MONTREAL - A construction boss delivered a burst of allegations about a deep, pervasive system of corruption in the industry that saw him pay a 2.5 per cent cut to the Sicilian Mafia.

Lino Zambito has told Quebec's public inquiry he was part of this system of collusion as he described a cartel-like operation controlling the industry in the province.

He says companies would rig bids and take turns winning public-works contracts and, at the end of the process, would provide the Cosa Nostra with a percentage.

He says that, as far as his company was concerned, that fee was a 2.5 per cent share of the value of a sewer project -- which he paid to the once-dominant Rizzuto family.

Zambito's testimony sheds light on allegations made three years ago in media reports that triggered demands for an inquiry that is now underway in Quebec.

He is the first person to describe, in such extensive detail and so publicly, his own personal involvement in construction-related wrongdoing.

Zambito's performance at this probe is reminiscent of the role played by Jean Brault at the federal sponsorship inquiry -- that of a businessman blowing the whistle on wrongdoing in which he personally participated.

But the scope of the alleged corruption being discussed at the Quebec industry potentially dwarfs the sums involved in the sponsorship scandal that rattled federal politics.

In this case, according to a police officer who testified at the Quebec inquiry, the Mafia has imposed a so-called "tax" of up to 30 per cent on the construction industry in the area. Firms are alleged to engage in price-fixing, setting bid prices artificially high and turning over some of the profits to the Mafia.

The inquiry heard earlier on Thursday that representatives from more than five-dozen construction companies visited a Mafia hangout several years ago, with the RCMP watching.

RCMP officers were jotting down licence plates outside a notorious Sicilian Mafia hangout on numerous occasions, including a 2005 Christmas party.

An investigator for the Charbonneau inquiry testified that his team later cross-referenced those plates and tied the vehicles to more than 60 construction companies.

He pointed out that some entrepreneurs own multiple companies. But the investigator, Eric Vecchio, noted that a good number of companies that received public-works contracts in Montreal, for things like excavation and sewers, were represented at that party.

For instance, he said six out of 10 companies that received contracts for sewer work were represented at that Christmas party in a now-closed "social club."

Later in the day, when he was on the witness stand, Zambito rattled off the names of companies he said were involved in price-fixing. But he said the system has existed for years and was originally established by the companies themselves -- not by the Mafia.

Zambito said that, as far as his own company was concerned, that fee was a 2.5 per cent share of the value of a sewer project, paid to the once-dominant Rizzuto family.

The burly 43-year-old businessman shrugged off a suggestion from an inquiry lawyer that he was paying protection money.

"I saw it as more of a business. Entrepreneurs made money and there was a certain amount owed to people of," he said and, pausing an instant before he completed his sentence, Zambito added, "the Mafia."

Zambito said he knew where the money -- delivered through a middleman -- ultimately wound up.

He even defended his personal ties to the Mafia.

Zambito said his family knew the Rizzutos from the old country and said they were part of the same tight-knit community whose members helped each other out as newcomers to Canada.

His testimony shed light on allegations made three years ago in media reports that triggered demands for an inquiry that is now underway in Quebec. That inquiry is probing links between the underworld, the construction industry, and political parties.

Zambito is the first person to describe, in such exhaustive detail and so publicly, his own personal involvement in construction-related wrongdoing.

His blunt testimony Thursday was reminiscent of the role played by advertising exec Jean Brault several years ago at the federal sponsorship inquiry -- that of a businessman blowing the whistle on wrongdoing in which he personally participated.

"When I got into the business, the system already existed, I can't tell you how long it had existed but there was a system in place and there were rules of the game that were well established," he said.

He said the rules were made clear to him when he first entered the business around 1999 and submitted an extremely low bid for a project, nearly at cost price.

He said he was informed that the other entrepreneurs weren't pleased and they told him -- through a city engineer -- that if he wanted to work anywhere near Montreal or its surrounding areas, he'd have to play by the rules.

