For the first time since the beginning of the Charbonneau Commission, Montreal Mayor Gerald Tremblay has been directly implicated in illegal campaign financing.

Former Union Montreal organizer Martin Dumont says it happened during a byelection in St. Laurent in 2004. A byelection was necessary because two Union Montreal councillors had been convicted of corruption.

Dumont said that at one point he got so fed up with excess spending during a campaign that he confronted Marc Deschamps, the official agent of the party in the presence of Mayor Tremblay and Bernard Trepanier, a fundraiser for Union Montreal.

Dumont was upset that the official spending limit of $45,000 was being ignored, and said he was shown two budgets: one official, one unofficial.

The secret budget had the party spending $90,000 on the campaign -- almost double the legal limit. At that point, according to witness Martin Dumont, the mayor stood up and excused himself from the meeting.

"I don't want to know that," Dumont quoted Tremblay as saying. Pressed by an inquiry lawyer whether Tremblay knew about illegal party financing, Dumont said, "Yes."

"The first official budget was around $43,000 and the second unofficial budget was around $90,000," said Dumont.

Chief inquiry counsel Denis Gallant asked "That was two weeks before the election?"

"Two weeks before the election," replied Dumont. "When Marc Deschamps produced the papers on the two budgets, that's when Mayor Tremblay got up and said he didn't want to know about it."

Dumont suggested that Tremblay was not only aware of illegal financing within his political party but was demonstrably indifferent to it.

The testimony's timing was politically devastating.

While the inquiry was hearing claims of cost overruns, corruption and criminal threats in the awarding of public contracts, Mayor Gerald Tremblay was busy presenting a municipal budget Tuesday that slapped homeowners with a 3.3 per cent increase in property taxes.

The latest allegations intensified pressure on the mayor to resign.

A former organizer for Tremblay's party told the inquiry that when the subject of illegal financing came up, the mayor wanted no part of the conversation.

Gerald Tremblay said he was upset about the testimony and has been getting increasingly angry about the continued revelations of corruption throughout City Hall, but did not deny the interaction took place.

"I'm really upset also. Maybe I don't show it the same way that the people show it, but do you think I'm not upset about what's going on?" said Tremblay.

Since 2008 we put in place whatever is required to make sure that we find ways to make sure that there's not all these collusion and corruption."


Dumont: no one would believe me

Dumont, who went on to advise Prime Minister Stephen Harper after working in Montreal municipal politics, testified on Monday that he was frustrated by seeing Montreal spending large amounts of money on public works contracts. He also said that civil servants told him to stop investigating the expenses.

On Tuesday he said that he never complained to the Elections Board because he did not think he would be believed.

Dumont also said that after party fundraising official -- Bernard Trepanier, who has been nicknamed "Mr. Three Per Cent" in the media -- held a fundraiser for Mayor Gerald Tremblay's Union Montreal, had difficulty closing a safe once because it was full of $50, $100 and $1000 bills.

"It was the most money I've even seen in my life," said Dumont.

More calls for Tremblay to resign

Tuesday's testimony prompted provincial politicians to weigh in on whether Tremblay should resign, as the municipal opposition has requested.

The provincial cabinet minister responsible for Montreal said that even though the 70-year-old mayor has hinted he might not seek re-election next year, that might not be enough.

"The status quo is untenable," said Jean-Francois Lisee. "Is it enough (to simply not run again)? The question is worth asking, increasingly, with every passing day."

The leaders of Quebec's major political parties were less blunt. Premier Pauline Marois said Tremblay has a duty to reflect on what's happening, and make the right decision.

But one prominent politician was far more direct.

Coalition party member Jacques Duchesneau, a former Montreal police chief and anti-corruption whistleblower, said the mayor had lost his legitimacy to lead Montreal. Duchesneau said he was "extremely bothered" that the mayor would try raising taxes amid such a scandal.

At the inquiry, Dumont testified that he saw considerable evidence of illegal activity in his days working for the mayor's party, Union Montreal.

He said he intervened at one point because he was disgusted that party officials had a summer employee, a student working as a secretary, counting $850,000 in cash.

Dumont said he urged Trepanier to stop involving the student in that kind of activity.

He expressed remorse at not having stepped forward years ago. Dumont said he had received death threats from one Mafia-linked construction boss -- who allegedly threatened to bury him in concrete. The warning came after Dumont questioned the high price of construction work, he said.

"I was very afraid," Dumont said.

He said that, before Tuesday, he had never even told his spouse about the threats he received from construction boss Niccolo Milioto, who was tied to the highest-ranking members of the Rizzuto crime family.

"She certainly learned about it by listening to me testify today," he added, his voice shaking. "I've never spoken about it."

Dumont left to work in Ottawa in 2007. He held several jobs in the Harper government over the next three years.

He testified Tuesday that he quit his municipal job immediately after passing the federal security-clearance test. Had it not been for the Charbonneau commission, he said, he might never have come forward to describe what he saw in Montreal.

Dumont recalled a meeting that he attended along with Tremblay and Marc Deschamps, Union Montreal's official agent, two weeks before a December 2004 byelection.

He testified that, during the meeting, Deschamps pulled out a document which indicated two budgets -- one was the official campaign budget of $43,000 and the other a so-called "unofficial" budget of about $90,000.

Dumont said that, at that point, Tremblay said he didn't want to know about it and left the room. Dumont told the commission that the maximum allowable spending limit for the byelection was $46,000, but in the end, it cost Union Montreal $110,000.

Ironically, the byelections had been called to replace two councillors who had to step down because of allegations they took kickbacks. They both pleaded guilty to one charge each of municipal corruption.

Dumont recounted several other incidents where envelopes stuffed with cash were circulating, including one containing $10,000 from a construction company entrepreneur.

He also said the party's head of financing had told him his vest wouldn't close for an official photo because it contained envelopes of cash.

With a report from The Canadian Press