November 1, 2005

Canadian probe blames former PM, clears Martin

By Randall Palmer and David Ljunggren

OTTAWA (Reuters) - Former Canadian prime minister Jean
Chretien shares the blame for a government sponsorship scandal
marred by greed, incompetence, carelessness and venality, but
Prime Minister Paul Martin, a fellow Liberal, is off the hook,
an official report said on Tuesday.

The scandal centers on a sponsorship program set up in 1996
after an referendum about independence in Quebec failed
narrowly. The program aimed to boost the cause of federalism in
the French-speaking province.

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

He said senior officials in the ruling Liberal Party had
engaged in an elaborate kickback scheme and in illegal campaign
financing, and he lashed out at "carelessness and incompetence
... (and) greed and venality."

The report, the first of two, is likely to embarrass the
Liberals as they prepare for an election early next year and
cut the chances that the party will win the extra Quebec seats
they need to win a parliamentary majority.

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 election campaign within 30 days of Gomery's final report,
which is due next February 1.

Gomery found that a select group of advertising firms in
Quebec had 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.

He said there had been a "blatant misuse of funds" and the
Quebec Liberals "cannot escape responsibility for the
misconduct" of its officers and representatives.

"Two successive 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 to Chretien -- who ordered the program
to be established -- as well as to 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. entitled, like other ministers in the
Quebec caucus, to be exonerated from any blame for carelessness
or misconduct," Gomery concluded.

He praised Martin's government for scrapping the program
once Martin took over from Chretien in December 2003 and said
the original goal of keeping Canada together was no excuse for
the wrongdoings.

Under the program, the government paid to get Canada's name
and the Maple Leaf flag displayed prominently at Quebec events.

"Good intentions are not an excuse for maladministration of
this magnitude," he said in remarks directed at Chretien, who
chose to run the program from his office with the help of his
chief of staff, Jean Pelletier.

The immediate political question is whether Canada's three
opposition parties will seize on the Gomery findings to bring
down the Liberal government, rather than following Martin's
preferred timetable of delaying the election till next April.

The two largest parties, the Conservatives and the Bloc
Quebecois, narrowly failed in May to topple the Liberals after
Martin reached a deal with the New Democratic Party.

The NDP has so far preferred to try to squeeze concessions
from the Liberals on spending or health care rather than voting
nonconfidence in the Liberals.

Martin is leading in the polls nationally. But without
making major gains in Quebec -- something which will be nearly
impossible in the light of Gomery -- he will find it
challenging to regain a majority in Parliament.