10/30/2012 11:39 EDT | Updated 12/30/2012 05:12 EST

Inquiry witness: Montreal mayor knew about illegal political financing

MONTREAL - The mayor of Montreal has been personally implicated in testimony at Quebec's public inquiry, with a witness suggesting that he was not only aware of illegal financing within his political party but was demonstrably indifferent to it.

The testimony's timing was politically devastating.

While the inquiry was hearing claims of cost overruns, corruption and criminal threats in the awarding of public contracts, Mayor Gerald Tremblay was busy presenting a municipal budget Tuesday that slapped homeowners with a 3.3 per cent increase in property taxes.

The latest allegations intensified pressure on the mayor to resign.

A former organizer for Tremblay's party told the inquiry that when the subject of illegal financing came up, the mayor wanted no part of the conversation.

The witness recalled talking about spending irregularities during a meeting with the mayor and another party executive before an important byelection. He said the other executive then pulled out two sets of books — one with the party's "official" budget for the byelection, and one with the "unofficial" budget.

The secret budget had the party spending $90,000 on the campaign — almost double the legal limit. At that point, according to witness Martin Dumont, the mayor stood up and excused himself from the meeting.

"I don't want to know that," Dumont quoted Tremblay as saying. Pressed by an inquiry lawyer whether Tremblay knew about illegal party financing, Dumont said, "Yes."

An angry Tremblay was quizzed by reporters about the allegation before tabling the city budget Tuesday. He denied the allegations, calling them "completely false."

A lawyer for the mayor's party said later in the day that Tremblay and a pair of senior officials at the party and at city hall wanted to be questioned as soon as possible by inquiry lawyers, so that they could offer their version of the facts.

Tuesday's testimony prompted provincial politicians to weigh in on whether Tremblay should resign, as the municipal opposition has requested.

The provincial cabinet minister responsible for Montreal said that even though the 70-year-old mayor has hinted he might not seek re-election next year, that might not be enough.

"The status quo is untenable," said Jean-Francois Lisee. "Is it enough (to simply not run again)? The question is worth asking, increasingly, with every passing day."

The leaders of Quebec's major political parties were less blunt. Premier Pauline Marois said Tremblay has a duty to reflect on what's happening, and make the right decision.

But one prominent politician was far more direct.

Coalition party member Jacques Duchesneau, a former Montreal police chief and anti-corruption whistleblower, said the mayor had lost his legitimacy to lead Montreal. Duchesneau said he was "extremely bothered" that the mayor would try raising taxes amid such a scandal.

At the inquiry, Dumont testified that he saw considerable evidence of illegal activity in his days working for the mayor's party, Union Montreal.

He said he intervened at one point because he was disgusted that party officials had a summer employee, a student working as a secretary, counting $850,000 in cash.

Dumont said he urged a party fundraising official — Bernard Trepanier, who has been nicknamed "Mr. Three Per Cent" in Quebec media — to stop involving the student in that kind of activity.

He expressed remorse at not having stepped forward years ago. Dumont said he had received death threats from one Mafia-linked construction boss — who allegedly threatened to bury him in concrete. The warning came after Dumont questioned the high price of construction work, he said.

"I was very afraid," Dumont said.

He said that, before Tuesday, he had never even told his spouse about the threats he received from construction boss Niccolo Milioto, who was tied to the highest-ranking members of the Rizzuto crime family.

"She certainly learned about it by listening to me testify today," he added, his voice shaking. "I've never spoken about it."

Dumont left to work in Ottawa in 2007. He held several jobs in the Harper government over the next three years.

He testified Tuesday that he quit his municipal job immediately after passing the federal security-clearance test. Had it not been for the Charbonneau commission, he said, he might never have come forward to describe what he saw in Montreal.

Dumont recalled a meeting that he attended along with Tremblay and Marc Deschamps, Union Montreal's official agent, two weeks before a December 2004 byelection.

He testified that, during the meeting, Deschamps pulled out a document which indicated two budgets — one was the official campaign budget of $43,000 and the other a so-called "unofficial" budget of about $90,000.

Dumont said that, at that point, Tremblay said he didn't want to know about it and left the room. Dumont told the commission that the maximum allowable spending limit for the byelection was $46,000, but in the end, it cost Union Montreal $110,000.

Ironically, the byelections had been called to replace two councillors who had to step down because of allegations they took kickbacks. They both pleaded guilty to one charge each of municipal corruption.

Dumont recounted several other incidents where envelopes stuffed with cash were circulating, including one containing $10,000 from a construction company entrepreneur.

He also said the party's head of financing had told him his vest wouldn't close for an official photo because it contained envelopes of cash.