CBC In Depth
Justice John Gomery smiles after delivering a statement on his first report on the sponsorship scandal in Ottawa, Nov. 1, 2005. (CP PHOTO/Tom Hanson)
Federal sponsorship scandal
CBC News Online | October 26, 2006

The sponsorship scandal tainted members of the Liberal Party and politics in Quebec. In its aftermath, there have been a few convictions and in Parliament, there came a call for the politicians to find ways to govern with accountability.

It all started with rumours and whispers about a fund that had been set up in the wake of the 1995 referendum on Quebec sovereignty to help promote federalism. The money was supposed to be used to raise Canada's profile in Quebec.

But it wasn't clear how the money was handed out: there were no application forms for this fund that was supposed to help pay the costs of social and cultural events and programs. There were rumours that the money was little more than a vehicle to reward loyal Liberal supporters.

By the early spring of 2002, then prime minister Jean Chrétien was forced to address the issue. The Globe and Mail – under the Access to Information Act – tried to find out why the government paid $550,000 to advertising firm Groupaction Marketing for a report that could not be found. No one at Public Works or the company could explain it.

Auditor general condemns 'scandalous' program

Chrétien asked federal Auditor General Sheila Fraser to see what she could find out. She learned enough to launch a full investigation – and to ask the RCMP to get involved as well.

By the time Fraser released her explosive report on Feb. 10, 2004, Paul Martin was prime minister.

The scathing report used words such as "scandalous" and "appalling" to describe how the Liberal government abused the system.

She found that $100 million was paid to a variety of communications agencies in the form of fees and commissions and said the program was basically designed to generate commissions for these companies rather than to produce any benefit for Canadians.

Public Works officials "broke just about every rule in the book" when it came to awarding contracts to Groupaction, which was paid millions doing work for the government under the sponsorship program, Fraser said.

Gomery picked to head public inquiry

Martin asked Justice John Gomery to head up a public inquiry into how the sponsorship program was handled. He also fired Alfonso Gagliano — who was the Minister of Public Works during the sponsorship program — from his job as appointed ambassador to Denmark. Five days later, Martin promised to resign if there was evidence that he knew about fraud in the program.

Fraser's report also sparked a parliamentary inquiry before the House of Commons Committee on Public Works. The committee's mandate was to determine who created the sponsorship program, whether ministers and bureaucrats followed parliamentary rules in conducting the program, and whether politicians broke the law. Problem is, the committee never got to complete its work.

Much to the chagrin of the opposition parties, the Liberal majority on the committee voted to end its hearings in early May 2004 – weeks before the federal election called for June 28.

The RCMP were also involved, investigating allegations of fraud beginning in May 2002.

Martin suspends top Crown officials

Two weeks after Fraser's report was released, Martin suspended the heads of three Crown corporations: Michel Vennat, president of the Business Development Bank of Canada, Via Rail president Marc LeFran�ois and Canada Post president André Ouellet.

All three men would eventually be fired.

The report showed that five Crown corporations and agencies – the RCMP, VIA Rail, the Old Port of Montreal, the Business Development Bank of Canada and Canada Post – played a role in transferring money through questionable means.

Scandal costs Liberals in 2004 election

The revelations from the unravelling scandal would cost the Liberals dearly in the election of June 28, 2004: their majority evaporated and – for the first time in 25 years – Canada had a minority government.

By September, Gomery would begin hearing testimony at the inquiry into the scandal.

On Feb. 8, 2005, Chrétien appeared before the Gomery inquiry. He vigorously defended the sponsorship program as an important part of the battle against Quebec sovereigntists in the wake of the referendum.

Mistakes were made, Chrétien conceded, and people who stole money should be punished.

Two days later, Martin gave his testimony, appearing a year to the day after he ordered the inquiry. It was the first time since Canada was six years old that a sitting prime minister testified before a public inquiry.

Shocking revelations from Montreal

After Chrétien and Martin completed their testimony, the inquiry shifted to Montreal, where it would get to the meatier side of the story. Witnesses would include some of the people at the heart of the sponsorship scandal.

Among them would be Jean Brault, who ran Groupaction; Paul Coffin, who ran another advertising company that did well under the program; and Chuck Guité, who ran the program for Public Works.

But there would be complications – all three men faced criminal charges, accused of defrauding the government out of millions of dollars under the sponsorship program.

Gomery would order a ban on the publication of their testimony because their appearances before the inquiry were initially scheduled for a few weeks before the beginning of their trials.

