Sponsorship scandal

"Adscam" redirects here. For the American sting operation, see Abscam.

The sponsorship scandal, "AdScam", "Sponsorship"or Sponsorgate, is a scandal that came as a result of a Canadian federal government "sponsorship program" in the province of Quebec and involving the Liberal Party of Canada, which was in power from 1993 to 2006. The program was originally established as an effort to raise awareness of the Government of Canada's contributions to Quebec industries and other activities in order to counter the actions of the Parti Québécois government of the province that worked to promote Quebec independence.

The program ran from 1996 until 2004, when broad corruption was discovered in its operations and the program was discontinued. Illicit and even illegal activities within the administration of the program were revealed, involving misuse and misdirection of public funds intended for government advertising in Quebec. Such misdirections included sponsorship money awarded to ad firms in return for little or no work, which firms maintained Liberal organizers or fundraisers on their payrolls or donated back part of the money to the Liberal Party. The resulting investigations and scandal affected the Liberal Party of Canada and the then government of Prime Minister Paul Martin. It was an ongoing affair for years, but rose to national prominence in early 2004 after the program was examined by Sheila Fraser, the federal auditor general. Her revelations led to the government establishing the Gomery Commission to conduct a public inquiry and file a report on the matter.

In the national spotlight, the scandal became a significant factor in the lead-up to the 2006 federal election where after more than twelve years in power the Liberals were defeated by the Conservatives, who formed a minority government that was sworn in February 2006.

Involved parties

• Jean Chrétien — Prime Minister of Canada at the time the Sponsorship Program was established and operated. The Gomery Commission, First Phase Report which assigned blame for the Sponsorship scandal cast most of the indemnity for misspent public funds, fraud on Chrétien and his Prime Minister's Office staff, though it cleared Chrétien himself of direct wrongdoing.
• Jean Pelletier — Prime Minister's chief of staff and later chairman of VIA Rail. VIA Rail was accused of mishandling sponsorship deals, though mostly not under Pelletier's tenure.
• Alfonso Gagliano — Minister of Public Works, and thus in charge of the program. Also the political minister for Quebec.
• André Ouellet — member of Prime Minister Chrétien's Cabinet, longtime Liberal politician and later head of Canada Post, who was also accused of violating sponsorship rules.
• Chuck Guité — bureaucrat in charge of the sponsorship program. Arrested for fraud by the Royal Canadian Mounted Police (RCMP) - convicted on five counts on June 6, 2006.
• Jean Brault — head of Groupaction Marketing, one of the companies to which deals were directed. Arrested for fraud by the RCMP, he pleaded guilty to five counts of fraud and on May 5, 2006 was sentenced to 30 months in prison.
• Jacques Corriveau — Liberal organizer and head of Pluridesign to which millions in sponsorship dollars were directed.
• Paul Martin — former Prime Minister of Canada. He was Minister of Finance, and Senior Minister from Quebec during most of the years the program occurred. When he became Prime Minister in December 2003, he claimed that he put a halt to it. He also set up the Gomery Commission which later cleared him of formal responsibility by Justice Gomery in his November 2005 'First Phase Report' of the Gomery Commission. The Gomery findings claimed that Martin, as finance minister, established a 'fiscal framework' but he did not have oversight as to the dispersal of the funds once they were apportioned to Chrétien's Prime Minister's Office. A report on the issue by the Auditor General's Office of Sheila Fraser came to the same conclusion. Nonetheless, Martin was frequently accused of tying Gomery's hands and using the sponsorship scandal as an excuse to purge the Liberals of members who supported Chrétien. The scandal played a factor in the federal election of 2006 and the fall of the Liberal Government. Shortly thereafter, Martin resigned from the liberal party leadership.
• Joe Morselli — Liberal Party fundraiser. Jean Brault testified that the money exchanges were with Morselli.
• Jean Lafleur — former CEO of Lafleur Communication Marketing Inc. One of the advertising executives that accepted money from the federal government. Pleaded guilty to 28 counts of fraud.
• Allan Cutler — former civil servant and whistleblower who reported anomalies in a Canadian sponsorship program, triggering the Scandal.

Timeline

1995

• Allan Cutler first attempts to raise concerns about bid-rigging and political interference to the attention of senior management at the Department of Public Works and Government Services Canada.

