INDEPTH: SPONSORSHIP SCANDAL|
Who's who: Companies
CBC News Online | February 17, 2004
Initiated in 1997, the Sponsorship Program was created by the Jean Chrétien government to raise the profile of Canada in Quebec. Much of the money disbursed by the program went toward ensuring Canadian flags and logos were displayed at large events in the province.
And almost since its inception, it has been mired in controversy. In her February 2004 report, Auditor General Sheila Fraser said the sponsorship program was designed to generate commissions for private companies while hiding the source of the funding, rather than to provide any benefit for Canadians.
"I think this is such a blatant misuse of public funds that it is shocking. I am actually appalled by what we've found."
She said there "was little evidence of analysis to support the expenditure of more than $250 million" to sponsor 1,987 events as part of the Sponsorship Program between 1997 and 2001. More than $100 million of that was swallowed up in commissions by advertising agencies.
See below for the companies Fraser pointed to as the biggest offenders:
Groupaction Marketing Inc.
Groupaction first came under fire in May 2002 when the federal government asked the auditor general to review the process taken to award the company $1.6 million in contracts to launch a pro-federalism advertising campaign in Quebec between 1996 and 1999.
That audit showed that the manner in which the contracts were awarded broke "every rule in the book" and it was noted "it's not clear why the government awarded the third contract in 1999."
Sheila Fraser recommended the RCMP investigate the contract procurements and in September 2002 the RCMP raided Groupaction's Montreal office, removing files and documents.
That same audit showed that Groupaction did not deliver everything it was paid for; a report that it was paid $540,990 to produce could not be found; Groupaction was paid twice by the government to do virtually the same work, and proper channels were not taken to award the contracts.
The 2004 audit shows that the Communications Co-ordination Services Branch signed a $330,000 advertising contract with Groupaction to develop a communications strategy related to the new firearms legislation. However, there was no evidence that the government received anything for the money.
In 1997, the federal government was billed $465,000 by Groupaction for the sponsorship of two sporting events, the Hermez Racing Series and the Classique du Parc Équestre de Blainville, and for handling other advertising-related services. But the audit shows there's no proof Groupaction actually did the work as contracted, and that civil servants failed to question the quality of the work provided.
Along with Lafleur Communication Marketing, Media/I.D.A. Vision and Gosselin, Groupaction received $440,000 in commissions related to the government's $5-million sponsorship of a television series about Maurice Richard, to be produced by the private firm L'information essentielle. The firms did not sign contracts or do any work.
In February 2004, former Groupaction vice-president Alain Richard told The Globe and Mail the company made hundreds of false claims, saying staff worked hundreds of hours they did not.
Groupaction has donated about $70,000 to the Liberal party over the past several years.
Lafleur Communication Marketing
Purchased in 2001 by Groupaction
Formerly headed by Jean Lafleur
- Was one of three companies which took a cut of $1.3 million in government funding earmarked for sponsorship of the RCMP's 125th anniversary celebrations.
- Along with Groupaction, Media/I.D.A. Vision and Gosselin, received $440,000 in commissions related to the government's $5-million sponsorship of a television series about Maurice Richard, to be produced by the private firm L'information essentielle. The firms did not sign contracts or do any work. The program also used Via Rail as a conduit to transfer nearly $1 million to the television series through a "fictitious contract," reimbursing the Crown corporation for all but $160,000 of the money. Lafleur received $112,500 to handle the transfer.
- Communications Canada gave $1.5 million to the Old Port of Montreal to buy a new screen for its science centre, but funnelled the money through Lafleur and Media/I.D.A. Vision, which collected $225,000 in commissions.
- Handles government contracts almost exclusively.
Gosselin Relations Publique Inc.
Groupe Everest/Media/I.D.A. Vision
President: Claude Boulay
Founded by Claude Boulay, Groupe Everest does graphic creation and production, market research and planning, public relations and special events. Along with Groupaction and Lafleur Communication Marketing, took a cut of $1.3 million in government funding earmarked for sponsorship of the RCMP's 125th anniversary celebrations (1998-1999).
