CANADIAN AD EXEC ARRESTED IN SPONSORSHIP SCANDAL

Jean Brault of Groupaction Pleads Not Guilty

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MONTREAL (AdAge.com) -- A high former government official and the president of a local advertising agency who are central figures in the Canadian government's
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advertising sponsorship scandal were arrested and charged here yesterday.

Fraud, conspiracy
Jean Brault, president of Montreal ad agency Groupaction, and Chuck Guité, the retired government official who managed the federal government's sponsorship program between 1997 and 1999, were arrested by the Royal Canadian Mounted Police and arraigned on five counts each of fraud and one count each of conspiracy to commit fraud.

Mr. Guité was chief of the communications branch of the Canadian government's Department of Public Works.

The men, who are charged with defrauding the federal government of nearly $2 million, pleaded not guilty and were released on bail. A court hearing has been set for Sept. 7. Under the bail conditions, Mr. Brault is allowed to travel to the U.S. for continuing treatment of a heart condition.

1990s separatist movement
The two played major roles in an effort in the 1990s to use advertising campaigns and public events to enhance the image of the federal government and the benefits of a united Canada at a time when a Quebec separatist movement was challenging both.

In February, a report issued by the Canadian auditor general, Sheila Fraser, alleged that a number of advertising agencies misused much of the $190 million appropriated to fund those lengthy pro-government sponsorships in and around Quebec. Her report called for the RCMP to begin an investigation of the entire sponsorship program.

The RCMP in a statement said that some of yesterday's charges stem from three sponsorship-related contracts awarded to Groupaction between 1996 and 1999. The auditor general's report said Groupaction billed taxpayers three times for preparing the same report on the government's sponsorship options for supporting various cultural, sports and recreational activities.

Bent rules
Last month Mr. Guité testified before a federal government committee and denied any wrongdoing. He said the federal government got value for its money in the sponsorship program, although he added that he sometimes bent rules in an effort to keep Canada united in the face of the Quebec separatist threat.

Mr. Brault was also called to testify at that session of the Commons Public Accounts Committee but did not appear, on doctor's orders.

In separate legal action, the RCMP in September 2003 charged the president of Montreal-based Communication Coffin with 18 counts of fraud against the federal government. The agency's president, Paul Coffin, is accused of submitting $2 million in fake invoices to the Department of Public Works. He has pleaded not guilty.

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