1996

• Ernst & Young conducts an audit of contracting and tendering practices. The initial draft, which identified recurring problems and the risk of legal action, was altered in the final report. Ernst & Young representative Deanne Monaghan later indicated that she did not recall why the report had been changed to remove those references.

2000

• February — An internal audit reveals that none of the recommendations of the 1996 Ernst & Young audit have been implemented.
• September — Minister Alfonso Gagliano receives the 2000 audit and suspends the Sponsorship Program. Later that year, the Office of the Auditor General of Canada begins investigating the program.

2004

• February 10 — Auditor General Sheila Fraser's report reveals up to $100 million of the $250 million sponsorship program was awarded to Liberal-friendly advertising firms and Crown corporations for little or no work.
• February 11 — Prime Minister Paul Martin orders a Commission of Inquiry into the Sponsorship Program and Advertising Activities. The Commission of Inquiry will be headed by Justice John H. Gomery. Martin fires Alfonso Gagliano from his post in Denmark. Martin asserts that he had no knowledge of the scandal prior to the Auditor General's report.
• February 13 — The National Post newspaper publishes a 2002 letter leaked to it by an unidentified third party, between the Liberal Party's then National Policy Chairman and Paul Martin, urging Martin to stop partisan financial abuses in the Sponsorship Program, thereby casting doubt on Martin's defence of personal ignorance.
• February 24 — Martin suspends Business Development Bank of Canada president Michel Vennat, VIA Rail president Marc LeFrançois and Canada Post president André Ouellet giving each an ultimatum to defend themselves or face further disciplinary action.
• February 27 — Past Olympic gold medallist Myriam Bédard reveals she was pushed from her job at VIA Rail for questioning billing practices. VIA Rail chairman Jean Pelletier publicly belittles Bédard and calls her pitiful.
• March 1 — Pelletier is fired.
• March 3 — Jean Carle, a close confidant of Chrétien and his former director of operations, surfaces in close connection to the sponsorship initiative.
• March 5 — LeFrançois is fired.
• March 11 — Allan Cutler, former public works accountant, testifies before the Commission of Inquiry. He places responsibility for the program and its irregularities with Chuck Guité.
• March 12 — Vennat is fired.
• March 13 — An unidentified whistle-blower reveals that high-ranking government officials, including Jean Pelletier, Alfonso Gagliano, Don Boudria, Denis Coderre, and Marc LeFrançois, had frequent confidential conversations with Pierre Tremblay, head of the Communications Coordination Services Branch of Public Works from 1999 until 2001. The claim is the first direct link between the scandal and the Prime Minister's Office. Coderre and LeFrançois denied the allegation.
• March 18 — Gagliano testifies in front of the Public Accounts Committee, a committee of the House of Commons chaired by a member from the Official Opposition. Gagliano denies any involvement by himself or any other politician; he points blame at bureaucrat Chuck Guité.
• March 24 — Myriam Bédard testifies at the Public Accounts Committee. In addition to repeating her earlier assertions, she also claims that Formula One driver Jacques Villeneuve was given a secret $12 million payoff to wear a Canadian flag logo on his racing suit (however, Villeneuve sharply denies this allegation, calling it "ludicrous"). Bédard also testifies that she once heard that Groupaction was involved in drug trafficking.
• April 2 — Previously confidential testimony from a 2002 inquiry into suspicious Groupaction contracts is made public. In it, Guité admits to having bent the rules in his handling of the advertising contracts but defends his actions as excusable given the circumstances, saying, "We were basically at war trying to save the country... When you're at war, you drop the book and the rules and you don't give your plan to the opposition."
• April 22 — Guité testifies. He claims Auditor-General Fraser is misguided in delivering the report, as it distorts what actually went on; he claims the office of then-Finance Minister Paul Martin lobbied for input in the choice of firms given contracts; and he denies that any political interference occurred, because his bureaucratic office made all final decisions. Opposition MPs decry his comments as "nonsense" and claim he is covering up for the government. The French language press gives a very different account of Guité's testimony; a La Presse headline states that Guité is involving the Cabinet office of Paul Martin.
• May 6 — An official announces the inquiry deadline is set for December 2005.
• May 10 — Jean Brault, president of Groupaction, and Charles Guité arrested by the Royal Canadian Mounted Police for fraud in connection with the sponsorship scandal.
• May 23 — Paul Martin requests that the Governor General dissolve Parliament and call a federal election.
• May 28 — Alfonso Gagliano launches a lawsuit for $4.5 million against Prime Minister Paul Martin and the federal government for defamation and wrongful dismissal claiming that he has been unfairly made to pay for the sponsorship scandal.
• June 28 — The Liberals win 135 of 308 seats in the 2004 election, forming the first minority government in almost 25 years.
• September — First public hearings of the Commission of Inquiry into the Sponsorship Program and Advertising Activities begin in Ottawa. They will move to Montreal in February 2005 and conclude in the Spring.
• December — In a year-end media interview, Justice John Gomery refers to Chrétien's distribution of autographed golf balls as "small-town cheap", which later prompts an indignant response from the former prime minister.

