Canada inquiry blames former PM, exonerates Martin

OTTAWA - 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 programme set up in 1996 after an referendum about independence in Quebec failed narrowly. The programme aimed to boost the cause of federalism in the French-speaking province.

But Judge John Gomery, who has spent the last year probing how $C100 million ($122.7 million) was funneled to advertising firms with close ties to the Liberals, said the programme 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 programme 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. Martin...is 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 programme 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 programme, 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 programme 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.

- REUTERS