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### Viewing cable 04QUEBEC33, THE QUEBEC SPONSORSHIP SCANDAL AND ITS AFFECT ON NATIONAL

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Reference ID | Created | Released | Classification | Origin
--- | --- | --- | --- | ---
04QUEBEC33 | 2004-02-20 15:33 | 2011-04-28 00:00 | UNCLASSIFIED//FOR OFFICIAL USE ONLY | Consulate Quebec

`

    This record is a partial extract of the original cable. The full text of the original cable is not available.

` `

    UNCLAS SECTION 01 OF 02 QUEBEC 000033

    SIPDIS

    SENSITIVE
    WHA/CAN FOR TERRY BREEZE

    E.O. 12958: N/A
    TAGS: PGOV PREL CA
    SUBJECT: THE QUEBEC SPONSORSHIP SCANDAL AND ITS AFFECT ON NATIONAL
    UNITY

    ¶1.  (SBU) Summary:  The scandal involving misuse of public funds
    for shoring up federalism in Quebec has caused a strong drop in
    support for federal Liberals in Quebec and a concurrent surge in
    support for the Bloc Quebecois.  Quebecers are angry at what
    they perceive as "Quebec-bashing."  Jean Charest and the
    provincial Liberal party have so far remained above the fray and
    are distancing themselves from their federal counterparts,
    although there are indications that the scandal may get worse.
    Charest's vision of a new era of federalism is being sorely
    tested, but Quebec's initiative on forming a Council of the
    Federation will go on, with the next meeting taking place in
    Vancouver February 23-24.  End Summary.

    ¶2.  (SBU) Prime Minister Paul Martin passed through Quebec
    February 16 for damage control on the sponsorship scandal and to
    stop the hemorrhage of public support for the Liberals.  In a
    recent Leger Marketing poll, 75% percent of Quebec respondents
    thought that Martin knew about the subsidies, or at least,
    should have known.  A February 11-12 CROP poll showed a drop in
    support for federal Liberals in Quebec to 35%; the Bloc
    Quebecois showed 47% support.  President of the National
    Assembly Michel Bissonet (PLQ) admitted to CG Keogh February 20
    that the Bloc might gain around 20 seats in the next general
    election because of the scandal.  Note: February 17, Minister
    for Natural Resources Sam Hamad downplayed the depth of negative
    public reaction, telling CG the Bloc is an "empty" party, where
    voters temporarily park their votes when they are mad at the
    government. End Note.

    ¶3.  (SBU) Bissonet said that Quebecers are angry and offended
    for having been implicated in a flag-waving campaign that went
    wrong, and that has set off the Canadian blame-game that is
    cynical about bending over backwards to placate Quebec
    separatists.  Politicians in Quebec wince over the image of a
    corrupt political culture in the province, with its invidious
    comparison to European politics.   They tend to dismiss the
    current outcry as "Quebec-bashing," although they acknowledge
    that political scandals relating to countering separatism have a
    long history in Quebec.   Certainly, the logic of heavy
    federalism behind the subsidies scandal has never gone down well
    with the provincial Liberals.  Jean Charest has been at pains to
    emphasize his loyalty to Quebec and determination to defend the
    province's interests.  He was not close to former PM Chretien.
    Embattled at home, Charest Liberals are now distancing
    themselves from Martin Liberals who have become a liability for
    the PLQ, and vice versa.

    ¶4.  (SBU) In a February 17 editorial interview with Le Solely,
    Martin insisted heads would roll if they were implicated in
    impropriety.  Among provincial names mentioned prominently in
    the press in the scandal are Jean Pelletier, head of ViaRail and
    former Chief-of-Staff for Chretien, Andre Ouellet, head of
    Postes Canada, and Michel Vennat of the Banque du Developpement
    du Canada.   Local press have reported on criticism of Minister
    for Heritage Canada Helene Scherrer, who had dealings with one
    of the implicated companies, Groupaction, to manage a $250,000
    sponsorship for the World Junior Downhill Ski competition in the
    Quebec region (allegedly the firm was paid a $30,000 commission
    to show the Canadian flag in and around the site).

