Advertising scandal fells Canadian government

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[Ottawa, Canada] Advertising scandals rarely draw much attention past the industry's back fence. But a sponsorship-kickback scheme that riveted TV viewers in Canada has now actually toppled a government.

The ruling Liberal Party government of Canadian Prime Minister Paul Martin fell last week after a vote of no-confidence, forcing an election in January. And opposition parties are expected to keep the scandal alive by making the most of Liberal's woes during the coming campaign.

The Nov. 28 parliamentary vote came weeks after the Gomery Commission, which was investigating the scandal, issued a report that outlined "a depressing story of greed, venality and misconduct" involving overspending, kickbacks and overbilling by ad agencies in Quebec. The report exonerated Mr. Martin, but eroded confidence in his party's ability to lead.

On Nov. 30, former Prime Minister Jean Chretien filed a Federal Court challenge against the Gomery Commission findings. Mr. Chretien, Canada's finance minister at the time of the scandal, claimed that Justice John Gomery's report was biased against him and that the judge's conclusion that the ex-prime minister was responsible was not supported by the facts heard during the sponsorship inquiry.

The move by Mr. Chretien was expected, but the timing was explosive, coming just as Mr. Martin, his successor and rival, launched his party's election campaign in Quebec. While the Gomery Report found no evidence that Mr. Chretien was aware of any wrongdoing, it said he was still to blame because the program was run on his watch.

The televised Gomery Commission hearings mesmerized Canadians-and raised their ire about wasted tax dollars-from September 2004 until this past June. The controversy centered on a $208 million federal sponsorship fund that in the mid-1990s was intended to be doled out in support of events held in Quebec following a fiercely fought referendum in which the province almost seceded from Canada.

According to the Gomery report, millions of dollars were funneled through advertising and public relations agencies that charged for work not done, including $83 million that's still not accounted for. The report detailed kickbacks, influence peddling, overpayments and other malfeasance involving Quebec advertising agencies, politicians and Liberal Party organizers.

"Criminal investigations regarding the fraud are still ongoing," said Constable Sylvain L'Hereux of the Royal Canadian Mounted Police. Ad executive Jean Brault, president of an agency called Groupaction, and a retired civil servant named Chuck Guite are scheduled to go on trial next May.

Too lenient?

The government is appealing as too lenient a community-service sentence given to Paul Coffin, president of Communication Coffin, in October. Mr. Coffin had pleaded guilty and avoided jail time by expressing remorse and repaying more than $1 million. The government has also filed civil suits against several other individuals related to missing and misspent funds.

None of the ad agencies or communications firms involved in the scandal appear to still be in operation. At least one, Jean Lafleur Communications Marketing, declared bankruptcy.

In a sign the scandal will continue to dominate Canadian politics, Conservative Leader Stephen Harper announced last week that if elected he would appoint a special independent prosecutor for federal crimes. "I expect the Gomery Commission will play a role for all parties in the early part of the campaign," said John Parisella, a Montreal-based political analyst. "After Christmas, their campaigns will be on their actual platforms."

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