Montreal Mayor Gérald Tremblay turned a blind eye to illegal campaign financing taking place in his party, according to one of his former party organizers.

Martin Dumont, who worked for Tremblay's party, told the province's corruption inquiry Tuesday that the mayor knew two separate spending budgets were kept during the 2004 byelection campaigns.

Dumont told the commission that Tremblay was in the room when an "official" budget, one that fell within spending allowances, and an unofficial budget were presented by the campaign organizer during a meeting called to address concerns about overspending.

Dumont testified that he began to worry about cost overruns during the byelections in the St-Laurent borough and asked for the meeting.

He said Union Montréal's campaign organizer Marc Deschamps and Tremblay attended that meeting at campaign headquarters.

"I said to them, 'I want to know what's going on. Are we in trouble? Are we going to go over the election budget?'" Dumont told the commission.

He said the organizer pulled out a printed document that showed two campaign budgets. One, Dumont was told, was the official budget and showed $43,000 in spending, within the allowable amount of $46,000.

The other, an off-the-books record, showed $90,000 in spending.

At that point in the meeting, Tremblay stood up and walked out of the room saying he didn't want to know anything about the two sets of books, Dumont recalled on Tuesday.

He said that by the end of the campaign, the unofficial budget had reached $110,000.

Tremblay, who was taking part in budget meetings at city hall Tuesday, refused to comment on the testimony, but said the allegations are false. He again urged citizens to reserve judgment until the commission concludes.

Union Montreal's lawyer at the commission, Michel Dorval, said he formally requested the inquiry interrogate Tremblay along with Deschamps.

Envelopes of cash

Dumont also told the commission about thousands of dollars in anonymous cash donations coming into the party at fundraising events.

Nicolo Milioto, the man who allegedly served as the middleman between the construction industry and the Montreal Mafia, personally delivered an envelope stuffed with cash

Dumont said it happened at a fundraising cocktail for the borough of Mercier-Hochelaga Maisonneuve in the fall of 2004.

He was at the registration table checking the guest list for the event when Milioto approached him and told Dumont to follow him to the bathroom.

"At first, I refused," he said. "He said, 'No, you don't understand. You have to come with me.' He took me by the arm and I followed him to the bathroom."

Dumont said Milioto handed him an unmarked envelope and told him it contained $10,000 cash. Dumont left the washroom, and took the cash straight to Bernard Trépanier, a party fundraiser.

"This is what Mr. Milioto wanted to give you," Dumont said he told Trépanier as he handed over the envelope, adding, "I don't want to be involved in these type of transactions."

Didn't report finance worries

Dumont admitted he should have denounced the financial irregularities he witnessed, but said he felt there was no one to whom he could express his concerns.

"You understand that the one time when I tell the mayor that things aren't working, the official agent starts to tell me that there's two types of budgets and I watch my boss, the mayor of Montreal, walk out," he said.

"I can't even speak to the mayor because he doesn't want to know about it."

Threatened by construction boss

Dumont lost some of his composure during his testimony when he told of receiving a death threat from Milioto.

Dumont told the Charbonneau commission on Tuesday the threat was made in the summer of 2007 after he noticed discrepancies between two contracts while serving as the borough mayor's cabinet leader.

Milioto's company, Mivela Construction, had placed a bid on a sidewalk project that was nearly $100,000 more expensive than a similar contract issued less than a year before.

Dumont said he asked a borough engineer about the difference in price, but instead received a visit from Milioto himself since the borough mayor, Cosmo Maciocia, was out of office.

According to Dumont, Milioto began by telling him the sidewalks his company made were "broad and deep."

Dumont told the commission he asked Milioto what he meant, to which he replied, "I wouldn't want you to find yourself in the foundation of one of my sidewalks."

Dumont said he took this as a threat and let Milioto out of his office without a word.

The witness told the Charbonneau commission he had never told anyone about the threat until now.

He also told the inquiry that visits from construction bosses at the borough mayor's office were frequent.

People like Paolo Catania of Frank Catania and Associates, Joe Borsellino of Petra and other representatives of a company owned by the Argento family allegedly visited the office.

According to Dumont, they attended meetings with the borough mayor who took care of housing projects. Dumont said he did not take part in the meetings because they were not his responsibility.