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Montreal Mayor Gerald Tremblay speaks to reporters at a news conference Thursday, October 25, 2012 in Montreal.Ryan Remiorz/The Canadian Press

The mayor of Montreal and the political party he helped found are showing the strain of a growing corruption scandal, just as a heavy hitter in the city's political scene unofficially launched his campaign to clean up city hall.

Mayor Gérald Tremblay cancelled events on Wednesday while a lawyer for his party, Union Montréal, was animated at Quebec's corruption inquiry as he tried to limit damage from testimony at that the mayor was involved in illegal spending and that the party was rolling in millions of dollars in illegal cash donations.

As these dramas unfolded in Montreal, Liberal MP Denis Coderre was in Ottawa making it clear he will jump into the city's mayoral race next year while closing the door on the leadership of the Liberal Party of Canada. Mr. Coderre is a popular figure in Montreal and recently topped a poll of potential contenders for the November, 2013, municipal vote.

"I've said before that I'd go for either mayor's job or the Liberal leadership," he said at a news conference. "What I'm now saying is that it won't be the Liberal leadership."

He said he will make his next move in April, when a new Liberal leader is chosen. Mr. Coderre said the current situation is "uncomfortable" for Mr. Tremblay, and that "Montreal deserves better."

Mr. Coderre's shot at Mr. Tremblay came as the mayor cancelled a major speech to the Montreal Chamber of Commerce where he was supposed to tout his economic legacy. A statement from event organizers said the mayor feared nobody would listen to his message.

He also pulled the plug at the last minute on attending a public art announcement Wednesday.

The mayor's political movement did not fare better inside the Charbonneau commission, where revelations have emerged at breathtaking speed implicating mobsters, construction companies, city officials and high-ranking political figures in a system of graft.

In the most high-reaching revelation yet, former Union Montréal organizer Martin Dumont testified that Mr. Tremblay was in the room when the party's official agent documented illegal spending and told Mr. Dumont not to worry about it.

Michel Dorval, the lawyer for the party, threw a few bombs of his own at Mr. Dumont. Mr. Dorval brought up Mr. Dumont's guilty plea in 1999 on a charge of shoplifting food from a supermarket where he worked as a clerk. Mr. Dumont said he was 25, having psychological issues and received an absolute discharge.

The lawyer said that he heard Mr. Dumont was stealing food for the mayoral campaign of Jacques Duchesneau, the crime-fighting cop whose investigations led to the establishment of the inquiry, led by France Charbonneau.

Mr. Duchesneau ran for mayor in 1998, one year before the shoplifting incident. Ms. Charbonneau chastised Mr. Dorval for spreading falsehoods. "I have to tell you that what you just did there is not proper," she said.

Mr. Dorval also revealed that Mr. Dumont, who worked on Mr. Tremblay's staff in the early 2000s, was once reprimanded for looking at pornography on his City Hall computer. Ms. Charbonneau put an end to the line of questioning after commission counsel Denis Gallant objected that Mr. Dorval was on a smear mission.

If the questioning was intense, it's because the stakes are immense. Mr. Tremblay is facing unprecedented calls for his resignation and Union Montréal may be finished as a political movement.

While Mr. Tremblay avoided public scrutiny, Mr. Coderre stopped short of formally announcing his mayoral campaign but portrayed himself as someone who could clean up Montreal politics. First elected in 1997, the former minister of immigration has matured politically. He's cut back on his most vocal outbursts while maintaining a common touch and a direct speaking style. "What you see is what you get," said Mr. Coderre.

As Montreal's political future was in upheaval, the inquiry returned to the nuts and bolts that triggered the turmoil.

City engineer Luc Leclerc testified that he collected at least $500,000 in bribes and took trips with construction bosses, five of whom pitched in on building his luxury home in an unusual sort of working bee.

Mr. Leclerc said his long career started to turn dirty in 1995 when he travelled to the Dominican Republic with a construction boss and Vito Rizzuto, the convicted killer and Mob leader. He described Mr. Rizzuto as "a great guy, an excellent travel companion, a good golfer."

His first cash bribe came around 1996, when he said a construction boss slipped him money in a Christmas card. "It was a beautiful, pink $1,000 bill. I hesitated. And I took it," he said.

So far, two city witnesses have admitted they took at least $1.2-million in bribes in return for padding construction contracts worth hundreds of millions of dollars.

Mr. Leclerc said he remembered golf tournaments where civic officials from municipalities all around Montreal would compare their cuts.

The commission is expected to run through most of 2013.