Sponsorship Scandal (Adscam)

After a razor-thin majority voted in the 1995 Quebec Referendum for Quebec to stay in Canada, the Liberal government of Prime Minister Jean Chrétien responded with various initiatives to promote federalism in the province. A sponsorship program began in 1996. Public money was directed from the Department of Public Works and Government Services to private advertising agencies to promote Canada and the federal government at cultural, community and sports events in Quebec. The media began questioning the spending and handling of these contracts. Two auditor general reports and a public inquiry revealed that ad agency executives and Liberal Party officials had corruptly handled more than $300 million; $100 million of which was funnelled from the government to the Liberal Party. Five people were found guilty of fraud. Along with several other issues, the scandal helped lead to the government of Chrétien’s successor, Paul Martin, being reduced to a minority in 2004.  

After a razor-thin majority voted in the 1995 Quebec Referendum for Quebec to stay in Canada, the Liberal government of Prime Minister Jean Chrétien responded with various initiatives to promote federalism in the province. A sponsorship program began in 1996. Public money was directed from the Department of Public Works and Government Services to private advertising agencies to promote Canada and the federal government at cultural, community and sports events in Quebec. The media began questioning the spending and handling of these contracts. Two auditor general reports and a public inquiry revealed that ad agency executives and Liberal Party officials had corruptly handled more than $300 million; $100 million of which was funnelled from the government to the Liberal Party. Five people were found guilty of fraud. Along with several other issues, the scandal helped lead to the government of Chrétien’s successor, Paul Martin, being reduced to a minority in 2004.  


Jean Chrétien

Background

In May 1980, 59.56 per cent of Quebecers voted to remain in Canada in a province-wide referendum. (See 1980 Quebec Referendum.) The referendum was followed by the patriation of the Canadian Constitution in 1982, which Quebec premier René Lévesque refused to sign. The Meech Lake Accord in 1990 and Charlottetown Accord in 1992 were failed attempts to add Quebec’s signature to the Constitution Act, 1982. These constitutional struggles led the separatist Parti Québécois to return to power in Quebec in 1994. The party arranged a second Quebec referendum in 1995. This time, only 50.58 per cent voted for Quebec to remain in Canada.

Sponsorship Program Introduced

Prime Minister Jean Chrétien responded to the referendum result with various initiatives to promote federalism in Quebec. One was a sponsorship program that began in 1996. It was intended to raise the profile of Canada and the federal government in Quebec by sponsoring cultural, sports and community events in the province.

The sponsorship program was initially administered by Department of Public Works and Government Services official Chuck Guité. He accessed a fund already set aside for national unity. From 1997 until December 2003, the program had a budget of $40 million a year. Guité contracted numerous advertising agencies; they determined the events to sponsor, directed money to the events, and ensured a federal government presence at them. One of the agencies hired was Groupaction Marketing.

Chrétien, Jean (1997)

Beginnings of the Scandal

In an article published in the Globe and Mail on 31 December 1999, journalists Daniel Leblanc and Campbell Clark revealed questionable expenses and accounting practices in the program. For example, $325,000 was spent to have a large balloon shaped like an RCMP officer tour cultural events. The article led to increased scrutiny from media and opposition parties and to more revelations.

Between December 1999 and March 2002, Leblanc and Clark published dozens of articles on the scandal. In March 2002, they revealed that the government had paid Groupaction $550,000 to write a report on the program; but the report did not appear to exist. When it was found a week later, it was the same report that Groupaction had previously been paid $575,000 to write.

First Auditor General Report

On 8 May 2002, Auditor General Sheila Fraser released a special report on the Groupaction contracts. It stated, “senior public servants responsible for managing the contracts demonstrated an appalling disregard for… policy, and rules designed to ensure prudence and probity in government procurement.” The report detailed numerous cases in which non-competitive contracts were awarded and payments were made for services that were never delivered. Fraser recommended that the RCMP investigate $1.6 million in contracts related to the program.

Paul Martin

Prime Minister Chrétien chose to continue the program but with government officials handling the contracts instead of outside agencies. On 28 April 2003, Public Works Minister Ralph Goodale announced new policies to increase accountability and control the government’s advertising spending. Meanwhile, the opposition parties formed multiple committees between 2002 and 2004 that studied different aspects of the scandal. This kept the story about financial mismanagement and Liberal Party corruption in the news for years, especially in Quebec.

Second Auditor General Report

The auditor general completed another report in November 2003. On 12 November, days before it was scheduled to be tabled, Chrétien prorogued Parliament. One month later, on 12 December, he resigned as prime minister and was replaced by Finance Minister Paul Martin, the new Liberal leader. The next day, Martin cancelled the sponsorship program.

The auditor general’s report was tabled in the House of Commons on 10 February 2004. It detailed the manner by which the federal government had overseen the spending of $250 million through the sponsorship program between 1997 and 2001. It criticized the absence of proper contracting and accountability processes. It also explained how $100 million was redirected from the government’s sponsorship funds to the Quebec wing of the federal Liberal Party.


Gomery Inquiry Begins

On 19 February 2004, Prime Minister Martin announced the Commission of Inquiry into the Sponsorship Program and Advertising Activities. It was led by Quebec Superior Court Justice John Gomery and became known as the Gomery Inquiry. Martin also fired two Liberal Party officials connected to the scandal: former minister of public works and government services, Alfonso Gagliano, whom Chrétien had appointed as the ambassador to Denmark; and Jean Pelletier, Chrétien’s former chief of staff and the former mayor of Quebec City, who had been named to the board of VIA Rail.

On 10 May 2004, the former administrator of the sponsorship program, Chuck Guité, and the president of Groupaction, Jean Brault, became the first of several people involved in the scandal to be charged with fraud.

