Benoit Labonte has stepped down as leader of the opposition at city hall and resigned as lieutenant to Vision Montreal mayoral candidate Louise Harel.

The Ville Marie borough mayor made the announcement early Saturday afternoon.

But he said he will still run in the upcoming Nov. 1 municipal election.

"I remain a candidate in my district for Vision Montreal," said Labonte.

Denies allegations

Labonte was on the defensive for the second day in a row following two separate allegations that he accepted large sums of money from businessmen tied to the water meter scandal, in order to fund his Vision Montreal leadership bid in the spring of 2008.

The $355-million water meter contract was cancelled by city hall in September, following a report by the city's auditor general that concluded there were irregularities with the tendering process.

"I've been a victim," said Labonte, calling the allegations part of a political smear campaign.

"They (the allegations) are totally false, and legal action will be taken to establish the truth," he added.

The first allegation surfaced in a report that appeared on ruefrontenac.com, a website run by locked-out Journal de Montreal journalists.

The report, citing unnamed sources, alleges that Labonte accepted more than $100,000 from construction giant Tony Accurso ahead of his leadership race in March 2008.

Labonte fiercely denied the allegations in the article and threatened to sue ruefrontencac.com for defamation if the story is not retracted.

On Friday evening, French-language television network TVA aired a report featuring an anonymous source who said that Labonte accepted $25,000 from a separate firm tied to the water meter scandal.

Labonte also denied that allegation.

"I never got any envelopes of any colour with money from any person," Labonte told reporters on Saturday.

Labonte said he was critical of the anonymous sources behind the allegations.

"These allegations are based on anonymous sources only. No one had the courage to come up front," he said.

Labonte said he urged the anonymous sources to come forward and contact the Director General of Elections if they truly have any facts to present.

With just two weeks left before the voters head to the polls, Labonte said he wondered about the timing of the allegations and whether the sources were connected to Montreal mayor Gerald Tremblay's team, Union Montreal.

"I think it's a legitimate question," he said.

Reaction

Speaking to reporters at city hall late Saturday afternoon, Tremblay dismissed Labonte's suggestions.

"It's completely ridiculous and I won't make additional comments," he said.

Meanwhile, Louise Harel called a press conference separate from Labonte's and said she had no doubt her former right-hand man was telling the truth.

Harel said she also wants to Director General of Elections to investigate the allegations, which she called "an attempted political assassination."