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Volume 1", Prepared by Commission Counsel.P-14 Documentary Binder Entitled "Allocations for Sponsorship, Volume 2", Prepared by Commission Counsel

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Volume 1 © Her Majesty the Queen in Right of Canada, represented by the minister of Public Works and Government Services, 2005 Cat. No: CP32-86/2-2005E ISBN: 0-660-19533-X Available through your local bookseller or through Publishing and Depository Services Public Works and Government Services Canada Ottawa, Ontario KIA OS5 Telephone: (613) 941-5995 Orders only: 1 800 635-7943 Fax: (613) 954-5779 or 1 800 565-7757 Internet: http://publications.gc.ca Commission d'enquête sur Commission of Inquiry into the programme de commandites et Sponsorship Program and les activités publicitaires Advertising Activities Juge John H. Gomery Justice John H. Gomery Commissaire Commissioner November 1, 2005 To Her Excellency The Governor General in Council May it please Your Excellency: As Commissioner appointed by Order in Council P.C. 2004-110 which was promulgated on February 19, 2004 pursuant to Part I of the Inquiries Act, in accordance with the Terms of Reference assigned therein, I have inquired into and respectfully submit this Fact Finding report on the sponsorship program and advertising activities of the Government of Canada, entitled “Who Is Responsible?” John H. Gomery Commissioner Complexe Guy-Favreau Guy-Favreau Complex 200, boul. René-Lévesque ouest 200 René-Lévesque Blvd. West C.P. 608, Montréal (Québec) P.O. Box 608, Montreal, Quebec H2Z 1X4 H2Z 1X4 (514) 283-8093 télécopieur / fax (514) 283-8138 CONTENTS I INTRODUCTION 1 1.1 Appointment of the Commissioner/Terms of Reference 1 1.2 The Report of the Auditor General (November 2003) 3 1.3 The Public Hearings 4 1.4 Incidental Proceedings and Rulings 5 1.5 Scope of the Present Report 8 1.6 A Short History of the Sponsorship Program 11 1.7 Brief Overview of Federal Government Advertising 14 II THE AUDITOR GENERAL’S REPORT OF NOVEMBER 2003 17 2.1 Genesis in March 2002 17 2.2 Summary of the Auditor General’s Conclusions 19 2.3 Additional Scope of a Commission of Inquiry 26 III STRUCTURE, ORGANIZATION AND OPERATION OF THE GOVERNMENT OF CANADA 29 3.1 General Principles of Responsible Government 29 3.2 The Prime Minister and the Prime Minister’s Office (PMO) 31 3.3 The Privy Council Office 32 3.4 Ministerial Responsibility 32 3.4.1 Exempt Staff 38 3.4.2 Ministerial Responsibility for Program Administration 39 3.5 Role and Responsibilities of the Deputy Minister 40 3.6 Treasury Board 43 3.7 The Federal Budget and the Minister of Finance 47 3.8 Public Works and Government Services Canada 50 3.9 Definition of a “Program” 53 v IV ORIGINS OF THE SPONSORSHIP PROGRAM 59 4.1 Evolution of the Management of Advertising Services within PWGSC 59 4.2 Financial Context 64 4.3 Unity Strategy and the Quebec Referendum 65 4.4 Post-Referendum Strategy 67 4.5 The Canada Information Office 75 4.6 Funding for Sponsorships 77 4.7 The Unity Reserve 88 V SELECTION OF ADVERTISING AND COMMUNICATION AGENCIES 105 5.1 Under the Previous Progressive Conservative Government 105 5.2 Mandate for Change 106 5.3 Formulation of Appendix Q 107 5.4 Contracting Rules for Sponsorships 115 5.5 Irregularities in the Application of the New Contracting Policy for