Vision Montreal mayoral candidate Louise Harel, left, asked Benoît Labonté, right, to pull out of the municipal elections over allegations of illegal campaign financing (CBC)The former leader of the opposition at Montreal City Hall has quit the party just two weeks before the municipal election amid claims he had dealings with a businessman at the centre of a cancelled $355-million water-meter contract.

Benoît Labonté quit Vision Montréal, resigning as leader Louise Harel's right-hand man, after media reports alleged he met with construction entrepreneur Tony Accurso in March 2008 and received a $100,000 campaign donation to fund his leadership bid for the party.

Labonté also announced he is pulling his candidacy as city councillor, and won't even run as an independent.

The former opposition leader categorically denied all claims and accused Montreal media of mounting a smear campaign against him. When he first addressed the allegations on Saturday he said he was prepared to resign as opposition leader but indicated he would still run for councillor in the Nov. 1 re-election.

'A major housecleaning is needed at Montreal's city hall.… We have to live, and accept to live in a glass house.'—Vision Montréal mayoral candidate Louise Harel

But on Sunday, Harel said that wasn't going to happen. The mayoral candidate told reporters that Labonté's explanations about his alleged relationship with Accurso "weren't satisfactory," prompting her to tell her right-hand man that "he had to leave."

"A major housecleaning is needed at Montreal's city hall, the citizens want it, and we [members of Vision Montréal] have to be irreproachable," Harel said in French. "We have to live, and accept to live, in a glass house."

Harel did not reveal any details about Labonté's explanation of his alleged relationship with Accurso.

Labonté has urged the anonymous sources behind the media reports to submit official complaints to Quebec's chief electoral officer.

Harel announced her new right-hand man is Pierre Lampron, a Vision Montréal candidate in the Vieux Rosemount district.

Ethics dominate Montreal city hall race

Labonté's shocking resignation comes as current Mayor Gérald Tremblay continues to weather a storm of criticism for his handling of the city's water-meter contract — the largest public tender in the island's history.

The contract was cancelled after a scathing report by the city's auditor general, released earlier this fall, which claimed elected officials had received insufficient information before approving it.

Tremblay's governing Union Montréal party also faces allegations of links to extortion and alleged Mafia-meddling over a $10.6-million contract to replace a roof at city hall.

Last week, reports of extensive Mafia control over infrastructure spending in Quebec prompted calls for a public inquiry into ties between government, business and organized crime.

Both municipal party leaders promised more transparency in how they raise cash by posting campaign contributions on their respective websites.

Harel, Tremblay and Projet Montréal leader Richard Bergeron appeared together Sunday night on Quebec's popular talk show Tout le monde en parle.

The three mayoral candidates taped their appearance on the Radio-Canada program on Thursday night, two days before Labonté's resignation — so the segment didn't reflect the campaign's unexpected twist.

With files from The Canadian Press