Political Fallout

The ongoing scandal became a major issue in the June 2004 federal election. The program had begun while Jean Chrétien was prime minister; but nearly twice as many Canadians blamed Paul Martin for the scandal. Opposition members insisted that he must have known, or should have known, of the corruption happening while he was finance minister. Polls showed that the scandal was a significant factor in his government being reduced to a minority.

In a nationally televised speech in April 2005, Martin promised to call an election 30 days after receiving Justice Gomery’s report. Meanwhile, the Gomery Inquiry heard from 172 witnesses between September 2004 and June 2005. They told of the government being overcharged; paying twice for the same work; paying invoices for services never rendered; and giving generous contracts to Liberal supporters and to others in return for donations to the party. Former prime minister Chrétien appeared before the commission, as did Martin. It was only the second time that a sitting prime minister has testified at a public inquiry. (The first was Sir John A. Macdonald during the Pacific Scandal in 1873.)


First Gomery Report

Gomery’s first report was submitted on 1 November 2005. It stated that $332 million had been spent on sponsorship and advertising programs; of that, 44 per cent was spent on fees and commissions to advertising agencies. The report confirmed the corrupt practices that the auditor general had exposed. It also said that while Guité had run the program until his retirement in 1999, Public Works Minister Alfonso Gagliano and Chrétien’s chief of staff, Jean Pelletier, had overseen it all.

Gomery found that Jacques Corriveau, a senior official with the federal Liberal Party in Quebec and a close friend of Chrétien, played a key role in the system of kickbacks between ad companies and the Liberal Party in Quebec. (Corriveau owned a graphics company and received millions in subcontract payments from sponsorship contracts.) The report also described new and troubling details; such as that both Corriveau and Groupaction president Jean Brault had demanded and received financial kickbacks. (See also Political Corruption.) 

The report cleared Martin of wrongdoing but found that Chrétien was “accountable for the defective manner in which the sponsorship program and initiatives were implemented.” However, Chrétien sued Gomery and the Inquiry over this characterization. In 2008, the federal court sided with Chrétien and ordered that Gomery’s finding be “set aside.”

Martin promised that the Quebec Liberal Party would repay the government $1.1 million that it had illegally received; ban Liberal party members involved in the scandal; and make more changes to ensure that such practices would not happen again.

Paul Martin

Non-confidence Vote and Election

The opposition parties did not wait for Martin to call the election he had promised. They accused Martin’s minority government of political corruption related to the sponsorship scandal and supported a vote of non-confidence on 28 November 2005. In the election that followed, on 23 January 2006, the Liberals lost power to the Conservative Party, led by Stephen Harper. As in 2004, polls showed that the scandal was a significant factor.

Second Gomery Report

The second Gomery report was released on 1 February 2006, days before Martin was to leave office. It made 19 recommendations, including open and transparent processes for awarding advertising and sponsorship contracts; more funding for parliamentary committees involved in the oversight of government programs; a more open selection process for deputy ministers; and a charter for the public service.

Convictions

Former public works official Chuck Guité was convicted on five counts of fraud in 2006. He was sentenced to 42 months in prison and served about seven months before being paroled in February 2009. Groupaction president Jean Brault pleaded guilty to the same five counts as Guité and was sentenced to 30 months in prison in 2006. He was paroled after serving five months.

Ad executive Paul Coffin pleaded guilty to fraud in 2005. He was fined and sentenced to 18 months in jail and served three months. Jean Lafleur, another ad executive, was sentenced to 42 months in jail and a $1.6 million fine in June 2007. He served seven months and reportedly paid less than $300,000 of the fine. Jean Pelletier, Chretien’s former chief of staff, sued for wrongful dismissal over his firing from VIA Rail; he won a $330,000 settlement in 2007.

It took the RCMP 11 years to investigate and bring charges against senior Liberal official Jacques Corriveau, a key figure in the scandal. He was charged with influence peddling, money laundering and forgery in 2013. He was convicted and sentenced to serve four years in jail and pay a $1.4 million fine. He died in June 2018 at age 85 while his case was under appeal.


Aftermath

In December 2006, the Conservative government of Prime Minister Stephen Harper introduced the Federal Accountability Act. It implemented many policies that were also recommended by the Gomery inquiry, such as creating protections for whistleblowers; instituting stricter guidelines to monitor the spending of public money; and giving more power to the Auditor General. However, Justice Gomery criticized the legislation for not heeding his recommendation to curb the power of unelected people in the Prime Minister’s Office.

Significance

The sponsorship scandal helped send the federal Liberals into the political wilderness for a decade. After winning three consecutive majorities in 1993, 1997 and 2000, when they won 172 of 301 seats, they were reduced to a minority of 135 seats in 2004, to 103 seats in 2006, to 77 seats in 2008 and to only 34 seats in 2011. Schisms in the party between Jean Chrétien and Paul Martin loyalists led to infighting. A series of ineffective leaders struggled to rebrand the party following years of focus on its corruption. This focus was especially damaging in Quebec, a former Liberal stronghold. The Liberal’s seat total in the province fell from 36 in 2000 to 13 in 2006 and to 7 in 2011. It took a charismatic new leader in Justin Trudeau facing a Conservative government weighed down by its own baggage after a decade in power for the Liberals to regain office in 2015.

See also these Maclean’s articles: Chuck Guité’s Strong Stand; Adscam Reveals Deeper Government Mismanagement; Gomery Inquiry Learns Illicit Cash Flowing for Years; Gomery Inquiry Uncovers Creative Accounting; Explosive Testimony at Gomery Inquiry; Gomery Report’s New Battles; Martin’s Minority Government in Crisis; New Political Finance Law Expected to Have a Profound Effect.