Corruption scandal torments Canadian PM

The Canadian Prime Minister, Paul Martin, was fighting yesterday to stave off the collapse of his 10-month-old minority Liberal government amid a financial corruption scandal described by some commentators as the worst in the country's history.

The crisis, spawned in part when the author of an American internet blog last week published testimony from court hearings into the case that had otherwise been shrouded by a blanket media ban, worsened last night with when one of Mr Martin's parliamentary members defected to become an independent.

Polls conducted over recent days have shown an implosion of support for the Liberals as details of the scandal have unfolded.

The main opposition party, the Conservatives, is now drawing greater support and its leader, Stephen Harper, has been huddling with advisers all this week to consider forcing a snap election.

The publication by the American blog, called Captain's Quarters, of details from his hearing forced the presiding judge, Justice John Gomery, to lift his media ban last Thursday on testimony from one key witnesses, who was the head of a large Quebec-based advertising firm.

Christened by some as 'Adscam', the scandal first broke over a year ago. It describes how the former Liberal government, then led by Prime Minister Jean Chretien, transferred nearly $100 million of tax-payer funds to advertising firms in the French-speaking province, ostensibly to bolster the image of a united Canada in the wake of a razor-thin secession referendum in Quebec in 1995. It is alleged that the firms did little or no work in return.

The scandal intensified suddenly last week, however, as the witness before Justice Gomery alleged that a large portion of the funds channelled to his firm was then laundered back to the coffers of the Liberal party by way of kick-backs. His testimony included descriptions of phoney invoices, money-stuffed envelopes passing across restaurant tables and one payment being transferred to a brother of Mr Chretien.

While Mr Martin has denied all knowledge of these activities, he was serving as Finance Minister for Mr Chretien during that period and the opposition parties have signalled their intention of linking him directly to the scandal.

"Like all Liberals and Canadians, I'm offended by what I've heard in recent testimony," the Prime Minister said this week. "If even part of it turns out to be true, it is abhorrent to us all. Canadians are looking for someone to step forward and to be accountable for cleaning up this mess and, as Prime Minister and Liberal Leader, I accept that responsibility."

The mushrooming scandal has unsettled the stock market in Toronto and the Canadian dollar has lost nearly 2 per cent against the US dollar in just five days as investors ponder the possibility of a sudden election.

Were the Conservatives to take power, Canada would be more divided than ever. The party, strongest in western Canada, has no representatives from Quebec in the current parliament. A defeat for the Liberals would almost certainly encourage the separatist movement in the block to seek another referendum for independence.

"This whole scandal can breathe new life into the sovereigntist movement in Quebec," agreed Marc Levesque, chief currency strategist at TD Securities.

If they joined forces, the Conservatives and the main Quebec party, the Bloc Quebecois, could force an election at any time with a motion of no-confidence. The ruling party currently has only 132 seats in the 308-seat parliament in Ottawa. Most observers think such a move is inevitable. The only question appears to be when Mr Harper of the Conservatives will make the move.

"The Liberals are being savaged," noted John Wright, a pollster at Ipsos-Reid in Toronto. "If they smell it in the air and they feel it on the ground, the Conservatives are going to go. Their political instincts will tell them to go sooner rather than later."

An election could in theory happen in late May or June. But while polls show falling support for the Liberals, an overwhelming number of Canadians express distaste for an election now.

Mr Harper this week indicated that he may bide his time. "We need to hear some more testimony," he said. "I think the public needs more time, especially outside Quebec, to absorb this testimony and we'll make our judgement as things unfold."

Also in peril, if his government collapses, is Paul Martin's push to pass a bill legalising gay marriage in Canada. It was partly that issue, as well as the expanding scandal, that pushed the defection yesterday of Liberal representative David Kilgour.

"There are whole lot of issues where I am increasingly out of sync with the government, he said.

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