The ripple effect from Quebec's corruption inquiry, which has focused so far on local wrongdoing in Montreal, has moved closer to federal circles with testimony about a scam involving a man once linked to the office of Prime Minister Stephen Harper.

Quebec's Charbonneau commission heard Tuesday that the man the Harper government once promoted as its preferred candidate to run the Port of Montreal played a role in the corruption schemes that were rampant in the local construction industry.

Former Montreal city manager Robert Abdallah was accused of participating in a kickback system at the city during testimony at the commission.

The testimony caused Quebec's inquiry to reverberate in the House of Commons. The federal government was forced to fend off opposition queries about its relationship with Abdallah and it stressed that, in the end, he didn't get the port job. Harper's office also downplayed Abdallah's federal ties.

Former construction entrepreneur Lino Zambito looks at a City of Montreal contract document during his third day of explosive testimony at Quebec's corruption inquiry. (CBC)

"We have no comment on the allegations made against former City of Montreal staff," a prime ministerial spokesman said in an email.

In his third day of testimony at the inquiry, former construction boss Lino Zambito testified Tuesday that Abdallah, when he was the top civil servant in the city, instructed him through a middleman to use piping from a particular firm while working on a major sewer contract.

The piping was $300,000 more expensive — but Zambito says he was assured by a city engineer acting as a middleman that he would be compensated and informed that that amount would go to Abdallah as part of the deal.

Members of the board of the Port of Montreal have said that they were pushed to appoint Abdallah by Harper's former communications director, Dimitri Soudas. Abdallah was not appointed in the end, and after leaving city hall, he went on to work in the construction industry.

The allegations against Adballah at the Charbonneau commission have not been proven in court and he has denied them in media interviews.

3rd day of bombshells

The testimony emerged during the third day of Zambito's bombshell-dropping turn on the inquiry witness stand.

He has already described a local construction industry that operated as a tightly controlled bid-rigging cartel that fixed prices. While taxpayers were getting milked, he said, a cut of the profits went to the Italian Mafia, corrupt local bureaucrats and even the mayor's political party.

On Tuesday, his testimony turned to the piping scheme.

Zambito said that after bidding successfully in 2005 on a $10-million sewer contract in east-end Montreal, he was summoned to a meeting a week later and told he had to use concrete piping furnished at a higher cost by supplier Groupe Tremca.

The former construction entrepreneur said his plan relied on a cheaper solution and didn't involve buying pipes. But, Zambito said, the order to use Tremca was given to him by an engineer for a private firm, Michel Lalonde of Groupe Séguin, which handled oversight for the city in its east end. Lalonde told him that the order came from Abdallah, then the city's top-ranking bureaucrat.

Charbonneau commission lawyer Denis Gallant led Zambito through 70 municipal contracts on Tuesday, trying to figure out which ones had been rigged. (CBC)

Zambito said he initially balked because buying from Tremca was more expensive. But Zambito said he ultimately realized that he had few options.

"In my head it was clear that there was an arrangement between Mr. Abdallah and Tremca and I had no choice but to buy pipes from Tremca if I wanted the contract," Zambito said.

He said the message was clear: "You either get on board or the contract goes back to tender," was how Zambito interpreted the process.

Zambito decided to participate since the contract was valuable and he was assured that any extra costs would be covered. He said the engineer was firm with him.

"He said, 'If you want the project to be done, the pipes must be purchased from Tremca.' The price was determined," Zambito told the commissioners.

" 'We'll compensate you — and the $300,000 difference is the amount that the folks at Tremca will have to give to Mr. Abdallah to ensure the project is granted by the City of Montreal.' "

Zambito said it was the only time he could remember being told that he had to deal with a specific supplier.

The former owner of Infrabec says he never personally met Abdallah about the contract and crossed paths with him only once at a community fundraising event.

Abdallah adamant: 'It's false'

Abdallah vehemently denied Zambito's allegations. He told Radio-Canada on Tuesday that "I never gave any such orders" and that Zambito's testimony was "hearsay" and "a pack of lies."

"I'm enraged by hearing that this morning," Abdallah said. "It's impossible, because it's false."

Abdallah, a long-time construction executive, was Montreal's city manager from 2003 until 2006, when he left the job for unspecified reasons.

He went on to work for a construction company owned by Tony Accurso, one of the businessmen who was pushing for him to get the port job, and who himself stands charged with 12 counts of fraud, conspiracy, forgery, breach of trust and other offences related to municipal contracts and corporate taxes.

Zambito spent much of his testimony Tuesday going over 70 municipal contracts tendered in 2004 and 2005 and answering the questions of inquiry lawyers.

He said that by looking at company names and dollar figures, he could identify contracts where there was clear bid-rigging going on. In the cases where he didn't recognize the names of companies, or if the bids came in at a reasonable price, he said they clearly weren't fixed.

But in the majority of cases studied by commission lawyer Denis Gallant, Zambito said there was a manipulation of the process — and he was actively involved in some of those cases.

Mayor's right-hand man implicated

In one case, Zambito discussed a contract that went to Accurso's Simard-Beaudry Construction, even though three or four companies were involved in the bidding for the $16 million-sewer contract.

Frank Zampino, former chairman of Montreal city council's executive committee, gave orders that a sewer contract go to a notorious businessman's construction company, according to testimony on Tuesday. Zampino denies it. (Radio-Canada)

Zambito said the contract was awarded as a "political command." Early in the day, he said he didn't know where that order came from — but in the afternoon he laid the blame with Frank Zampino, a man who was once Mayor Gérald Tremblay's right-hand man and the city's second-most powerful politician after the mayor.

"The businessmen weren't happy to see this project go to Simard-Beaudry, but the information sent to us was that there was a political command that the contract had to go to Simard-Beaudry," Zambito said.

Zampino, who has also been charged with fraud and breach of trust, issued his own denial, saying "I never gave any political orders."

"That's not how contracts are awarded in the city of Montreal," he said in a brief interview with Radio-Canada.

Zambito, vice-president and co-owner with his father of Infrabec Construction before it went bankrupt last year, will testify again on Wednesday. He, too, faces criminal charges, in his case stemming from the awarding of municipal contracts in the Montreal north shore community of Boisbriand.

With files from CBC News