TORONTO -- Ads for Quebec's celebration of the 125th anniversary of the famed Canadian Mounties in 1999 featured a prominent "Canada" logo, as one would expect. Few people would have guessed the government paid $2.5 million to make sure it was there.
The logo placement was arranged by public relations firms that pocketed nearly half of the money. And their help was hardly needed: the Royal Canadian Mounted Police is a government agency and "is already required to display the Canada word-mark," an auditor general later observed.
Prime Minister Paul Martin is under fire.
The ad campaign was part of a strategy to win the hearts and minds of the people of Quebec after talks of secession, but the strategy has backfired so badly it may now bring down the government.
An official inquiry has produced testimony that the campaign amounted to a slush fund including kickbacks, payoffs and payroll padding that consumed more than a third of the $200 million federal program.
The long-simmering scandal has led to plummeting public support for Prime Minister Paul Martin and his Liberal Party, spurring opposition parties to make plans to force a new election.
The chief opposition leader, Stephen Harper of the Conservative Party, referred to Martin Wednesday as a "national joke," although the ad campaign took place during the government of Martin's predecessor, Jean Chretien, also a Liberal.
The party is in disarray, with talk of defections. The Liberal premier of Ontario, Dalton McGuinty, publicly declared this week that Martin is out of touch. Opponents are trying to judge just when to demand an election, with most bets that it will come later in the spring.
"This is political opportunism" that seeks "the separation of Quebec from our country," complained Deputy Prime Minister Anne McLellan of the opposition plans.
The program at the heart of the controversy came after a 1995 referendum on whether Quebec should secede from Canada. The results were so close that the government set out to improve its standing and avoid another vote. Ironically, the resulting plan may lead to exactly the response that it feared, Liberal Party officials acknowledge. The program, created to encourage nationalism, has offended people from Quebec, and public support for the government has plummeted as a result of the alleged financial misdeeds.
In the next election, political analysts said, the Liberals are likely to lose most of their parliamentary seats in Quebec to Bloc Quebecois, which has failed in two referendums calling for the province's independence from Canada.
The financial scandal, known here as the sponsorship program, is at the center of public anger with the Liberals.
The party, which has been in power since 1993, decided that one way to lure public opinion away from separatism in Quebec was to pump money into the province. The program was designed to sponsor such events as hunting and fishing fairs and sports contests. Included were plans to purchase Canadian flags and promote national unity through radio, television and billboard advertising.
But in 2002 and 2003, Auditor General Sheila Fraser said her analysis indicated, much of the funding was paid out in contracts with 19 advertising firms and consultants that had close ties to the Liberals. For many contracts, she said, no work was performed. Her report led to an official inquiry, headed by John Gomery, a prominent jurist.
In testimony this week, the head of an advertising firm, Luc Lemay, said he got more than $30 million in government contracts with the help of a close associated of Chretien, Jacques Corriveau. In return, Lemay said, he paid Corriveau a "commission" of 17.5 percent, mostly through false invoices and fake bills.
Another ad executive, Jean Brault, testified last week that he secretly kicked back nearly half a million dollars from contracts to the political campaign coffers of the Liberal Party. He described payments made in white envelopes at restaurant tables and acknowledged putting party operatives -- including Chretien's relatives -- on his payroll while they performed political work.
The revelations were a bombshell in Quebec. "Not only are they angry at the sleaze, they hate the program itself," said Richard Simeon, a professor of politics and law at the University of Toronto. "To think you can just buy the loyalty of Quebeckers by displaying the flag all over the place."
Chretien, who was succeeded by Martin when he retired in December 2003, has denied any improprieties. Brault and three others face fraud charges. Martin, who also is from Quebec, was finance minister at the time, but his relations with Chretien were always frosty. Martin ended the sponsorship program on his first day in office and says he was not involved in it.
Martin has insisted he has "moral authority" and should be credited for creating the inquiry led by Gomery, and pursuing an investigation of the scandal. But opposition parties are critical.
"The Liberal Party produced a system of kickbacks using taxpayers' money. They should be ashamed of themselves," said Michel Gauthier, the Bloc Quebecois leader, on the floor of the parliament on Thursday. "Refund the money. That's what the citizens want."