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

MONTREAL – Quebec’s corruption inquiry heard that illegal political financing schemes also permeated the federal level, with testimony Wednesday moving beyond the realm of provincial politics.

The federal aspect was raised briefly, addressed vaguely, and immediately dropped.

An engineering executive was describing how he used fake-billing schemes to funnel cash from his company to parties as illegal provincial contributions.

Then, when asked whether he used that practice to contribute to federal parties, Rosaire Sauriol, the vice-president of Dessau Inc., 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 were 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.

The events that Sauriol has been describing in his testimony occurred as late as 2009.

Today’s brief exchange was a rare example of the inquiry tiptoeing, however gingerly, beyond the confines of Quebec provincial politics.

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 senator’s work and the company and his appointment to the upper chamber of the Parliament of Canada.

While testifying today, 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.

However, 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.

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

He said Dessau would get its hands on valuable cash currency by sending cheques to different companies; creating falls bills for work never rendered; and receiving cash in return, minus a 10 per cent commission Dessau paid the other company for its service.

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

The brief exchange Wednesday about federal politics came following a question from an inquiry lawyer who was trying to get a more specific tally about how the dollars were used.

“That money — that influx of cash money you were talking about yesterday — 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.

The company has already reported its wrongdoing to authorities. Sauriol said Dessau stopped the 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 explain one motive for cultivating ties at the municipal level: it helped him win public contracts.

He 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.