Collusion was deep-rooted and far-reaching, inquiry hears
Engineer says invoicing fraud freed up cash for political donations
A former vice-president of a prominent Montreal engineering firm says the collusion scheme in public engineering contracts was entrenched and reached up to the office of the head of the City of Montreal's executive committee.
François Perreault told the province's corruption commission that elaborate arrangements to ensure that a handful of companies each got a share of lucrative contracts was orchestrated from within city hall.
"At that time, who controlled this network of collusion – the person with the most authority, who you can say had authority over the distribution of contracts?" asked commission prosecutor Paul Crépeau.
"Mr. Zampino," Perreault replied.
"Mr. Trepanier told you that?"
"Yes, when I asked Mr. Trépanier for something like, ‘Can I be on that project?’ he said, 'I have to talk to the boss.'"
While he wasn't named, Perreault said there was no question that boss was former executive committee chairman Frank Zampino.
Until last week, Perreault was a vice-president at the engineering firm Genivar, which secured contracts for large-scale infrastructure work such as the recent improvements to Montreal's festival district.
The company was among a handful that, he said, gave money to the former mayor's Union Montréal party for a share in the rigged system. He couldn't give a precise amount but estimated that he and a colleague handed between $300,000 and $400,000 in cash to Trépanier over four years.
Perreault resigned from his position with Genivar last week in advance of his testimony and had been put on leave with the company after an internal investigation found evidence of misconduct related to political donations.
Perreault told the commission that though he had the opportunity, he never spoke to former mayor Gerald Tremblay about the kickback arrangement, which he said had increasingly become a point of contention with the firms toward the end of the scheme's four-year run.
Scale of collusion 'not normal'
He said the system of collusion was "exaggerated" and entrenched.
"To have all the firms that are in the public market [involved,] it’s not normal," he said. "There’s a problem. We were part of the problem, certainly, but it’s not normal."
He put the blame for opening the door to the closed-market system on the provincial law that compelled municipalities to accept the lowest bid on public works projects.
"Bill 106 brought with it the phenomenon of collusion," he said. "Before [that time,] collusion like that didn’t exist in engineering consulting. A closeness with political parties did exist, unfortunately."
He said though the arrangement ground to a halt in 2009, there are still problems with the public tendering process at city hall. He said an "incredible price war" that forces firms to drive their price below scale can have consequences.
"The municipalities don’t win. It's not realistic that you can do engineering services at 50 per of the scale or 30 of the scale and not lose on quality."
Perreault told the commission that employees at Genivar created 17 fake invoices for subcontracting work during the four years they participated in the collusion scheme to free up cash for political donations.
Perreault and his colleagues approved invoices for work that was never done and paid the companies with Genivar cheques.
Those companies then cashed the cheques and gave the majority back to Genivar, keeping a 10 to 15 per cent cut for themselves.
Perreault said he then took the cash directly to Bernard Trépanier, the former chief fundraiser for Union Montréal.
He said he never kept a portion of that cash for himself and doesn't believe any of his colleagues did either.
The amount given to Trépanier was around the equivalent of three per cent of the value of the contract and was understood to be a donation to the party, Perreault said.
He said that was the price of entry to participate in a contract-rigging scheme that ensured the company got a piece of the lucrative public contracts awarded by the City of Montreal.
Those rules included donating $200,000 to Union Montréal for the 2005 election campaign, paying three per cent of the value of the contracts back to the party, agreeing to work with other companies as part of a consortium to win bids and submitting false bids to ensure no red flags were raised in the tendering process.
Perreault said the false-invoicing practice was discovered at Genivar through an internal investigation. He said that he would look at projects that had room for extra expenses and attach the false invoice to that project.
He said the employees in charge of those projects were expected to sign off on the false bills.
He said he used a number of different companies to create the false invoices, all listed in the provincial business registry. They weren't real companies in the sense that they had no equipment and existed for the purpose of producing these kind of invoices, Perreault said.
It wasn’t an uncommon practice, he said, and he found out about the invoice-writing companies through associates in the construction industry.
"Wouldn’t it be safer to just deal with one business?" France Charbonneau, the commission chair, asked Perreault.
He responded that they felt more comfortable spreading the invoices out through several companies.
"We weren’t experts in that kind of fraud, so that’s what we did," he said.
Two sides in Union Montéal
His version of events was similar to Perreault's. He said he got a from Trépanier or Michel Lalonde, was told who his firm would be partnered in a consortium and how much they were to bid on a tender.
He later got a call and was told how much the firm owed to Union Montréal in exchange. A visibly uncomfortable Meunier described handing over envelopes of cash to Trépanier in parking lots and on street corners.
He said he wasn't aware of how much money was in those envelopes since it was handled by someone else, but told the commission "it wasn't just paper inside," motioning with his fingers to show the thickness of the package.
Meunier was charged with building relationships with elected officials on behalf of BPR, which was trying to break into the Montreal market. He said he had no political experience when he started and had great admiration for people in that sphere.
That impression remained intact when it came to former mayor Gerald Tremblay and Trépanier's predecessor at Union Montreal, Bob Church.
However things changed when Trépanier entered the picture, he said. BPR started getting contracts, but Meunier said he knew something wasn't right.
"I did my homework," he said. "I started to realize that I wasn't proud of this – that is wasn't honourable what was happening."
Meniere's testimony continues tomorrow.
Lalonde told me a price, for the submission, your price will be this.