2005

• March 29 — A publication ban is imposed by the Gomery commission on Jean Brault's testimony.
• April 2 — The United States blogger Ed Morrissey of Captain's Quarters discloses information about Brault's testimony, countervening the Canadian publication ban. Until the revocation of the ban five days later, the publication itself was a news event in Canada, with Canadian news media struggling to report on the disclosure without putting themselves at risk of legal action.
• April 7 — The publication ban on Jean Brault's testimony is lifted by the Gomery commission. Brault's testimony triggers a rapid shift in the public opinion of the Liberal Party. Whether or not the government is defeated in the imminent confidence vote, most political pundits are predicting an election call this year—many predicting by this summer.
• April 20 — The official opposition party, the Conservatives, puts forward a non-confidence motion in the government. Due to procedural rules, this vote which was to be held May 3 was postponed. If a non-confidence motion passes, the government will be dissolved and a new election will be held.
• April 21 — A national televised appearance by Prime Minister Paul Martin discusses the scandal. This was highly unusual in Canadian politics. The Prime Minister announced that a general election will be called within 30 days of Justice Gomery's final report. Martin emphasised that he was trying to clean up the scandal and had not been involved. In the following rebuttal speeches, Jack Layton of the New Democratic Party offered to keep the parliament alive, provided the Liberal Party makes some major concessions in the budget in their favor. However, the other Opposition parties were still ready to bring down the government and force an election before the summer.
• May 10 — The Conservatives and Bloc Québécois win a vote, by 153-150, in the House of Commons on what they argue is equivalent to a no confidence motion; three MPs are absent due to health reasons. The motion ordered a committee of the House of Commons to declare that the government should resign rather than being a direct motion on the House's confidence in the government. The opposition parties and several constitutional experts claim that the motion is binding and that the government must resign or immediately seek the confidence of the House; the government and several opposing constitutional experts suggest that this motion was merely procedural and therefore cannot be considered a matter of confidence. Ultimately, only the Governor General has the power to force an election, it is not clear what actions tradition would require her to take in such a case.
• May 11 — The government tells the House that it will consider a vote to be held on May 19 on the budget, including the concessions which the Liberal party ceded to the NDP in turn for their support on it, to be a matter of confidence. The government refuses to directly seek the confidence of the House and blocks the Opposition from putting any vote to the House; in consequence the Opposition continues a policy of non-cooperation and disruption of the other business of the House.
• May 17 — Conservative MP Belinda Stronach crosses the floor to the Liberals and is simultaneously given the Cabinet position of Minister of Human Resources and Skills Development as well as made Minister responsible for Democratic Renewal. Prime Minister Paul Martin states that Stronach will be responsible for implementing the recommendations of the Gomery commission, a statement that Opposition critics claim casts doubt on the sincerity of the Prime Minister's promise for an election within 30 days of the tabling of Justice Gomery's report. For some time afterwards, media attention is focused away from Gomery testimony onto Stronach's move and its implications on the budget vote.
• May 19 — The government passes the first of two budget bills easily after the Conservatives promise support, but the second bill with the NDP concessions ends as a cliffhanger. Speaker Peter Milliken breaks a 152-152 tie in favour of the bill, keeping the government alive.
• November 1 — Gomery's preliminary report into the scandal is released. The report criticizes Chrétien and his office for setting up the sponsorship program in a way as to invite abuse, and Gagliano as the Minister of Public Works for his behaviour. Prime Minister Paul Martin is formally cleared of any responsibility or wrongdoing in the matter as Gomery found his role as Finance Minister was to set up a 'fiscal framework' at the instruction of then Prime Minister Chrétien, but did not have oversight on the spending of the funds after they were passed to Chrétien's Prime Minister's Office.
  Conservative leader Stephen Harper and Bloc Québécois leader Gilles Duceppe announce their intention to try to force a pre-Christmas election; however, New Democrat leader Jack Layton says that he will try to have the Liberals implement some New Democrat policies, particularly with regard to a ban on private healthcare as the price for his support in keeping the government up.
• November 28 — The Liberals refuse to agree to the New Democrats' terms and the latter withdraws their support. The Liberals also turn down a motion sponsored by the three opposition parties which would have scheduled a February election in return for passing several key pieces of legislation. As a result, the Liberal government loses a confidence vote in the House by 171 to 133, resulting in the fall of the minority government and triggering a mid-January election after a long holiday election campaign that is expected to be dirty and hard-fought.

