10/15/2012 11:18 EDT | Updated 12/15/2012 05:12 EST

Lino Zambito, Quebec Corruption Investigation Witness, Testifies He Donated Illegally To All Political Parties


MONTREAL - A star witness at Quebec's corruption inquiry said illegal political financing was not limited to municipal politics in Montreal as he accused prominent people, different levels of government, and various political parties of participating in illicit fundraising schemes.

In his latest day of bombshell-dropping testimony Monday, former construction boss Lino Zambito waded into illegal political activities beyond Montreal.

He accused the mayor of Laval, Que., of claiming a financial cut on construction contracts in his city. He accused a prominent Loto-Quebec executive of demanding a $30,000 cash payment for the provincial Liberal party — which was 10 times the legal limit. And he said he donated illegally to other provincial parties.

That prompted the kind of terse denials Monday of the sort seen throughout Zambito's riveting turn on the witness stand over the last several weeks, with the people named in his testimony regularly brushing off his allegations.

In his latest testimony, Zambito said he funnelled $88,000 over the last decade to all Quebec political parties through false donors — notably through family, friends and employees. The lion's share went to the then-governing Liberals, while smaller amounts went to the Parti Quebecois and the now-defunct ADQ.

He said the practice helped parties circumvent the province's then-$3,000 donation limit under a broken system where political parties relied on engineering firms for cash; engineering firms went to get it from construction companies; and construction companies relied on their contacts to get work.

"I wasn't an angel," Zambito said.

"I manipulated public tenders, corrupted people, but the system existed. If I wanted to work in construction I didn't have the choice."

Zambito was into his sixth day of testimony that had already seen an explosive volley of allegations about bid-rigging, collusion and organized crime, mainly at the Montreal municipal level. On Monday, his testimony ventured into practices outside Montreal, at the provincial level and in smaller municipalities.

He described how he would reimburse associates who made donations in their own name to provincial political parties.

Zambito expressed remorse for embarrassing his friends, family and employees who might never have wanted to donate.

He said some of these people didn't care about politics — like one ex-spouse he described as resolutely "apolitical." Zambito said he was the one who urged them to participate, and said they did not deserve to have their names dragged out on a donors' list at a public inquiry.

Zambito said he once gave $30,000 to Pierre Bibeau, a Liberal party stalwart, for an April 2009 fundraiser for a cabinet minister — Line Beauchamp, who was Bibeau's partner.

Bibeau "vigorously denounced" the allegations in a statement. He said he had consulted lawyers and had decided, on their advice, to await further testimony before choosing what legal steps to take to counter what he called the "irreparable harm" to his reputation.

He declined further comment.

In his testimony, Zambito said he gave the money to Bibeau at the headquarters of Loto-Quebec, the provincial gaming corporation where Bibeau is still a senior executive. He recalled that a television in Bibeau's office was showing legislature debates as he handed over the money in cash.

He described attending numerous fundraisers for ministers over the years. But his political donations ended in October 2009 when he became the subject of a Radio-Canada investigative news report that led to calls for an inquiry.

In a dramatic moment of testimony, Zambito blamed a failed system that he said put unfair pressure on politicians to raise money and on people in the construction industry to deliver it.

Zambito said Liberal ministers were expected to raise $100,000 a year in donations and that often meant they were going to fundraising events without any idea who was attending. One guest at a high-profile fundraising event featured a prominent member of the Mafia.

At the provincial level, Zambito said, the financing system revolved around engineering firms.

He said large companies were intimately involved with political parties and they constantly solicited construction bosses for money.

Construction companies weren't thrilled to be ponying up the cash.

"These were not sums we gave out of conviction," Zambito said. "These are sums we gave out of obligation."

He offered two suggestions for fixing the fundraising system: Increase the public subsidy for political parties, or increase the donation limit.

Otherwise, Zambito said, a black market will inevitably develop. He said political parties are desperate for cash to finance their campaigns, and without sufficient fundraising channels they will be tempted to resort to illicit means to get it.

The limit was slashed to $1,000 under the previous Liberal government and the current PQ government has proposed lowering it again, to $100.

But Zambito said that without a significant increase in public subsidies the best solution might be higher donation limits — like $10,000, with the real donor's name being listed on the provincial registry.

He said that would be more honest than a system where heaps of cash from unknown sources were funnelled through middlemen.

"Why be hypocrites?" he said.

Zambito said the longstanding practice would force innocent people into an awkward spot. He cited the example of his secretary, who gave 10 per cent of her $30,000-a-year salary to the old ADQ party and the Liberals in 2007 and 2008.

"In the end, those people just tried to help a boss or their company," Zambito said.

"The financing system is ill and the problem is not the employees, it's the system that's sick and corrupt."

Zambito defended the political class, saying the majority of people involved in politics were well-intentioned and clean.

"I want people to understand that for the most part, politicians are honest and there to serve the population," Zambito said. "What I'm condemning is the system implanted in the political parties that obliges them to go and seek donations."

He said the system benefited certain construction companies.

Zambito said contractors either rigged the bidding process amongst themselves, or large engineering firms would tip one off with privileged information to help it win a bid.

Looking at 54 provincial contracts his company Infrabec bid on, four out of the 17 where it managed the lowest bid were rigged, Zambito said. In one instance, Zambito paid $150,000 cash to a construction company to help secure a contract.

He said most provincial contracts he was involved in weren't rigged. But Zambito cautioned that even when contracts looked like they were open to competitive bidding, engineering firms might have played a secretive role.

At the municipal level in Montreal, he has described a cartel-like structure that colluded to pick who would win public construction contracts.

He said the system included bribes for municipal officials, kickbacks to certain political parties, and a percentage claimed by the Italian Mafia.

Outside Montreal, every area had its own way of doing business.

Zambito testified on Monday that in Laval, a city next to Montreal, Mayor Gilles Vaillancourt claimed a 2.5 per cent cut of contracts to be delivered through an intermediary. Vaillancourt denied the allegation and said through a spokesperson that he was "beside himself" with anger.

When he won his first contract in Laval, Zambito said he had to give Vaillancourt a $25,000 payment to ensure his extra costs were covered. He said the money was delivered through the head of an engineering firm.

Zambito said he never directly gave Vaillancourt any money.

Vaillancourt's homes and office were raided last week by Quebec's anti-corruption squad.

Zambito said the practice continued in Laval until the arrival of Operation Hammer, a police anti-corruption squad. He said increased police pressure in 2009 quickly changed everything and collusion practices were suspended.

Zambito said every municipality had its own collusion techniques but, on the whole, companies were very territorial and there were non-aggression pacts between them.

After winning a contract in St-Jerome, another town north of Montreal, Zambito said he had his equipment set on fire when he used a demolition company from outside the area.

In one town, Terrebonne, he said engineering firms peddled privileged information to help specific companies submit the winning bids for contracts.

He described some towns north of Montreal as "guarded fiefdoms."

None of Zambito's allegations have been proven in court and his allegations have been met with denials of any wrongdoing.

Zambito is back on the stand on Tuesday.

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