10/02/2012 12:44 EDT | Updated 12/02/2012 05:12 EST

Montreal ex-director general implicated in construction probe

Lino Zambito is back for a third day of testimony at the Charbonneau commission after two days of shocking allegations relating to the handling of public contracts in Quebec's construction industry.

On Tuesday morning, Zambito said he was part of a construction project in Montreal's east end seven years ago that was deliberately overbid.

Zambito told the commission the so-called "extra" in the contract was to go to Montreal's former director general Robert Abdallah.

He testified that the city had requested that cement pipes be installed in the east end to fix a sewer issue in 2005.

Infrabec, for whom Zambito worked, was hired to take on the contract.

Zambito said that a few days or weeks after earning the contract, Michel Lalonde of the Séguin group, who was in charge of insuring the project was underway, called him to arrange a meeting with two other people – Michel Caron and Éric Caron of Tremca.

Tremca is cement-product supplier.

The Caron brothers told Zambito they would provide the pipes rather than have Infrabec make them on-site. Zambito said this would have cost his firm more money and he did not have the budget to purchase the pipes from Tremca. He argued that the contract needed to be renegotiated to allocate more money for the project.

Abdallah asked Zambito to insure that "the extras that were to be applied would be applied so that they wouldn't cost [him] a thing."

Zambito accepted the deal and said he checked out the average cost of cement pipes from other suppliers. He said the difference in cost was worth $300,000.

Lalonde allegedly told him "if you want the project to happen, you have to buy the pipes from Tremca at the price that's given and we will compensate [...] the difference will be given to Abdallah."

Zambito said this was the first time he witnessed the city protecting suppliers. Zambito said he had no choice but to buy the pipes from Tremca.

He admitted that the project was important to him and that he decided to go ahead with Abdallah's recommendation.

Abdallah's name was linked to controversy surrounding the appointment process at the Montreal Port Authority and allegations of political pressure from Ottawa.

Members of the board of the Port of Montreal have said that a onetime senior aide to Canada's Prime Minister Stephen Harper, Dimitri Soudas, had personally met with them to persuade them to appoint Abdallah. He was not appointed in the end.

The Conservatives have acknowledged the government indicated a preference for Abdallah as president of the board in 2007, as did the City of Montreal.

However, the Conservatives denied any wrongdoing in the matter and said the decision was ultimately up to the board, which selected another candidate.

Abdallah was the city's director general from 2003 until 2006, when he left the job for unspecified reasons.

Abdallah teaming up with lawyers

After hearing this morning's allegations, Abdallah denied ever having a hand in protecting suppliers.

He said he challenges Zambito to prove what he said before the commission.

Abdallah was reportedly heading to his lawyers' office and all evidence point to a possible counterattack from the formerdirector general.

Zambito may be protected by police

Several Quebec provincial police vehicles have been seen parked outside of residences and a business connected to Zambito, including outside the home of his former wife.

The Sûreté du Québec is refusing to comment on whether or not Zambito is receiving police protection as he testifies before the commission.

Two days of bombshell testimony

On Monday afternoon, Crown prosecutor Denis Gallant announced that he intends to unveil the stack of contracts issued by the City of Montreal for which Zambito's former company Infrabec had applied.

On Thursday, Zambito admitted to being part of a cartel that would split sewer-related public contracts between themselves.

His bombshell testimony on Monday also stirred a wave of criticism at Montreal's City Hall after alleging that Montreal Mayor Gérald Tremblay's party had received a cut from certain contracts negotiated within the Mob group.

According to his testimony last week at the Charbonneau commission, Nicolo Milioto, former president of Mivela Construction, also collected a 2.5 per cent "tax" from city construction contractors that went to the Rizzuto Mob family.

On RCMP surveillance video secretly recorded at the Rizzutos' former hangout in the Montreal neighbourhood of St. Léonard, Zambito and other industry bigwigs can be seen handing over wads of cash to Milioto. Other segments show Milioto and Mob bosses splitting up the money into piles and handing some of it to onetime Montreal Mafia godfather Nicolo Rizzuto Sr., who stuffs it into his socks.

A further one per cent cut, Zambito said Monday, was paid to the city engineer who approved contracts. There was a running joke that the official claimed a one per cent "GST" — the name being a tongue-in-cheek twist on the French-language acronym for the federal sales tax. It was apparently named for, and by, engineer Gilles Surprenant, according to Zambito.

"He picked the name himself," Zambito said. "TPS meant 'Taxe Pour Surprenant.' At the time, it was one per cent of the value of the work."

Zambito also said Mob boss Rizzuto played the role of mediator in a conflict opposing Tony Accurso and Zambito over a contract for Transport Quebec.

Accurso denied the allegations in a news release on Monday night.