In the spring of 2008, as they checked into allegations that Quebec businessman Frank Bruno had evaded paying taxes, investigators from the Canada Revenue Agency searched his accountant’s office and found a handwritten sheet of paper titled “Plan of Action.”
The CRA later determined that one of its own auditors wrote the paper, and that it outlined in 17 steps how to keep millions of dollars out of the agency’s reach, court documents say.
On Thursday, the RCMP took four men into custody in connection with the probe, including a central figure in the recent political scandals in Quebec, construction magnate Antonio Accurso.
In April, a provincial anti-corruption squad arrested and charged Mr. Accurso in a separate probe into public contracts in the town of Mascouche, north of Montreal.
Allegations that construction tycoons are cozy with politicians have been a backdrop of Quebec municipal and provincial politics in recent years, a recurring headache for Premier Jean Charest, who is now in the midst of an election campaign.
But the latest arrests underline that the problem also reaches the federal level, with allegations of rogue auditors at the CRA’s Montreal office.
Mr. Accurso, Mr. Bruno, his accountant, Francesco Fiorino, and Mr. Bruno’s cousin, Adriano Furgiuele, a former CRA auditor, will each be charged with six counts of conspiracy, fraud, forgery and breach of trust, police say. They are to appear in court on Sept. 19.
Mr. Bruno and Mr. Accurso are alleged to have used bogus invoices and created a fictitious person living abroad to evade tax on more than $3-million, RCMP spokesman Corporal Luc Thibault said.
The scheme is alleged to have taken place between April, 2007, and July, 2009.
According to previously filed court documents, the investigation, code-named Project Coche, is a continuation of a 2006 police probe into the Montreal Mafia.
As a result, the documents say, the CRA executed several search warrants in 2008 and found the “Plan of Action” at Mr. Fiorino's office.
A search warrant says the paper was prepared by Mr. Furgiuele and outlined how a numbered company owned by Mr. Bruno, 3703436 Canada Inc., could evade taxes.
The search warrant says the numbered company claimed it received loans from a European firm for which it did not have to pay taxes. The warrant adds that the European company did not exist. The court filing also alleged that 3703436 Canada Inc. issued fake invoices to three construction firms owned by Mr. Accurso.
According to court documents previously filed by the CRA, Mr. Bruno opened a bank account containing $1.7-million in 2006 in the Bahamas with two CRA employees, including his cousin, Mr. Furgiuele.
Other court documents obtained last year by Radio-Canada and The Globe and Mail show that the RCMP was investigating whether Mr. Bruno received lax auditing by offering perks to CRA staff such as trips, home renovations, and wining and dining in a luxury box at a Montreal Canadiens game.
Mr. Bruno and his construction company, B.T. Céramique, pleaded guilty last year to tax evasion and were fined $1.3-million. However, no charges had been laid until now in connection with the allegations of corruption of civil servants.
The CRA has fired at least six employees and suspended three others in the case.
“The CRA takes the situation at the Montreal tax services office very seriously. Today’s arrests demonstrate the strong action that has been taken in regard to these allegations,” spokesman Noël Carisse said in an e-mail.
He confirmed Mr. Furgiuele is no longer employed by the CRA, but wouldn’t comment further.
Previous court filings also allege that the RCMP search at B.T. Céramique's offices uncovered copies of an internal CRA document alleging that a shopping centre Mr. Accurso owned had not declared revenues.
The three copies were not supposed to be removed from the federal agency, and their disappearance meant “the information was no longer at the disposal of the CRA," the search warrant states.
Less than four months ago, Mr. Accurso was among 14 people arrested in a separate case over allegations of corruption in Mascouche. He was charged with fraud, conspiracy, municipal corruption, breach of trust and defrauding the government.
In 2010, two construction companies that Mr. Accurso had administered, Simard-Beaudry Construction Inc. and Louisbourg Construction Ltd., pleaded guilty to committing $4-million in tax fraud.
According to an agreed statement of fact presented in court, the two companies submitted $19-million in non-deductible expenses, including $1.7-million for the construction of a luxury yacht.
The yacht, called Touch, has gold faucets and a six-person hot tub. It has been used by Mr. Accurso to host elected officials and union leaders.