Liberals forced to call election and lose

As the testimony heated up – a year after Martin asked Gomery to look into the sponsorship scandal – the opposition parties demanded that the government resign and call an election. Martin resisted. He went on national TV to ask Canadians to hold off judging his government until after Gomery released his final report. He promised to call an election within 30 days of the release of the final report.

For a time, it looked as though he would get that chance. But when Gomery's first report came out on Nov. 1, 2005, the opposition parties signalled that they had had enough. In less than four weeks, they would unite to topple the government in a motion of no confidence, arguing that the Liberals no longer had the moral authority to govern.

After the parliamentary election on Jan. 23, 2006, the Liberals found that for the first time in 12 years, they did not have enough seats in the House of Commons to govern. The Conservatives picked up 10 seats in Quebec, prompting the new prime minister, Stephen Harper, to say the scandal had inflicted "enormous damage … to the image of federalism" in Quebec.

Harper's government introduced the Accountability Act in April to crack down on unethical actions and make government transparent.

But Gomery said in October that he was disappointed that the government hasn't resolved some problems, pointing for example how deputy ministers are appointed. "The Accountability Act isn't an answer to my report," Gomery told CBC Newsworld. "They seem to have dropped into something of a black hole in Ottawa."

The criminal cases

On Feb. 1, 2006, Gomery released the final report from his inquiry, which cost taxpayers more than $14 million, according to a report later released by the Canadian Press.

But Gomery wasn't the only judge that Coffin, Guité and Brault had to face. The RCMP investigation led to criminal charges.

In May 2005, Coffin – the first person to face charges in the scandal – pleaded guilty to 15 counts of fraud. He was later sentenced to two-years-less-a-day to be served in the community. By the time of his sentencing, he had repaid more than $1 million of the $1.5 million he had been accused of taking. However, the Quebec Court of Appeal eventually overturned his conditional sentence and ordered Coffin to spend 18 months in jail.

On Sept. 21, 2005, Guité and Brault pleaded not guilty to six charges of fraud.

But, on March 2, 2006, Brault changed his tone and pleaded guilty to five of six fraud-related charges, leaving the charge of conspiracy. The former head of Groupaction Marketing admitted to paying salaries to Liberal party workers who never did any work for his company. He was sentenced to 30 months in prison, and was granted a full parole after five months. Brault will later go to trial for the conspiracy charge.

Guité, however, headed to trial on five fraud-related charges involving a total of $1.5 million. In late March, he told a judge he couldn�t afford a lawyer, and he represented himself when he went into a Montreal court on May 5, 2006. The court heard that he authorized more than $2 million in contracts to Brault's Groupaction Marketing Inc. without proper competition. And, testimony revealed he also doubled the value of one contract to $500,000 without demanding any additional work. On June 6, 2006, Guité was convicted of all five charges.

On June 19, 2006, Guit� was sentenced to three-and-a-half years in prison. Crown prosecutors wanted a jail sentence of three to four years for Guit�. The defence recommended a two-year sentence.

More revelations

Almost a year after the Gomery report, the sponsorship scandal occasionally surfaces. In September 2006, Gagliano published his "version of the truth" in his autobiography called Les corridors du pouvoir (The Corridors of Power). He maintained his innocence and said he was a scapegoat for the Martin government. Gagliano pointed blame at Guit�.


GALLERIES: Who's who photo gallery Cartoon gallery: Phase One report Cartoon gallery: Auditor general's report
GOMERY INQUIRY: Gomery: The players Gomery: Key Companies Gomery by the numbers A summary of the testimony Testimony 2004 Follow the money Kroll report (pdf)
PLEA TO THE NATION: Paul Martin's televised address Stephen Harper's response Jack Layton's response Gilles Duceppe's response (RealVideo runs 5:59)
CHUCK GUITÉ 'Not all my fault' From bureaucrat to lobbyist 'No phoney invoices'
PAUL COFFIN 'Phoney invoices'
JACQUES CORRIVEAU: At the centre of the storm
ALAIN RENAUD: Lobbyist extraordinaire
JEAN BRAULT: Cash for contracts Paper trail
PAUL MARTIN: Not in the sponsorship loop
JEAN CHRETIEN: Economics and golf balls Editorial reviews
VIEWPOINT: Rex Murphy: Sell the Peace Tower to Wal-Mart? Ira Basen: Watergate, the sponsorship scandal and the press
HISTORY: Ad firms and liberals In their own words
RELATED: The top 10 Canadian government scandals Public inquiries Auditor General's report 2004 Jean Chrétien Paul Martin

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Gomery Inquiry into the Sponsorship Program

Public Works internal audit on sponsorship program, August 2000 [PDF file]

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