November 1, 2005

Canadian probe uncovers Liberal kickbacks

OTTAWA (Reuters) - The inquiry into a Canadian government
corruption scandal said on Tuesday that senior officials in the
Quebec branch of the ruling Liberal Party had engaged in a
kickback scheme and in illegal financing, but it said Prime
Minister Paul Martin was not to blame.

The initial report by Judge John Gomery into the scandal is
likely to embarrass the Liberal team as it prepares for an
election early next year.

The scandal centers on a sponsorship program set up by the
Canadian government in 1996, after an independence referendum
in Quebec failed narrowly. It was designed to boost the cause
of federalism in the French-speaking province.

But Gomery, who has spent the last year probing how C$100
million was funneled to Liberal-friendly advertising firms,
said the program had backfired amid inadequate management and
"a blatant abuse of public funds."

He lashed out at "carelessness and incompetence ... (and)
greed and venality."

The scandal has dominated Canadian politics for the last 18
months and public anger cost the Liberals their parliamentary
majority in a June 2004 election. Martin has promised to call a
new vote within 30 days of Gomery's second and final report,
due on February1, 2006.

Gomery found that a select group of advertising firms in
Quebec received lucrative federal contracts and then knowingly
kicked some of the money back to the Liberal Party's Quebec
wing, enabling it to sidestep electoral financing laws.

"Two successive (Quebec Liberal party) executive directors
were directly involved in illegal campaign financing, and many
of its workers accepted cash payments for their services when
they should have known that such payments were in violation of
the Canada Elections Act," he said.

He apportioned blame on former Liberal Prime Minister Jean
Chretien -- who ordered the program to be established -- as
well as on former Public Works Minister Alfonso Gagliano,
several senior aides and bureaucrats and the heads of the
advertising agencies involved.

But he spared Martin -- who was finance minister as well as
the senior minister in Quebec at the time of the scandal -- on
the grounds that he had not known what was going on.

"Mr Martin is ... entitled, like other ministers in the
Quebec caucus, to be exonerated from any blame for carelessness
or misconduct," Gomery concluded.