POLITICS

Quebec corruption inquiry goes federal: witness says fake billing financed parties

03/20/2013 02:25 EDT | Updated 05/20/2013 05:12 EDT
The steady drumbeat of details about illegal political financing in Quebec has suddenly echoed beyond the province's politics and into the nation's capital.

The province's corruption inquiry has heard that crooked financing schemes also permeated the federal level, via testimony Wednesday from a repentant construction-industry executive.

The federal aspect came up only briefly.

It was addressed in the most vague, fleeting fashion during Wednesday's testimony before being dropped as the testimony moved on to other topics.

Rosaire Sauriol, the vice-president of Dessau Inc., was describing how he used fake-billing schemes to funnel cash from his engineering company to provincial and municipal parties.

He was asked whether he used that same practice to contribute to federal parties and he responded: "Yes."

And that was it. There were no more details about which parties might have received the cash, how much they received, and when they received it.

The mandate of Quebec's corruption inquiry does not extend to the federal level — so any questions about politics beyond the province are deemed out-of-bounds.

But that statement alone is enough to raise questions about whether federal parties have been financed with illegal cash and, if so, which ones.

There have been limits since 2004 on corporate donations to federal parties, while corporate donations were banned altogether in 2006. Meanwhile, the events that Sauriol described in his testimony occurred as late as 2009.

"I have every confidence that Elections Canada and the RCMP are going to be following this closely," Opposition Leader Tom Mulcair said Wednesday.

He added that the federal government is also responsible for punishing anti-competitive practices and he expects it to be monitoring allegations of collusion emerging from the inquiry. The federal Competition Bureau has, in fact, said it is watching the inquiry and working with Quebec police.

Elections Canada would not say whether it was investigating the claims made Wednesday. In an email, the elections watchdog said it never confirms or denies whether complaints are received and investigations are underway.

Wednesday's brief exchange with Sauriol was a rare example of the inquiry tiptoeing, however gingerly, beyond the confines of Quebec provincial politics.

But it wasn't the first. The inquiry has also twice raised the name of Sen. Leo Housakos — although he has not been accused of any wrongdoing.

At one point this week, an inquiry lawyer suddenly began asking the head of another engineering firm, BPR, about the Conservative senator's previous work at the company and his appointment to the upper chamber of Parliament.

Sources have told The Canadian Press that Housakos helped organize a lucrative 2009 Conservative fundraiser — attended by numerous engineering-industry employees, and featuring a speech by Prime Minister Stephen Harper.

Housakos admitted to soliciting a donation from his ex-boss at BPR at the time, although he said he did not have any formal role in that event.

The guest list for the 2009 Montreal fundraiser included Sauriol and Pierre Duhaime, the former SNC-Lavalin boss who now faces fraud charges.

That list of invitees does not prove that Sauriol actually attended the event, nor is there any trace of a contribution from him.

Meanwhile, the Conservative party is touting its record in cleaning up political financing.

The Tories point out that they were responsible for tightening rules with the Federal Accountability Act — their first piece of legislation upon taking office in 2006.

"We only accept individual donations within the legal limit. We banned corporate donations and imposed a strict limit on personal donations," said an email from Tory spokesman Fred DeLorey.

This week's inquiry testimony has illustrated how frequently such rules have been flouted in Quebec, where corporate donations have been illegal since the 1970s.

While testifying Wednesday, Sauriol said his company gave more than $1 million to provincial parties between 1998 and 2010 — about 60 per cent of it to the Liberals and 40 per cent to the Parti Quebecois.

That does not include the contributions Sauriol said went through a network of middlemen not associated with the company who were reimbursed for their donations.

That sum also does not include the multitude of donations to municipal parties inside and outside Montreal that Sauriol said the company made.

It does not include federal donations, either.

For Dessau employees, Sauriol said the provincial donations were made by cheque and the company would reimburse workers in different ways: cash, expense accounts and inflated gas mileage.

There was another scheme for non-employees.

First, Dessau needed to get its hands on coveted cash currency. Sauriol said he did so by sending cheques to different companies. The companies created false bills for work never rendered. In exchange, he said, Dessau got cash — minus a 10 per cent commission paid to the other company for its services.

The cash would then be split up through various middlemen and contributed to parties.

Sauriol testified that his company donated $2 million through false-billing schemes alone, at the municipal and provincial level, between 2005 and 2010.

The benefits of being close to certain local politicians were clear. One chart produced Wednesday showed how Dessau's contracts suddenly dried up, and other companies' skyrocketed, when there was a change in government in a municipality near Montreal.

The brief exchange about federal politics came while an inquiry lawyer was seeking a more specific tally about how the cash dollars were used.

"That money — that influx of cash money you were talking about yesterday (Tuesday) — was only for financing political parties, not only at the municipal level but also the provincial one," said inquiry counsel Denis Gallant, opening the exchange.

"I just want to ask on a sidenote — and to drop it immediately thereafter because it's not part of our mandate — but because we're going to see some numbers later...

"But was there also a certain financing that happened at the federal level?"

Sauriol said yes.

Gallant followed up with: "So it was really for a whole bunch of political parties, that cash money, there was no other purpose than to finance (political parties)?"

Sauriol answered no.

And they moved on to other subjects.

Dessau has already reported its wrongdoing to authorities. Sauriol said the company stopped the false-billing practice a few years ago and paid a fine to cover back taxes and interest.

Sauriol said his own company president, his brother Jean-Pierre Sauriol, was aware of the scheme. The company, Quebec's third-biggest engineering firm, was founded by their father.

The inquiry has already heard about illegal or questionable fundraising practices at other firms. For instance, the country's biggest engineering company, SNC-Lavalin, admitted it reimbursed employees who donated to political parties.

Sauriol did not explain why he got involved in financing federal politics.

But he did reveal a motive for cultivating ties at the municipal level: it made his company money.

Sauriol made that observation Wednesday while describing why he invited municipal politicians — including the man who is now interim mayor of Montreal, Michael Applebaum — to a corporate box for an NHL game several years ago.

"Our objective was to get closer to politicians," Sauriol said.

"In most cities, it was the executive committee, (the municipal equivalent of a cabinet), that decided which contracts went where.

"So there was an advantage to knowing elected people. It was the entry point for getting contracts."

Laws have since been tightened, and ethical standards have been raised since 2009, he said, so Dessau does not engage in such practices anymore.