2006

Gomery Commission hearings in Montreal

• January 23 — After twelve consecutive years in power, the ruling Liberals are defeated in the general election. The Conservatives have enough seats to form a minority government. Paul Martin immediately announces that he will not contest the next federal election as party leader, and Bill Graham is appointed interim parliamentary leader.
• February 1 — Justice John Gomery delivered his final report consisting mostly of recommendations for changes to the civil service and its relation to government.
• February 6 — The new Conservative government, led by Stephen Harper, are officially sworn in as the new government in Canada. Stephen Harper becomes Canada's 22nd Prime Minister.
• March 18 — Paul Martin resigns the leadership of the Liberal party, handing the post to Bill Graham for the interim.
• May 5 — after pleading guilty to five counts of fraud, Jean Brault was sentenced to 30 months in prison.
• May 11 — the Conservative government is reportedly preparing to file a lawsuit against the Liberal party.
• June 6 — Chuck Guité was convicted on five counts of defrauding the Government of Canada; on June 19, he was sentenced to 42 months in prison.

2007

• April 27 — Jean Lafleur, after returning from two years in Belize, pleaded guilty to 28 counts of fraud. He was sentenced to 42 months in prison, and was ordered to repay $1.6 million to the federal government.

Political consequences

Within the Liberal Party during 2004-05, revelations of scandal and the subsequent Gomery Commission highlighted the rift between the "Chrétien camp" and "Martin camp". These two groups had been fighting perhaps even prior to Chrétien's election as party leader in 1990; the Chrétienites were descended from long-serving Prime Minister Pierre Trudeau while the Martinites were linked to the right-leaning (and briefly Prime Minister) John Turner.

The Liberals, for the most part, have weathered the damage from the scandal by pointing out the conclusions of reports of the Auditor General and the Gomery Commission: misdeeds were committed by a small, isolated, and corrupt subculture within the previous Liberal government and in particular the PMO of former Prime Minister Jean Chrétien.

Similarly, supporters of then Prime Minister Paul Martin argued that the "culture of corruption" was a byproduct of Chrétien's leadership and that any malicious elements had been purged, both from the government and the party, since the discoveries of wrongdoing. When he assumed the leadership of the party and then the country, Martin made an active effort to dissociate the Liberals and himself from the Chrétien's supporters, arguing these individuals were implicated in the scandal, thus hoping to illustrate that the Liberal Party bore little or no connection or resemblance to party elements involved in the sponsorship program.

Martin supporters contend that many Chrétien loyalists left with or shortly after Chrétien left in 2004, before the scandal was revealed. They point to the departure of John Manley and other Chrétien cabinet ministers from the party, many of whom did not stand for candidacy in the 2004 federal election. Martin's supporters assert those expunged from the party were ejected for their impropriety and not for their leadership affiliations.

Chrétien supporters alleged that Martin used the scandal as an excuse to remove Chrétien supporters from their positions in government and the party. Often cited examples include Martin's major cabinet change after taking power and Martin's refusal to sign nomination papers of MPs who were known to support Chrétien, with many of these controversial moves occurring before the sponsorship scandal broke out.

