Report Charges Ad Agencies With Mishandling $76 Million

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OTTAWA ( -- A Feb. 10 report issued by the Canadian auditor general's office alleges that a number of advertising agencies misused much of the $190 million
Photo: MIchael Bedford
Canadian Auditor General Sheila Fraser's report has rocked the ad industry.
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Auditor General's statement.
appropriated to fund pro-government event sponsorships in Quebec.

Separtist Quebec
The rising advertising industry scandal grew out of a six-year federal effort triggered by the French-speaking province's move to secede in the mid-1990s. The government sponsored a broad series of patriotic flag-and-maple-leaf events, designed to boost public support for a unified country after a 1995 referendum on secession was narrowly defeated. The sponsorship program ended in December 2003.

Auditor General Sheila Fraser's report is focused on the first four years of the program, which started in 1997.

'Shocking and outrageous'
She described the results of her department's investigation as "shocking and outrageous" and said it found "little evidence of the value received for the money spent" by the government. According to the report, more than $76 million of the $190 million pro-government sponsorship funding was mishandled during the four-year period.

The auditor general's findings indicated that federal government offices had selected advertising agencies and awarded contracts without complying with official rules; had written checks in violation of those rules; and lacked adequate documentation of their activities.

Five agencies named
The report names five Canadian advertising agencies that allegedly received commissions or fees for doing little or no work. They are Groupaction, a Montreal agency that until 2002 had a non-equity affiliation with WPP Group's J. Walter Thompson; Lafleur Communications and Gosselin, both owned by Groupaction; Groupe Everest; and Media/I.D.A. Vision.

None of the five agencies returned's calls for comment and none have yet issued public responses to the auditor general's public charges.

Yves St-Amand, general manager of the Association des Agences de Publicite du Quebec, a group of the top 25 agencies that represent about 80% of Quebec's ad industry, characterized the auditor general's report as a "political" problem. He said "99% of the industry is clean, fair and doing a damn good job."

Reprimands and dismissals
Thus far, the bombshell allegations have rocked the capital city of Ottawa and forced Prime Minister Paul Martin's office to have 14 government workers either reprimanded or fired. Even more dramatic was the Mr. Martin's immediate recall and firing of Canada's ambassador to Denmark, Alfonso Gagliano, who was previously the cabinet minister and whose department oversaw the sponsorship program.

The prime minister has also appointed a special counsel to recover misused funds.

Parlimentary review
In addition, a separate House of Commons committee is being set up to conduct a public inquiry.

"It's tough to speculate on who's guilty," said Rupert Brendon, president of the Institute of Communications and Advertising. "And consequently I don't know how it will reflect on the industry."

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