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Former Union Montreal candidate Martin Dumont testifies at the Charbonneau inquiry looking into corruption in the Quebec construction industry Tuesday, October 30, 2012 in Montreal.Ryan Remiorz/The Canadian Press

For the first time since the stench of corruption rose from Montreal city hall five years ago, damning testimony has put Mayor Gérald Tremblay in direct contact with illegal acts.

A former political organizer for Mr. Tremblay's party says the mayor was one of three people in a 2004 meeting where a Union Montréal official showed the two sets of books the party was keeping – clean records designed to fall within spending limits and satisfy the chief electoral officer, and an unofficial cash-only accounting that had the party spending double the $46,000 campaign limit.

The startling testimony Tuesday at the Charbonneau corruption inquiry by former party staffer Martin Dumont had provincial leaders making an unprecedented call for Mr. Tremblay to immediately come clean about his actions, or resign. Others said he should just quit now. Mr. Tremblay refused, calling the testimony a pack of lies.

The Parti Québécois government is expected to table integrity legislation – as early as Thursday or perhaps next week – that will tighten the rules for companies bidding on public contracts and reduce contributions individuals can make to political parties.

Mr. Dumont methodically described a world between 2004 and 2006 where hundreds of thousands of dollars in cash contributions from construction and engineering bosses stuffed suit jackets, filled safes and were counted by hand by a bewildered junior party staffer.

Mr. Dumont was put in charge of running the Union Montréal campaign for two by-elections in late 2004 which were being held to replace two corrupt councillors. He noticed spending was out of control in the campaign, and said he "blew a gasket" with the mayor and the party's official agent, Marc Deschamps.

He said Mr. Deschamps produced the dual ledger and explained they would take care of the numbers later. Mr. Tremblay promptly stood up and announced "I don't need to know this," Mr. Dumont testified. The mayor then left and closed the door behind him, he said.

The mayor vehemently denied the allegation at an event Tuesday where, in a twist of difficult political timing, he was announcing he would be hiking Montreal property taxes by 3.3 per cent and would be seeking more financing for infrastructure from the province. (The inquiry has heard 3 per cent was the kickback collected by Union Montréal on construction projects.)

"All I can say is that it's totally false," Mr. Tremblay said, before angrily telling reporters he would no longer talk about corruption. The Union Montréal lawyer at the commission said he wants Mr. Tremblay and Mr. Deschamps to testify as soon as possible.

In Quebec City, Jean-Marc Fournier, the interim Leader of the Quebec Liberal Party, said Mr. Tremblay, who was once a Liberal cabinet minister, needs to explain now. Parti Québécois Municipal Affairs Minister Sylvain Gaudreault said the situation had become "very, very, very difficult for the mayor" and invited him to reconsider whether he still belonged in office.

The Coalition Avenir Québec party was much more blunt. "It is clear with everything we have heard, [Mr. Tremblay] has lost all legitimacy… he no longer has any place there," said CAQ member Jacques Duchesneau, the former cop whose own revelations forced the holding of the inquiry.

The PQ government says it is powerless to force Mr. Tremblay from office.

Mr. Dumont described how the money flowed from a dozen construction bosses, who the inquiry has heard had close connections to the mob. The bosses made dozens and dozens of visits to the offices of both the party and local politicians, usually with the blinds drawn, from 2004 to 2010. The bosses also bought tickets to fundraising events with little regard for spending limits, he said.

Mr. Dumont described several instances where cash flowed wildly. At one point, cash donations stuffed a party safe until it was impossible to close. At one event, chief fundraiser Bernard Trépanier could no longer button his coat, its pockets were so full of envelopes of cash. A student who was working as a receptionist for the summer complained to him that she had spent all day locked up in Mr. Trépanier's office counting out $850,000 in cash.

Mr. Dumont says he stepped in on behalf of the student and told Mr. Trépanier to get a mechanical counter if he was going to continue operating on massive amounts of improper cash.

Construction bosses like Nicolo Milioto could be charming one day, dropping by with a coffee, or menacing the next, he said. At one fundraiser, Mr. Dumont said Mr. Milioto ordered him into a bathroom to hand him an envelope with $10,000. Others asked him to accept other bathroom donations for Mr. Trépanier. He said he refused.

Mr. Dumont worked as a chief of staff for a borough mayor from 2006 to 2010 and described how his questions about an inflated sidewalk contract brought a menacing visit from Mr. Milioto, who called himself "Mr. Sidewalk." The inquiry has heard Mr. Milioto was the go-between for the mob and construction bosses.

According to Mr. Dumont, Mr. Milioto warned that his sidewalks were thick and deep, and that Mr. Dumont "didn't want to become the foundation for one of his sidewalks." Mr. Dumont was visibly shaken as he told the story – an account he says he had never told anyone before Tuesday's testimony.

While Mr. Dumont's credibility is bound to face a stiff attack under cross-examination, he is one of the few direct witnesses to corruption heard so far who did not appear to be on the take.

From Mr. Dumont's account, he was trying to walk a fine line. He avoided getting involved in the dirty party financing he saw all around him, but never went to police of the chief electoral officer to tell them what he'd seen.

"Who would have believed me?" Mr. Dumont said, when asked why he didn't go to authorities during the 2004 encounter with Mr. Tremblay. "Here we were, holding a by-election to replace two corrupt councillors and we were running another, even bigger fraud?"

Mr. Dumont said he was extremely uncomfortable but with high party officials and the mayor in on it, going to authorities seemed pointless.

"The system was so big, I would have been going against the entire establishment of the city of Montreal," he said. "No one would have believed me."