- Groupe Everest, along with Lafleur, Groupaction and Gosselin, also received $440,000 in commissions related to the government's $5-million sponsorship of a television series about Maurice Richard, to be produced by the private firm L'information essentielle. The firms did not sign contracts or do any work.
- In May 2002, Public Works Minister Don Boudria was demoted after it was revealed that he spent a ski weekend at an Eastern Townships chalet owned by Claude Boulay. Boulay's Groupe Everest was a major Public Works contractor at the time. Later that month, Immigration Minister Denis Coderre came under fire after he admitted having stayed at Boulay's condo in 1997.
Vickers and Benson
(Now Arnold Worldwide Canada Inc.)
A division of Havas Communications, one of the world's largest advertising and marketing conglomerates with more than $2.1 billion in yearly sales.
- Received $250,000 in funding from the Communications Coordination Services Branch with no contract.
Le Groupe Polygone Editeurs Inc.
Between 1997 and 2003, Le Groupe Polygone Éditeurs Inc. was on the receiving end of nearly $40 million in government sponsorship funds. The money was earmarked for raising the Government of Canada profile in publications run by the company, and at hunting and fishing shows it organized.
- In 2000, the company was paid $330,000 for a non-existent hunting and fishing show.
- Le Groupe had some notable political connections. Before becoming citizenship and immigration minister and later minister responsible for La Francophonie, Denis Coderre was vice-president of public affairs for the company.
- Jacques Corriveau, a friend of former prime minister Jean Chrétien, was a consultant at the company.
President/CEO: Andre Ouellet (former foreign affairs minister under Jean Chrétien)
Employees: 55,000 full and part-time
What: Crown corporation
In 1998, the Canada Post Corporation decided to take part in a stamp competition with over 30 other countries. The corporation hired Lafleur Communication Marketing to mange the project and to attract financial sponsors.
Lafleur was successful in getting funding from the government's Communications Co-ordination Services Branch, the only financial sponsor.
With no written agreement between them, CCSB paid Canada Post $521,739 through Lafleur and Media/I.D.A Vision. The two agencies received $78,261 (15 per cent) in commission fees simply for transferring the money.
The audit questions why CCSB did not pay Canada Post directly and avoid paying commission.
The audit also questions what "visibility" the Government of Canada gained by sponsoring the stamp competition given that the Canada wordmark already appeared on Canada Post's corporate identity applications.
The audit criticized the Crown corporation for failing to produce a business case that outlined the project's objectives and budget or the expected results that would be a benchmark against which the success of the event could be measured.
The audit concluded that Canada Post was in violation of the Treasury Board's transfer payment policy when it used Sponsorship Program money for commercial needs
"We do not understand why CCSB paid for a Canada Post event that should have been considered part of Canada Post's normal operations, especially when Canada Post paid Lafleur most of the funds that it had received through Lafleur in the first place," the audit reads.
Canada Post was also found culpable of granting the contract to Lafleur without putting it through a bidding process.
On the auditor general's recommendation, Revenue Minister Stan Keyes has demanded a full audit of Canada Post's sponsorship and advertising programs.
Canada Post was also asked why it paid $1,625,000 to a production company, L'Information essentielle Inc., owned by journalist Robert-Guy Scully, to produce a television series on Maurice Richard, despite the fact that no contract was signed and there was no documentation provided to show how the corporation would benefit.
Via Rail Canada Inc.
Chairman: Jean Pelletier (former chief of staff to Jean Chrétien)
President/CEO: Marc LeFrancois
What: Independent Crown corporation.
The auditor general's report shows the Crown corporation bypassed the bidding process and simply handed the production of Via magazine to Lafleur in 1997, even though two other companies had expressed interest in publishing the magazine.
Without a written agreement, the Communications Co-ordination Services Branch (CCSB) and Via each gave Lafleur $500,000 annually to produce the magazine. Lafleur subcontracted all of the publishing to its subsidiary, Satellite Publishing Inc.
The audit shows that Via paid for most of the costs of the magazine yet Lafleur retained ownership of the publication.
Fraser also questioned why Lafleur was paid a $30,754 commission to simply facilitate the transfer of $174,246 from CCSB to Via.
