The sponsorship scandal, AdScam or Sponsorgate, was a scandal in Canada that came as a result of a federal government "sponsorship program" in the province of Quebec involving the Liberal Party of Canada, which was in power from 1993 to 2006.
The program was originally established as an effort to raise awareness of the Government of Canada's (then led by Prime Minister Jean Chrétien) contributions to Quebec industries and other activities in order to counter the actions of the Parti Québécois government of the province that worked to promote Quebec independence. The program ran from 1996 until 2004, when broad corruption was discovered in its operations and it was discontinued.. Illicit and even illegal activities within the administration of the program were revealed, involving misuse and misdirection of public funds intended for government advertising in Quebec. Such misdirections included sponsorship money awarded to Liberal Party-linked ad firms in return for little or no work, in which firms maintained Liberal organizers or fundraisers on their payrolls or donated back part of the money to the Liberal Party. The resulting investigations and scandal affected the Liberal Party and the then-government of Prime Minister Paul Martin.
Though an ongoing affair for years, it rose to national prominence in early 2004 after the program was examined by Auditor General Sheila Fraser, who found significant concerns. Her revelations led to the Martin government establishing the Gomery Commission, formally the Commission of Inquiry into the Sponsorship Program and Advertising Activities, headed by Justice John Gomery for the purpose of conducting a public inquiry and filing a report on the matter The Commission concluded that $2 million was awarded in contracts without a proper bidding system, $250,000 was added to one contract price for no additional work, and $1.5 million was awarded for work that was never done, of which $1.14 million was repaid. The Commission found that a number of rules in the Financial Administration Act were broken. The overall operating cost of the commission was $14 million.
In the national spotlight, the scandal became a significant factor in the lead-up to the 2006 federal election when, after more than 12 years in power, the Liberals were defeated by the Conservatives, who formed a minority government that was sworn in February 2006.
Notable people involved
Jean Chrétien — Prime Minister of Canada (1993-2003) at the time that the Sponsorship Program was established and operated. The Gomery Commission's First Phase Report, which assigned blame for the Sponsorship scandal, cast most of the indemnity for misspent public funds and fraud on Chrétien and the Prime Minister's Office (PMO) staff, though it cleared Chrétien himself of direct wrongdoing. On 26 June 2008, the Federal Court quashed the Gomery Inquiry's conclusions that Chrétien and Pelletier bore responsibility for the sponsorship scandal. This decision was later upheld by the Federal Court of Appeal. Chuck Guité — bureaucrat in charge of the sponsorship program, who was arrested for fraud by the RCMP and convicted on five counts on 6 June 2006. Jean Pelletier — Chrétien's Chief of Staff (1990-2001; 1993-2001 for the PMO) and chairman of Via Rail (2001-2004). Guité testified that he regularly received instructions from Pelletier during his time at the PMO about what programs to spend sponsorship money on and how much, a claim that Justice Gomery found to be truthful. Via Rail was accused of mishandling sponsorship deals, though mostly not under Pelletier's tenure. Alfonso Gagliano — Minister of Public Works (1997-2002) who was in charge of the program. He was also the Quebec lieutenant between 1999 and 2002, making him in charge of Liberal Party operations in Quebec. André Ouellet — member of Prime Minister Chrétien's Cabinet, longtime Liberal politician and later head of Canada Post, who was also accused of violating sponsorship rules. Jean Carle — long-time close associate of Chrétien's, going back to the 1980s, and generally viewed as Chrétien's "surrogate son." Carle served as the chief of operations at the PMO between 1993-1998 and as a senior executive at the Crown-owned Business Development Bank of Canada (BDC) between 1998 and 2001. Guité testified that besides for Pelletier that he sometimes also received his orders from Carle during his time at the PMO. During his time at the BDC, Carle testified at the Gomery commission that he created a $125,000 phony paper trail to hide a sponsorship deal, a tactic that Gomery compared to money laundering. Jean Brault — head of Groupaction Marketing, one of the companies to which deals were directed. He was arrested for fraud by the RCMP, pleading guilty to five counts of fraud and on May 5, 2006, was sentenced to 30 months in prison. Jacques Corriveau — Liberal organizer and head of Pluridesign to which millions in sponsorship dollars were directed. Paul Martin — Minister of Finance and Senior Minister from Quebec during most of the years the program occurred. Martin later became Prime Minister of Canada (2003-2006); when he became Prime Minister in December 2003, he claimed that he put a halt to it. He also set up the Gomery Commission which later cleared him of formal responsibility in the "First Phase Report". The Gomery findings found that Martin, as finance minister, established a "fiscal framework" but he did not have oversight as to the dispersal of the funds once they were apportioned to Chrétien's PMO. A report on the issue by the Auditor General's Office of Sheila Fraser came to the same conclusion. Nonetheless, Martin was accused of tying Gomery's hands and using the sponsorship scandal as an excuse to purge the Liberals of members who supported Chrétien. The scandal played a factor in the federal election of 2006 and the fall of the Liberal Government. Shortly thereafter, Martin resigned from the liberal party leadership. Joe Morselli — Liberal Party fundraiser. Jean Brault testified that the money exchanges were with Morselli. Jean Lafleur — former CEO of Lafleur Communication Marketing Inc. One of the advertising executives that accepted money from the federal government. Pleaded guilty to 28 counts of fraud. Allan Cutler — former civil servant and whistleblower who reported anomalies in the Canadian sponsorship program, triggering the scandal.
Timeline of events
Prior to AG report YearEvent1996Ernst & Young conducts an audit of contracting and tendering practices. The initial draft, which identified recurring problems and the risk of legal action, was altered in the final report. Ernst & Young representative Deanne Monaghan later indicated that she did not recall why the report had been changed to remove those references.2000February – An internal audit reveals that none of the recommendations of the 1996 Ernst & Young audit have been implemented. September – Minister Alfonso Gagliano receives the 2000 audit and suspends the Sponsorship Program. Later that year, the Office of the Auditor General of Canada begins investigating the program.2002March – The Globe and Mail reports that the government had paid CA$550,000 to Groupaction Marketing Inc. for a report that no one could find. The government responds by asking Auditor General Sheila Fraser to look into its dealings with Groupaction.Azzi, Stephen. 2006 September 21. "Commission of Inquiry into the Sponsorship Program and Advertising Activities." The Canadian Encyclopedia (last edited 2014 July 3). May 8 – Fraser issues a report accusing "senior public servants" of having broken "just about every rule in the book" in awarding contracts worth $1.6 million to the Groupaction ad firm. Fraser promises a follow-up report on the sponsorship program due in early 2004.2003December – Paul Martin becomes Prime Minister of Canada. He sets out to distance himself from the scandal: he cancels the sponsorship program, establishes new controls on government spending, and decides that the government will sue various individuals and corporations that had over-billed the government.
AG report (2004–2007)