Advertising 117 5.6 Tourism Canada Contract 119 5.7 Use of Communication Agencies for Sponsorships 122 5.8 The Agency of Record (AOR) 123 5.9 Selection of Agencies in 1994 and 1995 124 5.10 Selection of Agencies in 1997 and 2001 129 5.11 Advertising Policy Following Cancellation of Appendix Q 131 VI ADMINISTRATION OF THE SPONSORSHIP PROGRAM 135 6.1 Non-adherence to Rules and Procedures 135 6.2 Problems of Accountability and Direction 137 6.3 Lack of In-house Expertise in Sponsorship Programs 139 6.4 Choice of Events, Amounts and Agencies 139 6.5 PMO Involvement 140 6.6 Involvement of Minister Gagliano 144 vi 6.7 Choice of Agencies 151 6.8 Reporting Lines and Oversight 156 6.9 Mr. Guité’s Promotions 158 6.10 Absence of Guidelines and Criteria 165 6.11 Commissions, Fees and Production Costs 170 6.12 Montreal Expos Sponsorship 172 6.13 The Bluenose Sponsorship 173 6.14 Promotional Items and Free Tickets 177 6.15 Examples of Overcharging 180 6.16 Example—Grand Prix du Canada Tickets 183 6.17 Communication Canada 185 VII AUDITS AND INVESTIGATIONS 197 7.1 Introduction 197 7.2 Management Control Framework Assessment 199 7.3 Allan Cutler’s Complaint 200 7.4 Ernst & Young Audit of APORS 204 7.5 Internal Audit of 2000 209 7.6 Kroll Lindquist Avey Administrative Review 214 7.7 Demers Administrative Review 215 VIII CROWN CORPORATIONS AND THE RCMP 221 8.1 Auditor General’s Concerns 221 8.2 Via Rail 223 8.3 Canada Post 226 8.4 Business Development Bank of Canada 232 8.5 RCMP 234 IX JEAN BRAULT 243 9.1 Communication Agencies 243 9.2 Credibility of Jean Brault 247 vii 9.3 Initial Government Contracts and Political Contributions 249 9.4 Contract with Alain Renaud 258 9.5 Cash Contributions to the Liberal Party of Canada (Quebec) 261 9.6 Termination of the Renaud Contract 264 9.7 Encounters with Joseph Morselli 268 9.8 Conclusion 272 X JACQUES CORRIVEAU AND LUC LEMAY 283 10.1 Influence and Credibility of Mr. Corriveau 283 10.2 Salon National du Grand Air de Montréal 286 10.3 1998 Sponsorships 289 10.4 Commission Agreements 291 10.5 Meetings with Mr. Dezainde 297 10.6 Testimony of Michel Béliveau 301 10.7 Source of Funds in 1997 306 10.8 Testimony of Benoît Corbeil 313 XI JEAN LAFLEUR 325 11.1 Introduction 325 11.2 Culture of Entitlement 328 11.3 Political Contributions 329 11.4 Relationship with Jean Pelletier 330 11.5 The Lafleur Invoices 335 11.6 RCMP Anniversary Celebration 339 11.7 Encyclopédie du Canada 2000 341 11.8 Grand Prix du Canada 1996 343 11.9 Financial Results 345 XII GILLES-ANDRÉ GOSSELIN 353 12.1 Introduction and Early PWGSC Contracts 353 12.2 Contract and Billing Irregularities 356 12.3 The Ottawa Senators Contract 359 viii 12.4 Politics and Friendship 363 12.5 Commissions for Little or No Work 365 12.6 Financial Results 368 XIII PAUL COFFIN 375 13.1 Communication Coffin 375 13.2 Billing Irregularities 378 13.3 On the Road to Atlanta—Sponsorship Contract 379 13.4 The Clarity Act—Advertising Contract 380 13.5 Relationship with Mr. Guité 382 XIV CLAUDE BOULAY 387 14.1 Corporate Organization 387 14.2 Selection as Agency of Record (AOR) 388 14.3 The Business of Groupe Everest 389 14.4 Relationship with Paul Martin and the Liberal Party 389 14.5 Canvassing Commissions 391 14.6 Art Tellier Contract 394 14.7 Attractions Canada Contracts 395 14.8 Financial Results 396 XV JOSEPH CHARLES GUITÉ IN RETIREMENT 401 15.1 