The city of Montreal has temporarily suspended a $355 million water meter contract granted two years ago to a consortium involving a company belonging to controversial businessman Antonio Accurso.

Mayor Gerald Tremblay made the announcement Wednesday night following revelations by the Canada Revenue Agency that three of Accurso's companies are under investigation for tax fraud.

Tremblay said the suspension will be in place until an audit is conducted.

The federal tax agency alleges Accurso's three companies -- Simard-Beaudry Construction Inc., Construction Louisbourg Ltee., and Hyprescon Inc. -- funneled $4.5 million to shell companies that provided receipts for fake contracts.

Simard-Beaudry Construction Inc. belonged to G�NIeau, the consortium that was granted the largest contract in the city's history for the installation and management of city water meters.


On Tuesday, the RCMP arrested two Revenue Canada officials during raids on six offices belonging to Simard-Beaudry Construction Inc. On Wednesday, federal Revenue Minister Jean-Pierre Blackburn announced that another two Revenue Canada employees had also been suspended without pay, for the duration of an internal investigation.

The employees are suspected of facilitating the fraud scheme involving the shell companies. At least one employee falsified a tax audit, federal officials allege.

So far, no charges have been laid.

Zampino connection

Last week, Frank Zampino, former city councillor and president of the Montreal executive committee, confirmed that he spent time on Accurso's luxury yacht while the businessman was trying to secure the $355 million contract water meter contract.

In a letter addressed to Mayor Tremblay, Zampino admitted he went on trips to the Caribbean with Accurso in 2007 and 2008, while he was the top-ranking councillor in the Tremblay administration.

After releasing the letter to the media, Tremblay said Zampino "did not make the best decision," but insisted he was convinced the process that ultimately awarded the water meter contract to Accurso's firm was carried out fairly.