Montreal's Charbonneau Commission Report Is Published

The big news in local government ethics yesterday was the publication of the final report of Quebec's Charbonneau Commission, which investigated bid rigging in the Montreal area, involving not only government officials and contractors, but also the Mafia and Hells Angels (see my 2012 blog post on the investigation).

The bad news is that the report, at least so far, appears to be available only in French. Although I read French, the report is 1,700 pages long, so I'm going to depend on articles about the report. In addition, Montreal's inspector general published a report this week on bid rigging in Montreal's snow removal, which is a pretty big expense there ($155 million a year).

First, for the snow removal business, which reflects the ways things worked in general. According to the Montreal Gazette article linked to above, "the report found evidence of collusion between certain contractors to bid only on contracts in agreed-upon sectors, which affected the price of winning bids. 'Contractors would contact each other during the call-for-tenders period in order to know one another's intentions in terms of contracts they were planning to bid on.' ... Some snow-removal contractors refused to acknowledge that such deal-making existed. However, the report said what they hinted at was just as significant. 'When questioned by the inspector general's office, those entrepreneurs said that "everyone decides to stay in his own territory," admitting to have told their competitors, "You stay in your turf and I'll stay in mine."'

In addition, other potential bidders were threatened with physical violence.

The report's recommendations include: 

• The creation of an online bidding platform to assure the anonymity of bidders.
• Mandatory disclosure of any bidder's contact with other snow-removal companies during the call-for-tenders period and justification for any contact made.
• Prohibiting contractors from transfering their own contracts to other entrepreneurs.
• Increased monitoring to ensure city rules governing subcontracting are respected.

The last two of these four recommendations have the most promise. But more important is the fact that Montreal is to take on a bigger role in coordinating snow clearing among its 19 boroughs, with only one snow-removal policy and program. This will make it very difficult for contractors to divvy up the boroughs among them.

Equally important was the creation of the inspector general's office in late 2013. This hopefully shows that the current administration, unlike former administrations, will actually do something about the reports on procurement problems, which go back to 1996 (those reports were internal, unlike the ones that came out this week).

The Charbonneau Commission report determined that there is a political machine operating in Quebec, with a deeply rooted culture of impunity. The report contains the following recommendations:

• Creation of an independent authority to oversee public contracts.
• Better protection for whistleblowers.
• Requirement that construction companies report acts of intimidation or violence.
• Increased penalties for construction companies that break the law, up to and including cancelling their licence under Quebec's building authority.
• Increased penalties for people who make use of so-called "strawman" schemes.

Unfortunately, there do not appear to be recommendations involving a better government ethics program, to prevent ethical misconduct from turning into criminal misconduct, to provide training and advice, and to make investigations and enforcement faster and less expensive.

Much of the report's factual sections are blacked out, due to ongoing criminal investigations. This includes much of the section on the Hells Angels. But here is something interesting that was left in, because it is historical and general:

About 75 per cent of Hells Angels members own their own companies, often in the construction industry. The masonry industry is particularly vulnerable to criminals because companies tend to be small, with seasonal cash-flow problems. Legitimate companies with liquidity problems “often have no choice but to turn to illegitimate sources of funding to the often very high (interest) rates.”

Yes, the unavailability of credit is one of the ways in which organized crime stays in the game. Will masonry companies be looking online for their loans in the future?

A Montreal Gazette editorial today states that the costs of the bid rigging and other misconduct "can be measured in unnecessarily high taxes, inferior infrastructure and an erosion of societal values."

Robert Wechsler
Director of Research-Retired, City Ethics