    ¶5.  (SBU) Scherrer strongly denied any impropriety in a February
    18 conversation with CG.  "I was not even elected when involved
    in the ski event.  The program was there for people to use. If
    anyone had known about malfeasance, they would not have touched
    the money."  As for the Bloc Quebecois gaining from the scandal,
    Scherrer accused Bloc Chief Gilles Duceppe of encouraging groups
    in his riding to apply for federal funds - $1.9 million in
    FY2001-2, $2.3 million in FY2002-3  -"when he was supposed to
    know something fishy was going on."

    ¶6.  (SBU) So far the provincial Liberal Party (PLQ) has escaped
    direct involvement in the scandal, and continues to promote its
    vision of Quebec finding a new place in Canada.  February 19, at
    a meeting of Consuls General in Quebec, Charest insisted: "this
    government has nothing to do with it."   He called the scandal
    "shocking" but said the storm would pass.  Norman MacMillan,
    President of the Liberal Caucus, insists that the PLQ, including
    Jean Charest and his entourage, had no knowledge of the
    accounting fraud. He noted the worst excesses took place in 1997
    after the failed sovereignty referendum.  At that time, Charest
    was head of the federal Conservative Party, in opposition to the
    Liberals.  Respected journalist Alain Dubuc (former chief
    editorialist of La Presse, now Editor of Le Soleil) concurs that
    Charest had no involvement in the federal sponsorship scam.

    ¶7. (SBU) Of course, rumors abound.  One high-level government
    contact hinted to CG that the revelations so far are the tip of
    the iceberg and that the PLQ will eventually be implicated.
    While some commentators point out that Charest himself is
    relatively insulated from the scandal, others insinuate that the
    weak link is Groupe Everest, one of the companies involved in
    the scandal, which managed Charest's 1997 campaign.  MNA
    Bissonet believes the scandal will deeply undermine the Martin
    forces in the province and said the scandal could have a
    "Watergate" dimension.

    ¶8.  (SBU) Until the recent scandal, political observers here
    have tended to characterize Quebec Liberals as a house divided:
    federalist Liberals, either in the Chretien or Martin camps,
    center-left Bourassa Liberals, conservative Charest Liberals.
    One result of the current scandal, however, has been public
    papering-over traditional divisions.  There is less evident
    partisanship.  Charest told the recent CG gathering that his
    three main priorities relate to the demographic problems of an
    aging population, "fiscal imbalance"/budget priorities, and
    promoting cultural diversity.   On the latter point, he noted
    the federal government has been the main supporter of cultural
    institutions in Quebec, e.g. Radio Canada, and that if federal
    monies dried up it would cause a lot of problems.

    ¶9.  (SBU) Quebec's initiative on forming a Council of the
    Federation will go on, however.  Minister of Intergovernmental
    Affairs Benoit Pelletier told CG February 19 that all Provincial
    and territorial premiers (possibly with the exception of
    Nunavut) will be meeting February 23-24 in Vancouver.  This 5th
    reunion/first full meeting of the Council will create a
    Secretariat to be based in Ottawa, a body to handle fiscal

    SIPDIS
    imbalance, and will agree on a common agenda.   Asked if
    relations with Ottawa have been affected by the subsidies
    scandal, he confirmed it would complicate relations, in that
    Ottawa might not want to make any concessions to Quebec in the
    current environment.  Negotiations with Health Minister
    Pettigrew are not yet arranged.  "Everything is on hold because
    of the scandal," but Pelletier said he thought things would work
    better after the federal elections.

    ¶10.  (SBU) Comment:  Charest is keen to propagate new relations
    with the rest of Canada's provinces and with Ottawa and to
    promote national unity, although not at Quebec's expense.  His
    vision of a new era of federalism is being tested by the
    sponsorship scandal; the widespread cynicism over political
    corruption that it has engendered is obviously a source of
    frustration as the Quebec Premier tries to establish a new place
    for Quebec within Canada and on the international scene.
    Charest does have the advantage - unlike PM Martin - of time.
    He knows where he wants to go.  With 4 years of his mandate
    still ahead of him, he is focused on mending fences with some of
    the civic groups he alienated through precipitous legislation at
    the end of 2003.  After the elections, if the Liberals regain
    power, and if Martin is the leader, he also hopes to renegotiate
    Quebec's place on the international scene.  Some of these larger
    visions may go on hold though if indeed the subsidies scandal
    continues to grow.  Quebecers are likely to insist on
    individuals being held accountable.

    KEOGH

`