Credibility 401 15.2 Oro Communications Inc. 403 15.3 Groupaction and Jean Brault 407 15.4 PacCan US 409 15.5 Communication Coffin 414 15.6 Gescom 415 15.7 Groupe Everest 416 15.8 Conclusion 418 ix XVI ASSIGNING RESPONSIBILITY 423 16.1 The Responsibility of Messrs. Chrétien and Pelletier 425 16.2 The Responsibility of Mr. Gagliano 429 16.3 The Responsibility of Other Ministers 430 16.4 The Responsibility of the Deputy Minister of PWGSC 432 16.5 The Responsibility of the Liberal Party of Canada (Quebec) 435 16.6 The Responsibility of the Communication Agencies 437 16.7 Conclusion 438 Annex A INDEX OF NAMES 439 Annex B CHRONOLOGY OF EVENTS 445 Appendix A TERMS OF REFERENCE 453 Appendix B REPORT OF THE AUDITOR GENERAL OF CANADA 457 Government-Wide Audit of Sponsorship, Advertising, and Public Opinion Research 457 Overall Main Points - chapters 3,4 and 5 457 Recommendations 459 Chapter 3: The Sponsorship Program 462 Main Points 462 Introduction 464 Observations 466 Program controls and oversight 467 Sponsorship funds to Crown entities 470 Mismanagement of sponsorships 474 How was this allowed to happen? 484 Recent improvements in management 487 Conclusion 491 x Chapter 4: Advertising Activities 492 Main Points 492 Introduction 493 Observations 496 Management of contracts by departments 500 Co-ordination of advertising activities 508 New measures for renewal of advertising practices 511 Conclusion 512 About the Audit 514 Appendix C OPENING STATEMENT 517 1. Introduction 517 2. Composition and Schedule of the Commission of Inquiry 520 3. The Nature and Procedure of the Inquiry 524 4. The Commission’s Mandate and the Issues List 531 5. Conclusion 533 Appendix D SCHEDULE OF WITNESSES 535 PHASE 1A Bytown Pavilion (Former City Hall), Ottawa 535 PHASE 1B Conference Centre, Guy-Favreau Complex, Montreal 544 Appendix E PARTY LAWYERS APPEARING BEFORE THE COMMISSION 551 Appendix F LIST OF EXHIBITS 555 xi Appendix G RULINGS 585 Ruling on Standing (July 5, 2004) 585 Ruling on Funding (July 19, 2004) 600 Supplementary Ruling on Funding (October 26, 2004) 607 Supplementary Ruling on Funding- Liberal Party of Canada (Quebec) (April 4, 2005) 611 Supplementary Ruling on Funding-Bloc Québécois (April 6, 2005) 613 Supplementary Ruling on Funding- Conservative Party of Canada (April 6, 2005) 615 Ruling on In Camera Hearing (Mr. Joseph Guité) (October 28, 2004) 617 Ruling on Parliamentary Immunity (November 22, 2004) 622 Ruling on Motion for Recusal (February 1, 2005) 629 Ruling on Applications for Publication Ban (March 29, 2005) 632 Ruling Modifying Publication Ban (Jean S. Brault) (April 7, 2005) 639 Ruling Modifying Publication Ban (Paul Coffin) (April 27, 2005) 641 Ruling Modifying Publication Ban (Joseph Charles Guité) (May 4, 2005) 643 xii Ruling on Confidentiality Order (April 13, 2005) 645 Ruling on Public Accounts Committee Evidence (May 20, 2005) 647 Ruling on Motion Pertaining to the Role of Commission Counsel 654 Appendix H DEMERS ADMINISTRATIVE REVIEW 655 Appendix I STAFF OF THE COMMISSION 681 Executive 681 Office of the Executive Director 682 Research Office 684 Office of the Lead Counsel 684 xiii xiv PREFACE On February 10, 2004, I was asked to preside over the Commission of Inquiry into the Sponsorship Program and Advertising Activities of the Government of Canada.
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