The political scandals that have rocked Quebec mushroomed with the new leader of the province's Action Démocratique party suddenly announcing his resignation and declaring his intention to report alleged financing irregularities to the police.

A mere 23 days into his reign as ADQ leader, Gilles Taillon dropped the bombshells at a hastily convened news conference Tuesday.

No sooner had Taillon stormed out of the room, there was more: a Liberal member of the provincial legislature resigned to sit as an independent while police investigated the transfer of a cash-stuffed envelope, which he says was intended for another politician.

Tuesday provided dramatic developments after months of successive scandals that began at Montreal's City Hall, with initial reports of cost overruns in municipal construction projects and cosy ties between local politicians and company bosses.

Those were followed by reports of Mafia involvement in the construction business, and allegations that construction money was illegally funding political parties at higher levels of government. Now the ADQ is calling the police on itself.

With high-placed connections in Quebec and Ottawa, the Action Démocratique's woes will surely generate plenty of attention.

One of those connections in Ottawa is Conservative Senator Leo Housakos, described in one of his corporate bios as the ADQ's chief fundraiser from 2001 to 2008. He was out of the country, but his office issued a statement late Tuesday saying Taillon was free to contact police if he had any concerns.

New ADQ leader quits, says party funding is dodgy

Earlier in the day, Taillon told a news conference he was quitting. He did not explicitly explain why he was leaving, although the party has been crippled by infighting and Taillon has been battling prostate cancer.

Taillon did say that, upon taking over the ADQ leadership Oct. 18, he discovered irregularities with the party's finances. He did not elaborate and did not take questions after his announcement.

But he did say the police should be involved. "I've discovered what I would call certain aspects of the management of the party's finances since 2003 that are a bit troubling," Taillon said, before walking away.

"I intend to push my observations further and will probably demand a meeting with the authorities at the Sûreté du Québec [provincial police]."

Taillon's comments on the ADQ financing come a few weeks after the party announced it would cut off ties with members of the Conservative party, including Housakos.

Housakos has been a senior Conservative organizer and was president of the ADQ's fundraising commission before quitting the job in December, after a debacle at the polls that saw the party reduced to seven seats in the 2008 Quebec election.

Shortly thereafter, Housakos was named a senator by the prime minister.

Housakos denies links to Montreal contract

In recent weeks, Housakos has made headlines in Ottawa and subsequently asked the Senate ethics officer to look into the matter of a $1.4-million stimulus contract going to a Montreal engineering firm where he once worked. Housakos says he worked for a subsidiary of the firm and had absolutely no role in it winning the bid.

Questions to the federal Tories were swiftly redirected to the provincial arena.

A spokesman for Prime Minister Stephen Harper was asked for comment Tuesday and replied: "You may wish to contact the ADQ since this concerns them."

Housakos's office issued a similar statement: "Mr. Taillon is the leader of the ADQ and as leader of the party, he's responsible to do as he sees fit. If he does have any concerns about any matter, he can contact the proper authorities."

A former ADQ president said any questionable practices were news to him. Yvon Picotte, a former provincial Liberal who served as ADQ president from 2004 to 2006, said during his reign, the party was $1.2 million in deficit, and the party was struggling to get a financial institution to lend it money to finance an election campaign.

"At least under my reign, the finance issue was taken care of by the director general of the party, the party treasurer and the party leader," he told The Canadian Press.

ADQ may not afford a leadership race

Taillon was elected by the thinnest of margins on Oct. 18 after a bitter leadership race, barely outlasting Eric Caire by two votes.

He said he will remain leader until a successor is chosen but will not run in the race, one of his associates said.

It's not clear whether the party even wants another leadership race, admitted François Bonnardel, ADQ leader at Quebec's provincial legislature.

"It's a difficult situation that we're going to have to discuss over the coming days," Bonnardel told CBC News. "We'll see if we can afford a long leadership race, or name somebody as a leader without a race."

The ADQ caucus now stands at four seats after Caire and Marc Picard resigned last week. Party president Mario Charpentier resigned this week amid reports he violated his neutrality by contributing to Taillon's leadership campaign.

Caire said he'll continue to sit as an independent even if the ADQ picks a new leader. The MNA denied allegations that Housakos may have been involved in his party leadership campaign.

Liberal MNA admits to cash-filled envelope

Minutes after Taillon's news conference Tuesday afternoon, the Quebec Liberals were hit by another financial bomb, when newly elected MNA Jean d'Amour announced he was leaving the caucus pending a police investigation into a cash-stuffed envelope he received.

D'Amour, who is also Liberal Party president, says the move is temporary.

He says he contacted police investigators working on Operation Hammer, a widespread investigation into the Quebec construction industry, to report he received $500 in a brown envelope in 2007 from a contractor.

D'Amour, mayor of Rivière-du-Loup at the time, says the money destined for another municipal politician.

D'Amour was elected to the legislature last June in a byelection called to replace former ADQ leader Mario Dumont.