06/19/2012 01:10 EDT | Updated 08/19/2012 05:12 EDT

Illegal Funding In Rampant In Quebec Politics, Former Police Chief Tells Corruption Inquiry

MONTREAL - A Quebec corruption inquiry has heard its most incendiary allegation to date: that political parties in the province are financed primarily with "dirty money."

In one particularly vivid example shared by Tuesday's star witness, an unnamed municipal party had so much cash on hand that it could not close the door to its safe.

Jacques Duchesneau, the one-time head of a government anti-collusion unit, described a political system awash in kickback money to a more alarming degree than he'd ever suspected when he began investigating. He blamed a "clandestine empire," linked to the construction industry.

Duchesneau, who is also a former Montreal police chief and federal civil servant, is the first high-profile witness to take the stand at the inquiry that began last month. In three previous days of testimony, he accused construction firms of involvement in collusion schemes and suggested the Charest government was indifferent to his findings on corruption.

But Duchesneau's appearance Tuesday, alongside two law-enforcement colleagues, has the potential to cast an even longer shadow on politicians and their supporters at all levels.

He said a majority of the money used by Quebec's provincial parties — as much as 70 per cent of it — comes from outside registered donations. He described a widespread disregard for Quebec's election-financing laws, long touted as among the strictest in the country.

"Dirty money finances elections," Duchesneau told Quebec Superior Court Justice France Charbonneau, who is presiding over the inquiry.

"This clandestine empire I'm talking about comprises links between the construction world and the illegal financing of political parties," he added. "According to the testimony (we gathered), we have before us a widespread and brazen culture of kickbacks."

Duchesneau testified that a well-organized system was in place when he conducted his investigation for Quebec's Transport Department.

He said political organizers would demand donations from engineering firms. Those firms, in turn, would inflate invoices for work being done on public projects — and get away with it.

Duchesneau estimated that, during his investigative research over the last three years, he found as many as 50 engineering firms that submitted false invoices in Montreal alone.

The outline of this system was initially traced by Duchesneau in a secret report he drafted for the Quebec government. He said he leaked the report when he feared the transport minister at the time, Sam Hamad, would ignore its politically controversial findings.

Its eventual release generated public pressure that ultimately forced the Liberal government to call an inquiry, something it had been avoiding for almost two years.

Duchesneau was relieved of his duties soon after the leak. He told the inquiry on Tuesday that he has spent the last four months conducting his own investigation into the political-financing dimension of the corruption problem.

"All we wanted to do was shed light on a problem," Duchesneau said. "But we're seeing the problem is much larger than the one we presented to you in the (leaked) report."

The testimony Tuesday began with Duchesneau and two former co-workers providing a list of names of civil servants who ended up working for engineering firms that dominate the bidding process for public contracts.

They also named two individuals whom they said specialized in finding contractual loopholes, allowing firms to inflate their billings.

But the accusations prompted lawyers representing Quebec's construction industry to question the quality of Duchesneau's evidence.

At times they appeared frustrated by his frequent references to anonymous sources, whose identity he refused to reveal because he said they feared reprisals.

"You bring us one example... and then you generalize for the whole of the industry," said Denis Houle, the lawyer for an association of road contractors.

In a later exchange, Houle added that he had "a lot of difficulty with you identifying people and companies that I know to be very serious."

Duchesneau noted that Quebec's elections chief drafted a new set of laws in 2010 aimed at cracking down on the use of false names to make political donations.

In his report, this was identified as a preferred method for engineering firms to circumvent political-financing laws in Quebec that ban corporate donations.

These laws, first passed in 1978, had once placed Quebec at the forefront of transparent politics, and were repeatedly cited as a point of pride by many of the province's politicians. They were an early precursor to donation limits established at the federal level nearly three decades later.

Since the 2010 Quebec reforms, electoral officers in various parts of the province have seen notable increases in the number of registered donations, Duchesneau said.

But other legal reforms passed recently by the Quebec government to curb corruption appear not to have been as successful.

Earlier this month, Montreal Mayor Gerald Tremblay wrote to the Quebec government to express his frustration over Law 35, designed to prevent individuals and businesses guilty of a crime from bidding on public contracts.

Tremblay's concern was prompted by revelations that the city was about to award $17 million worth of contracts to a company controlled by Tony Accurso, a construction magnate now fighting charges of fraud and influence-peddling. Accurso's company Louisbourg SBC was the lowest bidder on five contracts.

Quebec Labour Minister Lise Theriault now says the government could revisit Law 35, which was passed in December.

"We're looking at how we can go further with the law," she said in a news release Tuesday.

"The problem right now is with the lowest bidder," she added. "Should we re-examine the rules? Certainly."

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