The Chrétien camp also contended that the Gomery Commission was established to make them look bad, and that it was an unfair investigation. Martin's supporters responded to such allegations by pointing out that the commission was set up to search for facts under independent judicial oversight. They also argued that Justice Gomery's commission operated without undue influence from Martin or anyone outside of the investigation, having all due and necessary authority to investigate and draw conclusions on the matter. Chrétien's supporters were outraged that they shouldered all of the blame for the scandal, even though the commission was directed not to make any conclusions or recommendations on criminal charges or civil liability.

Detractors of Martin's innocence point out that he had a particularly powerful role in government, not only because of being Finance Minister, but also because he had significant support within the party due to his strong showing in the 1990 leadership contest. This forced Chrétien to make concessions to Martin, allowing the latter to wield considerable influence. Another cited example was a speech that Martin made in 1995, stating that separatism would be bad for Quebec's economy, which damaged support for federalism in the province and relegated Martin to a backroom role in fighting the referendum. It is speculated that from there, the sponsorship program was hatched.

Many inside and outside of the Liberal Party contended that, going into the 2006 election, Martin-vs.-Chrétien issues are effectively behind the Liberals. There were few publicized nomination battles, although some Chrétien strategists complained that they have been left out. Formally, the two leaders have remained publicly respectful of each other.

Critics of the Liberal Party and even former Liberals, like Sheila Copps, argued that the sponsorship scandal has highlighted a "culture of corruption" within the Canadian government. Some Conservative critics alleged that the problems within the Liberal Party are so systematic it could only be effectively reversed (or cured) by a change of government and argue that the Liberals, who had been in power for over a decade, were too arrogant and complacent to be trusted with instituting necessary reforms. The sponsorship crisis thus became a key election issue, and remained a rallying-point for conservative opponents of the Liberals in the 2006 federal election.

Quebec sovereigntists—led by the Bloc Québécois in the federal parliament and the provincial Parti Québécois—have cited the scandal as "proof" of institutional corruption and dysfunctionality of the federal government. Critics have argued that the entire sponsorship scandal, originally intended to encourage pro-Canada sentiment in Quebec, has done exactly the opposite and instead, emboldened separatist forces in Quebec: polls before the election indicated increased support for sovereignty, rising to approximately 53% (around 19 December 2005). Ultimately support for separatism declined and the Bloc Québécois lost both popular vote and seats in the Parliament of Canada in the 2006 Federal Election.

The New Democratic Party (NDP) caucus of Jack Layton has also been criticized for alleging major corruption in the Liberal Party of Canada, while simultaneously working with the Martin government to achieve NDP policy objectives.

Unlike the 2004 Election, the Conservatives did not spend the initial part of the campaign attacking the Liberals for Adscam. The sponsorship scandal was brought back to national attention after an NDP member tipped off the RCMP to launch a criminal investigation into the Finance Department, regarding allegations of insider trading from the leaking of the news on the taxable status of income trusts.

The Conservative minority government of Stephen Harper introduced the Federal Accountability Act which included new lobbying rules and electoral law reform; it was granted royal assent on December 12, 2006. Still unfulfilled are promises for a Public Appointments Commission and registrar for lobbyists which is an independent officer of Parliament [1].

Communication Canada was created after the results of the 1995 Quebec referendum to increase intergovernmental communications. The agency was connected to the scandal and labelled as a propaganda machine and eventually disbanded in 2004.

References

• Gomery, John (2005). Who is Responsible? Phase 1 Report. Ottawa, ON: Public Works and Government Services Canada. ISBN 0-660-19532-1.

See also

• Canadian political scandals
• Politics of Canada
• Gomery Commission

External links

• Who Is Responsible: Phase 1 Report
• CBC.ca Indepth: Federal sponsorship scandal
• 2003 Reports of the Auditor General of Canada
• Commission of Inquiry into the Sponsorship Program and Advertising Activities
• Testimony from Jean Brault on the activities of the Government in the Sponsorship Program
• Official transcripts of the hearings available on the website of the Gomery Commission
• Liberals brace for release of Gomery report on sponsorship scandal
• Whistleblowers Canada: Information regarding the inadequacy of legislation introduced in response to the scandal
• Scandal nomenclature contest
• Maple Leaf Web: Ethics & Government in Canada
• Maple Leaf Web: Auditor General Report on Sponsorship Scandal