"The market in Montreal was closed and hermetically sealed," he said.

"If you didn't follow the rules, you didn't work in Montreal. You can go work elsewhere."

He added that the same cartel system existed wherever people bid on public contracts -- whether at the municipal or provincial level. He was not asked, nor did he discuss, whether such a system existed in other Canadian provinces.

Zambito, who now owns a restaurant north of Montreal, explained how companies justified inflated expenses while also pocketing extra cash payments.

He said there were fake-billing schemes for services that weren't used or needed. For example, Zambito said a company he'd lease trucks from each day would agree to be billed for extra trucks that weren't used. The extra money would be funnelled back to Zambito, minus a cut for the other company.

Zambito now faces criminal charges related to an alleged corruption scheme involving his construction business. His company, Infrabec, went bankrupt last year after two directors including Zambito were arrested on fraud charges amid allegations of a widespread collusion scheme in the municipality of Boisbriand.

The scope of the alleged corruption being discussed at the Quebec inquiry potentially dwarfs the sums involved in the sponsorship scam, which rattled federal politics.

Mayor Tremblay furious

Montreal's mayor called a news conference on Thursday where he expressed outrage over the revelations trickling out at the Charbonneau inquiry.

"As a citizen, as the mayor of Montreal, I was profoundly angered," Gerald Tremblay said.

He demanded that the provincial legislature convene immediately, several weeks ahead of schedule, for an emergency session to toughen contracting laws so that the city can legally bar certain companies from public-works contracts.

Tremblay has also asked for an administrative review into a former city employee who happened to be the daughter of one of the construction bosses seen handing over stacks of cash to a late Mafia don in police surveillance video.

This was one day after the Charbonneau inquiry saw old videos of construction bosses handing over money to the now-deceased Nicolo Rizzuto, the onetime head of the Sicilian Mafia in Canada.

The videos and evidence were amassed during Operation Colisee, a five-year investigation that culminated in mass arrests in 2006 in the largest sweep against the Italian Mafia in Canadian history.

But much of the construction-related evidence was ignored. Because construction wasn't part of the RCMP investigation, which centred on drugs and illegal gambling, officers either ignored evidence or even turned off surveillance microphones while mobsters were talking to construction bosses.

The inquiry head, France Charbonneau, explained today that the RCMP decision was a legal matter. She said that, in Canada, police investigators cannot listen to conversations involving people not specifically targeted in a wiretap investigation.

The recordings have created a splash now, years later, at the inquiry which is investigating allegations of criminal corruption in the construction industry and its ties to organized crime and political parties.

Tremblay said he wants to hear more about why the evidence was never used.

He said it could have prompted political action years ago that would have saved untold sums of taxpayer money. Tremblay said he wished the material had been handed over to the provincial police.

"I don't understand," Tremblay said. "I'm deeply angry about that."

Vecchio testifies Thursday morning

Montreal police officer Lt. Detective Eric Vecchio took the stand at the Charbonneau Commision Thursday morning to continue presenting video recordings made by the RCMP during a surveillance operation.

The videos were taken at the Consenza Social Club several years ago during Operation Colisee, and what they show is shocking.

Several construction moguls whose companies win the majority of public works contracts in and around the Montreal area attended a Christmas party thrown by the Rizzuto clan.

Vecchio testified that there were six people who police were aware of, but while the party was going on other officers wrote down the numbers of license plates in the parking lot.

They were shocked to find the vehicles were affiliated with 68 different construction companies.

When asked by commissioners, Vecchio could not say if that was proof positive that bidding for municipal contracts was rigged.

"The principle we found when we analyzed bids was that the winner always submitted the lowest price, but that the price was still much higher than the actual cost," said Vecchio.

There were also evident patterns when it came to which companies won bids, with companies belonging to Arcusio Sciascia winning most projects in Lachine, while Paolo Catania's companies performed almost all work in Verdun.

Montreal Mayor Gerald Tremblay said he was shocked about the revelations, but that he never had any idea of wrongdoing.

