
  • May 23 – Paul Martin requests that the Governor General dissolve Parliament and call a federal election.
  • May 28 – Alfonso Gagliano launches a lawsuit for $4.5 million against Prime Minister Paul Martin and the federal government for defamation and wrongful dismissal claiming that he has been unfairly made to pay for the sponsorship scandal.
  • June 28 – The Liberals win 135 of 308 seats in the 2004 election, forming the first minority government in almost 25 years.
  • September – First public hearings of the Commission of Inquiry into the Sponsorship Program and Advertising Activities begin in Ottawa. They will move to Montreal in February 2005 and conclude in the Spring.
  • December – In a year-end media interview, Justice John Gomery refers to Chrétien's distribution of autographed golf balls as "small-town cheap", which later prompts an indignant response from the former prime minister.

2005
  • March 29 – A publication ban is imposed by the Gomery commission on Jean Brault's testimony.
  • April 2 – The United States blogger Ed Morrissey of Captain's Quarters[17] discloses information about Brault's testimony, countervening the Canadian publication ban. Until the revocation of the ban five days later, the publication itself was a news event in Canada, with Canadian news media struggling to report on the disclosure without putting themselves at risk of legal action.[18]
  • April 7 – The publication ban on Jean Brault's testimony is lifted by the Gomery commission. Brault's testimony triggers a rapid shift in the public opinion of the Liberal Party. Whether or not the government is defeated in the imminent confidence vote, most political pundits predict an election call this year—many predicting by this summer.
  • April 20 – The official opposition party, the Conservatives, puts forward a non-confidence motion in the government. Due to procedural rules, this vote, which was to be held May 3, was postponed. If a non-confidence motion passes, the government will be dissolved and a new election will be held.
  • April 21 – A national televised appearance by Prime Minister Paul Martin discusses the scandal. This was highly unusual in Canadian politics. The Prime Minister announced that a general election will be called within 30 days of Justice Gomery's final report. Martin emphasised that he was trying to clean up the scandal and had not been involved. In the following rebuttal speeches, Jack Layton of the New Democratic Party offered to keep the parliament alive, provided the Liberal Party makes some major concessions in the budget in their favor. However, the other Opposition parties were still ready to bring down the government and force an election before the summer.
  • May 10 – The Conservatives and Bloc Québécois win a vote, by 153-150, in the House of Commons on what they argue is equivalent to a no confidence motion; three MPs are absent due to health reasons. The motion ordered a committee of the House of Commons to declare that the government should resign rather than being a direct motion on the House's confidence in the government. The opposition parties and several constitutional experts claim that the motion is binding and that the government must resign or immediately seek the confidence of the House; the government and several opposing constitutional experts suggest that this motion was merely procedural and therefore cannot be considered a matter of confidence. Ultimately, only the Governor General has the power to force an election, it is not clear what actions tradition would require her to take in such a case.[19]
  • May 11 – The government tells the House that it will consider a vote to be held on May 19 on the budget, including the concessions which the Liberal party ceded to the NDP in turn for their support on it, to be a matter of confidence. The government refuses to directly seek the confidence of the House and blocks the Opposition from putting any vote to the House; in consequence the Opposition continues a policy of non-cooperation and disruption of the other business of the House.
  • May 17 – Conservative MP Belinda Stronach crosses the floor to the Liberals and is simultaneously given the Cabinet position of Minister of Human Resources and Skills Development as well as made Minister responsible for Democratic Renewal. Prime Minister Paul Martin states that Stronach will be responsible for implementing the recommendations of the Gomery commission, a statement that Opposition critics claim casts doubt on the sincerity of the Prime Minister's promise for an election within 30 days of the tabling of Justice Gomery's report. For some time afterwards, media attention is focused away from Gomery testimony onto Stronach's move and its implications on the budget vote.
  • May 19 – The government passes the first of two budget bills easily after the Conservatives promise support, but the second bill with the NDP concessions ends as a cliffhanger. Speaker Peter Milliken breaks a 152-152 tie in favour of the bill, keeping the government alive.
  • November 1 – Gomery's preliminary report into the scandal is released. The report criticizes Chrétien and his office for setting up the sponsorship program in a way as to invite abuse, and Gagliano as the Minister of Public Works for his behaviour. Prime Minister Paul Martin is formally cleared of any responsibility or wrongdoing in the matter as Gomery found his role as Finance Minister was to set up a 'fiscal framework' at the instruction of then Prime Minister Chrétien, but did not have oversight on the spending of the funds after they were passed to Chrétien's Prime Minister's Office.
    Conservative leader Stephen Harper and Bloc Québécois leader Gilles Duceppe announce their intention to try to force a pre-Christmas election; however, New Democrat leader Jack Layton says that he will try to have the Liberals implement some New Democrat policies, particularly with regard to a ban on private healthcare as the price for his support in keeping the government up.
  • November 28 – The Liberals refuse to agree to the New Democrats' terms and the latter withdraws their support. The Liberals also turn down a motion sponsored by the three opposition parties which would have scheduled a February election in return for passing several key pieces of legislation. As a result, the Liberal government loses a confidence vote in the House by 171 to 133, resulting in the fall of the minority government and triggering a mid-January election after a long holiday election campaign.

