Major engineering firms, including SNC-Lavalin, were in on Quebec collusion, inquiry hears
By Sidhartha Banerjee, The Canadian Press
Published Thursday, January 24, 2013 10:44AM EST
Last Updated Thursday, January 24, 2013 8:05PM EST
MONTREAL--A number of major engineering firms -- including global giant SNC-Lavalin -- participated in a collusion scheme to raise the price of construction projects in Quebec, the head of one company testified Thursday at a provincial inquiry.
The incendiary testimony of Michel Lalonde suggested that big, even publicly traded, engineering firms were complicit in the cartel-like practices previously ascribed to lower-level construction companies in that province.
The president of Genius Conseil Inc. said the group of companies selected him as a go-between with Montreal city officials, and he pointed at firms of varying sizes as participants in the system including: Montreal-based SNC-Lavalin (TSX:SNC), Dessau, CIMA, Genivar (TSX:GNV), Tecsult, SM, BPR and Roche.
He said the companies were expected to cough up donations to the city's ruling political party.
"We had to talk if we wanted to make sure that we could split up the contracts and assure that we understood the political donation obligations we had," Lalonde explained to commission counsel Denis Gallant.
The inquiry has heard similar tales about other pockets of the industry conspiring to inflate public contracts, while sharing the illegal profits with political parties, corrupt officials and the Mafia.
Among the engineering firms, Lalonde described himself as a key player in a scheme that ran for roughly five years, between 2004 and mid-2009.
He used the word "spokesman" to describe his role.
The co-chair of the inquiry, Renaud Lachance, asked him: "When you say 'spokesman,' you're basically saying, 'collusion co-ordinator?"'
Lalonde replied: "I call it spokesman in the name of the firms." He added that he had a personal interest in the role because it might have helped his own company win some contracts.
Each of the other firms had a representative that would take part in discussions about how contracts would be divided, Lalonde said.
He said his city contact was Bernard Trepanier, a fundraiser for the Union Montreal party at the time. He said Trepanier had connections within the city's executive body and would keep him abreast of upcoming contracts. He said he would make political donations to ensure the city selection committee gave him contracts.
Lalonde said he even had a few meetings with Frank Zampino, then the executive committee chairman. He said they would discuss upcoming contracts, in Trepanier's presence. Zampino and Trepanier now face criminal charges in an alleged fraud scheme.
Lalonde estimated that his firm would give Union Montreal anywhere from $50,000 to $100,000 a year between 2005 and 2009. The scandal-plagued party recently lost power, following a series of defections.
Lalonde said the first cash call came in 2004 when his firm paid Union Montreal $100,000, split into about a half-dozen payments.
Lalonde testified that bigger firms would give double -- about $200,000.
After that, a three-per-cent rule apparently went into effect: a fixed cut on each contract would go to the city's ruling party, he said. Lalonde said most of the money was given through Trepanier, with the presumed blessing of the party.
"When someone asks you for a significant amount for political contributions, I guess it has to come from the party," Lalonde said.
"And he (Trepanier) told me, 'Listen, I set this up with Mr. Zampino, we talked about it.' That's why I say it was sanctioned."
On one occasion, Lalonde said he gave money directly to a city official -- Robert Marcil -- who headed the public works department.
The practice ended four years ago, he said. Media reports began surfacing about corruption in the industry. Authorities began to crack down, beginning with a provincial police unit called Operation Hammer. It has since made numerous arrests.
He said such practices drove up the price of construction in Montreal by 25 to 30 per cent, which taxpayers had to cover.
Lalonde is back on the stand Monday.
Earlier Thursday, new details have emerged about the events that led to the scandal-propelled resignation of Montreal's mayor last fall.
It turns out that the witness whose damning allegation at a public inquiry torpedoed the mayor's career did not originally share it with investigators because, he said, he thought it seemed "trivial."
That statement from former mayoral aide Martin Dumont came Thursday as he was back on the witness stand, nearly three months after he shared an anecdote that pushed his ex-boss Gerald Tremblay into political retirement.
Dumont's earlier testimony has been under attack since he admitted to making up another story during his appearance at the inquiry in October.
At the time, as Tremblay resigned in scandal, he vehemently denied Dumont's testimony and said he was eager to clear his name.
The former aide had testified that Tremblay was at a meeting in 2004 where he heard his party kept two sets of books -- one for legal purposes, and an accurate one for illicit cash. Dumont said the mayor promptly stood up and, declaring that he did not want to be involved in such a chat, left the room.
The claim severely damaged Tremblay's reputation, as he had spent years professing ignorance of any criminal activity within Union Montreal.
Provincial politicians began pressing Tremblay to resign. Within a few days, he was gone.
The inquiry heard Thursday that Dumont actually described the controversial 2004 meeting when he met investigators last Sept. 12 -- but he left out the mayor's presence.
He finally mentioned Tremblay when he met investigators a second time, the following month. He soon repeated the story publicly, on the stand, and the mayor quit days later.
Commission chair France Charbonneau questioned how Dumont could have forgotten to share that story the first time he met with investigators, on Sept. 12.
"Am I to understand that if you didn't mention this the first time it's because you found this incident trivial?" she asked Thursday.
Dumont replied, without hesitation: "Yes, it was trivial."
Later Thursday, Dumont explained his "trivial" comment, saying that what he meant was it wasn't shocking to see Tremblay at the meeting.
He said it was shocking to see two sets of accounting books.
The explanation didn't fly with Charbonneau.
She said she couldn't understand how the mayor being there -- and not wanting to know about the books -- could be deemed "trivial."
"I thought he was already aware of the books," Dumont explained.
Asked bluntly, under cross-examination by the lawyer for the Union Montreal party, if he invented the story involving the mayor, Dumont maintained the testimony was true.
Lawyer Francois Dorval spent much of the morning attempting to poke holes in Dumont's testimony. His most serious strike was the revelation about Tremblay.
"When it is a fact that's as dramatic as revealing before the mayor that you're over-budget and the official agent produces a document talking about two sets of accounting to get around the law -- this is a detail you forgot?" an incredulous Dorval asked.
Concerns about Dumont's credibility have dominated the commission this week, since it returned from its holiday break.
Also, Dumont initially told investigators that he'd described to a colleague how he was threatened by a Mafia-linked businessman. He says the construction boss warned Dumont he'd be buried in concrete if he kept asking questions about inflated costs.
In a subsequent interview, Dumont had the name of that supposed colleague struck from the record. He has admitted to making up another story about a secretary who was forced to count illegal cash donations to Union Montreal.
Also, Dumont was questioned Thursday about his claim that a safe in party offices was stuffed so full of cash it wouldn't close.
Dorval produced a receipt showing that the safe was actually broken and that's why it wouldn't close.
Tremblay cannot be reached for comment through his former spokesman. But he is expected to respond on the inquiry witness stand.