INDEPTH: SPONSORSHIP SCANDAL|
The Gomery report: how could it all go so wrong?
CBC News Online | November 1, 2005
The scandal-plagued sponsorship program was fatally flawed from the start but politicians and bureaucrats alike turned a blind eye, said Mr. Justice John Gomery. In his much-awaited report, Gomery described the atmosphere in Ottawa in the mid-1990s after the Quebec referendum as a "culture of entitlement."
Gomery's report paints a picture of corruption, fraud, mismanagement, gross overbilling, and rigging of competitions to reward Liberal-friendly firms. Cash envelopes destined for the Liberal party's Quebec wing changed hands many times.
The report also confirms the existence of an "elaborate kickback scheme" masterminded by Jacques Corriveau, a close friend to Jean Chrétien, to funnel money to the Liberal party's Montreal headquarters. The party was broke, couldn't pay its suppliers, and needed money to fight an election campaign.
Corriveau's graphic design firm, PluriDesign Canada Inc, charged $900,000 to the party for designing its ad campaign for the 1997 election. The party couldn't pay. Gomery believes a 10 per cent commission charged on sponsorship projects managed by Groupaction, was transferred to PluriDesign in exchange for sponsorship contracts. The money was used to pay the party's debts or for personal gain, assumes Gomery.
"Jacques Corriveau was the central figure in an elaborate kickback scheme by which he enriched himself personally and provided funds and benefits" to the Liberal party, Gomery wrote in his fact-finding report. Corriveau evaded questions and maintained sloppy accounting records to avoid documenting a "corrupt practice," he said.
Accountability starts at the top
But how did such a program, with legitimate goals to sponsor sport and cultural events, get out of hand?
First of all, the management of the program bypassed normal reporting channels. It was managed by a mid-level bureaucrat in Public Works, Chuck Guité, but run out of the Prime Minister's Office "under the direct supervision of Jean Pelletier," then Chrétien's chief of staff.
Both must share a part of the blame for the program's abuses and mismanagement, the judge concluded. But they escape blame for Corriveau's "misconduct." As for then Public Works Minister Alfonso Gagliano, he was a "hands-on manager" who must take responsibility for both the program's abuses and Corriveau's misconduct.
Accountability starts at the top, Gomery stated. "Wilful ignorance of administrative inadequacies will not absolve a Minister from responsibility for failures within the department."
Gomery says ministers are responsible for their departments over which "they have overall direction and management." And ministers are "responsible for the actions of their political staff."
In that sense, Gomery singled out Chrétien, who remains responsible for his political staff and the actions of his chief of staff, Jean Pelletier. The clerk of the Privy Council, Jocelyne Bourgon, had twice warned Chrétien that he was taking on too much responsibility in wanting to control the sponsorship funds. But Chrétien failed to act and in doing so, became accountable for the way the funds were used by Public Works.
Chrétien was "personally responsible for the actions or the inaction of Mr. Pelletier and other exempt staff in his office." Pelletier's central role was similar to that of a minister, the judge concluded.
However, Paul Martin, who was minister of finance at the time, was "exonerated." The judge concluded that he and other Quebec ministers were "not informed" of Pelletier's initiatives and funding requirements. The Department of Finance is responsible for the overall fiscal framework of government but has "no oversight role for other departments."
How the sponsorship program got its start
The sponsorship program was funded from a special fund, the "Unity reserve," controlled by Chrétien. In June 1996, the prime minister signed a submission to Treasury Board requesting $17 million for Public Works for the 1997-98 fiscal year to fund sponsorship initiatives.
The message was clear, judge Gomery said. "His signature sent a message to everyone about the seriousness of the initiative."
And no one challenged the wisdom of the program or the way it was run. Guité was "untouchable," writes Gomery. He used the program to reward his friends as well as Liberal-connected ad firms. Overbilling and fake invoices were the norm. Records were shaky.
"In the eyes of everyone in the public service, he was in a special category, seemingly exempt from the usual reporting rules, and not obliged to conform to normal practices and procedures." Only one subordinate, Allan Cutler, says Gomery, "dared to challenge Mr. Guité's authority and methods" and he was threatened with dismissal.
A culture of "secrecy" also contributed to the program's failure.
Gomery says the ill-fated program got off to a bad start, even after Chrétien instructed government officials to develop new contracting policies in 1994. Under the Tories, contracts were awarded by so-called "consultants," who were really political nominees.
When the Liberals swept to power, there was a "sincere attempt" to "depoliticize an openly biased procurement policy," Gomery says, but that goal quickly got derailed. Chuck Guité, the bureaucrat who ran the sponsorship program, and the advertising industry "mounted a concerted campaign to exclude price" as one of the criteria.
Because the program was administered by advertising firms, that was an invitation "to unscrupulous persons to reap unjustified or exaggerated profits." And creating a program without clear rules or guidelines "left the door open to error, abuse, and careless administration."
"For the next five years, Mr. Guité awarded advertising and sponsorship contracts as he pleased, without respecting the competitive process. No one appears to have questioned the procedures he was following, and no one ever verified whether Mr. Guité and his employees were awarding advertising contracts" according to the rules.
The judge also expressed disgust with what he called a culture of entitlement. Cozy relationships between heads of advertising firms and public officials were not questioned.
Jean Lafleur, head of Communication Lafleur, believed that "entertaining lavishly" was good for business. His government clients were wined and dined, sent hockey tickets, entertained at the Grand Prix, and offered salmon fishing expeditions. On more than one occasion, Lafleur picked up the tab at fancy restaurants. No one blinked an eye, remarked Gomery.
That culture of entitlement went too far, Gomery said. Lafleur was generous with everybody involved in the administration of the sponsorship program, "starting with Mr. Guité." But no one had second thoughts about being entertained by someone who expected to land "lucrative federal contracts."
"It is highly improper and indeed unethical to entertain politicians and public servants involved in the procurement of goods and services …," the judge says.
Lafleur was a generous and regular contributor to the Liberal party. The payback was enormous. In the first year of the sponsorship program in 1996, Lafleur received "an avalanche" of sponsorship contracts from Guité, totalling over $16.3 million.
Judge Gomery believes the two met frequently before the program was created to arrange the deals. Lafleur testified he had no recollection of such meetings. The judge did not believe him.
"It was obvious that the Commission was hearing a witness who was prepared to appear to be slow-witted rather than to give truthful answers," Gomery remarked.
Final report due in February
Gomery will now proceed with a second report due at the beginning of February 2006. He will recommend sweeping measures "to improve the government's administrative and accountability systems."
"The public trust in its system of government was subverted and betrayed, and Canadians were outraged, not only because public funds were wasted and misappropriated, but also because no one was held responsible or punished for his misconduct."
Martin accepted Gomery's findings, banished 10 people from the Liberal party, including Gagliano and Corriveau, and promised that the party would reimburse $1.14 million to taxpayers. Other people and companies will be sued by the government in an attempt to recoup $44 million.
Martin said new controls have been put into place to avoid another fiasco, promising to implement the recommendations in Gomery's second report.
However, this is not likely the end of the saga. Gomery's unusually strong language hints at the possibility of further charges by the RCMP.