2006
  • January 23 – After twelve consecutive years in power, the ruling Liberals are defeated in the general election. The Conservatives have enough seats to form a minority government. Paul Martin immediately announces that he will not contest the next federal election as party leader, and Bill Graham is appointed interim parliamentary leader.
  • February 1 – Justice John Gomery delivered his final report consisting mostly of recommendations for changes to the civil service and its relation to government.
  • February 6 – The new Conservative government, led by Stephen Harper, are sworn in as the new government in Canada. Stephen Harper becomes Canada's 22nd Prime Minister.
  • March 18 – Paul Martin resigns the leadership of the Liberal party, handing the post to Bill Graham for the interim.
  • May 5 – after pleading guilty to five counts of fraud, Jean Brault was sentenced to 30 months in prison.
  • May 11 – the Conservative government is reportedly preparing to file a lawsuit against the Liberal party.[20]
  • June 6 – Chuck Guité was convicted on five counts of defrauding the Government of Canada; on June 19, he was sentenced to 42 months in prison.

2007
  • April 27 – Jean Lafleur, after returning from two years in Belize, pleaded guilty to 28 counts of fraud. He was sentenced to 42 months in prison, and was ordered to repay $1.6 million to the federal government.
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See also

References
  1. "Auditor General's Report 2004". CBC. CBC. 11 February 2004. Retrieved 11 February 2004.
  2. CBC.ca News Indepth: Federal Sponsorship Scandal
  3. MacCharles, Tonda (2008-06-27). "Gomery was biased in report, judge rules". Toronto: The Star. Retrieved 2010-02-21.
  4. "Chuck Guité's conviction". Retrieved 2019-10-16.
  5. Gomery, John (November 1, 2005). "Who is Responsible?" (PDF). Her Majesty the Queen in Right of Canada. Retrieved 2013-08-26.
  6. Jeffrey, Brooke Divided Loyalties: The Liberal Party of Canada, 1984 - 2008, Toronto: University of Toronto Press page 198.
  7. Gomery, John (November 1, 2005). "Who is Responsible?" (PDF). Her Majesty the Queen in Right of Canada. Retrieved 2013-08-26.
  8. "Chrétien's Aide recounts phoney paper trail". CBC News. February 4, 2005. Retrieved 2013-11-27.
  9. CBC.ca News Indepth: Federal Sponsorship Scandal
  10. Martin, Lawrence Iron Man, Toronto: Viking, 2003 page 358
  11. National Post article
  12. CBC.ca News Indepth: Federal Sponsorship Scandal Timeline
  13. Toronto Star article
  14. Globe and Mail insider edition article Archived 2004-06-25 at the Wayback Machine
  15. Toronto Star article
  16. Cyberpresse article
  17. Captain's Quarters posting
  18. Edmonton Sun article
  19. CBC article: Liberals will not quit despite losing vote
  20. Government may sue Liberals for sponsorship funds: report

Further reading
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