In another instance of questionable money transfers, the audit shows that Via was used by Lafleur to handle the transfer of nearly $1 million to produce a television series on Maurice Richard using what the auditor general called a "fictitious contract." Via was reimbursed all but $160,000 of the money; of that, Lafleur kept $112,500.
Old Port of Montreal Corporation
President and CEO: Mrs. Claude Benoit
What: Federally operated historic site.
In need of a giant screen for its Science Centre, the Old Port asked the federal government's Communications Co-ordination Services Branch (CCSB) for $1.5 million.
Rather than dealing directly with the Old Port, the government contracted Lafleur Communication Marketing and Media/I.D.A Vision (CCSB's agency of record) to handle the money transfer. They accepted and were paid $225,000 to handle the task.
In exchange for the money, CCSB requested Old Port provide the federal government with visibility in Quebec.
In August 2000, Old Port received $1.2 million as the first payment from Media IDA Vision, but the remaining $300,000 promised has not yet been paid.
Commissioner: Giuliano Zaccardelli
What: Canada's national police service. Provides policing to all provinces and territories except Ontario and Quebec.
In 1997, CCSB decided to give the Royal Canadian Mounted Police more than $3 million to help the force with its 125th anniversary celebrations. But rather than send the money directly to the RCMP, CCSB used two communications agencies and an agency of record to transfer the funds.
The audit shows that Gosselin, Lafleur, and Media/I.D.A Vision, were paid $244,380 in commission fees for transferring $1,704,000 from CCSB to the RCMP.
The balance of more than $1 million went to Lafleur and Gosselin to pay for production work related to the RCMP's 125th anniversary event.
In return for this money, the RCMP was to provide the Government of Canada and the Canada wordmark with greater visibility during the anniversary celebrations. The audit questioned whether the federal government did indeed get more visibility for the money and whether the money was well spent, given the fact that the RCMP was already required to display the Canada wordmark.
The audit found other irregularities associated with the funds meant for the 125th anniversary celebrations.
The audit concluded that it was not the intent of Parliament to use the sponsorship money "to purchase horses for the RCMP. Given that they were, however, we can see no reason why CCSB did not transfer the funds directly to the RCMP and save $244,380 in commissions."
- It found that Lafleur charged CCSB 12 per cent to 15 per cent in commission fees when it subcontracted work to Publicité Dézert.
- The RCMP spent $65,000 of the CCSB sponsorship funds that it received through Media/I.D.A Vision and Lafleur to purchase goods from Lafleur.
- The RCMP inappropriately used some of the sponsorship money to buy six horses and two trailers and as credit against departmental expenditures in its Quebec Division.
Business Development Bank of Canada (BDC)
Established: September 1944
President and chief executive officer: Michel Vennat
What: Crown corporation
The auditor general's report reveals BDC played a complex and unnecessary role in the transfer of sponsorship money to a company hired to produce a television series called Le Canada du Millenaire.
The report shows the company, L'Information essentielle, did not have a written contract with the government's Communications Co-ordination Services Branch that should have defined deliverables, a timeline and terms of payment.
The report also criticized BDC for transferring $250,000 in production money to L'Information essentielle via a second party.
BDC told auditors that it had transferred the money on instructions given in error by Lafleur Communication Marketing. The bank explained that the money should have been given to the production company directly by Media/I.D.A Vision.
The audit shows that the people who prepared the invoices on this particular project are no longer with BDC and current management could not explain the reasons for the transfer of funds.
Fraser notes that since BDC underwent management changes, it has improved its sponsorship activities, but she still questions the need to use a Crown corporation in routing funds from a department to a private sector company.
In another matter, the BDC imbroglio surrounding a lawsuit filed by its former president, François Beaudoin was settled by a judge on Feb. 6, 2004.
The court ordered Beaudoin's $200,000 annual pension and $245,000 severance package reinstated.
The former president said he was forced to resign from his position in 1999 following an incident in which he questioned a $615,000 loan to Yvon Duhaime, owner of the Auberge Grand-Mère and also a friend of then-Prime Minister Jean Chrétien.
Lawyers for BDC alleged Beaudoin misused bank property and staff, and lied about the costs of his pension deal.