MARKETING SCANDAL BRINGS DOWN CANADIAN GOVERNMENT

New Elections Triggered by Report on Kickbacks, Influence Peddling

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OTTAWA (AdAge.com) -- On the heels of the Gomery Report released earlier this month on the sponsorship scandal that implicated both politicians and ad executives, Canada’s government fell Nov. 28, triggering an election scheduled for Jan. 23, 2006.
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Historic vote
The minority Liberal government was toppled by a non-confidence vote led by the Conservatives, supported by two other opposition parties, the Bloc Québécois and the NDP. It is the first time that Canada’s federal government was defeated on a straight non-confidence vote.

The sponsorship scandal led directly to the government’s fall. The televised Gomery Commission hearings this year investigated a $208 million sponsorship fund funneled through advertising and public-relations agencies who often charged for work not done, including $83 million that is still unaccounted for. The first Gomery Report issued earlier in November confirmed kickbacks, influence peddling, overpayments and other malfeasance that involved Quebec advertising agencies, politicians and Liberal Party organizers. Several agency executives and one retired civil servant are still awaiting criminal and/or civil trials related to the scandal.

Advertising and sponsorship contracts
Prime Minister Paul Martin had promised to call a spring election 30 days following the second and final installment of the Gomery Report, due out in February 2006. That report is expected to include recommendations on how to manage advertising and sponsorship contracts and other related issues in the future. However, the three opposition parties in Parliament were unwilling to wait, and forced the winter election. The government had narrowly missed falling in May 2005, surviving only because the NDP sided with the Liberals. This time, however, the Liberals were defeated by a 177-133 margin.

Mr. Martin, who was finance minister during the scandal, was absolved in the Gomery Report of any wrongdoing, and is expected to campaign on the strong Canadian economy under his Liberal Party. He was already in pre-election mode prior to the parliamentary vote. The opposition parties are expected to emphasize the wasted sponsorship dollars in their campaign.

Pollsters say Canadians didn’t particularly want a winter election, with election advertising mixed into their holiday programming, and the need to go out to vote in the midst of snowstorms. Voter turnout could play havoc with future election spending on media and traveling road shows, since, if the same rules are followed as in 2004, every vote translates into about $1.50 to the party the voter marks on the ballot, as long as that party gets at least 2% of the popular vote. The more votes a party gets, the less it has to depend on individual corporate donations to fill its coffers.

Election spending
The spending for this election is expected to be pegged at $15.4 million for parties that are running candidates in all 308 districts. The separatist Bloc Québécois is expected to spend about $3.9 million and the NDP about $11.9 million. Advertising dollars, which eat up a large chunk of the spending, must now be booked in the expensive pre-holiday period.

A poll by Environics Research for the Canadian Broadcasting Corporation is already predicting another minority government, with the Liberals in the lead. Stephen Harper, the Conservative Party leader, is not popular in Quebec, and the Bloc Québécois is expected to sweep most of that province. With a strong Bloc and a recently named new leader for the opposition, separatist Parti Québécois, Quebec could face another referendum on separatism. Ironically, the disastrous sponsorship program that destroyed the government that fell this week was originally created to boost support for the federal government in the separatist-minded Quebec province.

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