On Thursday morning he reiterated that provincial law forces the city to always go with the lowest bidder on a contract unless the company has been found guilty of fraud or other crimes.

Tremblay asked for a stronger version of Bill 35 to exclude companies that have mafia links from winning bids, but said otherwise the presumption of innocence prevails.

But even then, "innocence has its limits," said Tremblay.

List of businesses seen outside of Cafe Consenza

The following is a list of businesses which had vehicles parked outside the Consenza Social Club between September 23, 2002 and November 21, 2006, as collected through Operation Colisee.

1. Asphalte T.M.S. Inc.

2. Entreprise Borsellino & Fils Paysagistes Inc.

3. B.P. Asphalte Inc.

4. B.T. Céramiques Inc.

5. Céramiques Pavigres Inc.

6. Cirillo F. Mormina Inc.

7. Club Céramique Gagliardi Inc.

8. Construction Civicon Inc.

9. Construction Frank Catania & Associés Inc.

10. Construction Garnier Ltée

11. Construction Joseph Borsellino Ltée

12. Construction La Rocca Inc.

13. Constructions L.P.G. Inc.

14. Les Constructions Nouveau‐Tek Inc.

15. Construction Priorité

16. Construction San Massimo Inc.

17. Construction Timberstone Inc.

18. Entreprise de Construction V.H.R. Inc.

19. Construction Tyron

20. Les Entreprises de construction et d’excavation Mottilo Inc.

21. Électricité Northern Inc.

22. Entrepreneurs Électriciens Frank Fiore & Fils Inc.

23. Les Entreprises FMAC

24. Les Expertises Marcogliese et Associés Inc.

25. Les Finitions Intérieures G. Lanni Inc.

26. Les Finitions de Murs secs Picarazzi Inc.

27. Groupe Triaxon Inc.

28. Les Céramiques Estétik Inc.

29. Les Constructions Infrabec Inc.

30. Les constructions Oakwood Canada Inc.

31. Les Entreprises Catcan Inc.

32. Les Entreprises Duroc

33. Les Entreprises Uni‐Val Inc.

34. Les Habitations Presti Inc.

35. Les murs secs Iona Inc.

36. Les Paysagistes N.D.C. Inc.

37. Les Peintres Multicouleurs Inc.

38. Les Peintres Filmar Inc.

39. Les Peintures Première Inc.

40. Menuiserie Cattolica Enr.

41. Mivela Construction Inc.

42. Les Panneaux de revêtement Vito Inc.

43. Pavages A.T.G. Inc.

44. Pavage C.S.F. Inc.

45. Pavage L’Étoire Bleue Inc.

46. Groupe Paramount Inc.

47. Pavages S.P. Enr.

48. Les Pavages Tallarita Canada Inc.

49. Pavage Tu‐Val Inc.

50. Pavages North Star Inc.

51. Paysagiste P.L. Inc.

52. Paysagistes Ramco Inc.

53. Plancher Mirage André Villeneuve Inc.

54. Plomberie Deritec Inc.

55. Plomberie et Chauffage Riviera Inc.

56. Plomberie Europe Inc.

57. R‐2000 Ébénisterie Architecturale Inc.

58. Sheril‐Lin Inc.

59. Silman Rénovation/Silman Construction

60. Spectrum Électrique Inc.

61. Construction Renda Inc.

62. Tilmar Internationale Inc.

63. Construction Ulisse

64. 2427‐6347 Québec Inc. Pavage entretien paysager

65. 9054‐5047 Québec Inc.

66. 9059‐5729 Québec Inc.

67. 9060‐4661 Québec Inc.

68. 9075‐3856 Québec Inc.

69. 9079‐0346 Québec Inc.

70. 9106‐8510 Québec Inc.

71. 9107‐9301 Québec Inc.

72. 2856794 Canada Inc.

73. 2870258 Canada Inc.

74. 4025032 Canada Inc.

With files from The Canadian Press