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Gilles Cloutier, ex-employee of Roche engineering firm, is seen in a frame grab from the video feed at the Charbonneau inquiry looking into corruption in the Quebec construction industry Tuesday, April 30, 2013 in Montreal.

HO/The Canadian Press

Testimony at Quebec's corruption inquiry rattled the pillars of the Quebec National Assembly Tuesday as a new witness revealed that political parties have long obtained most of their campaign money through illegal fundraising schemes.

While former Liberal bagman and municipal election fixer Gilles Cloutier's evidence touched all provincial parties, the specifics of his testimony revolved around decades of shady work he did for Liberals, along with the federalist side of the 1995 referendum campaign.

Mr. Cloutier testified Tuesday that he spent thousands in unaccounted cash to buy up billboards for the No side in the referendum and hired guards to protect them from vandals. While the expense was a small part of the millions that went into the referendum campaign, the Parti Québécois government grabbed the fresh ammunition to say federalists cheated to narrowly win the 1995 vote.

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"It confirms the worst-case scenarios involving the manipulation that took place during the 1995 referendum," said PQ Treasury Board President Stéphane Bédard.

Bernard Drainville, Minister for Democratic Institutions, said the testimony is "further proof that the federalists tried to buy the result of the referendum and buy the conscience of Quebeckers."

Mr. Cloutier's reference to the referendum was brief and just one of a series of bombshells he tossed in a day of testimony. He covered the era of Maurice Duplessis and the Union Nationale in the 1950s when he used cows and television sets to entice voters, right up to the 2000s when parties used fake donors to launder illegal corporate cash.

Mr. Cloutier also admitted to setting up more than 60 "turnkey" municipal elections in which he used corporate money to pay rent, buy advertising, pay so-called volunteers and guarantee turnout for chosen candidates. His candidates rarely lost. In return, the newly elected officials would send business to engineering firms that employed Mr. Cloutier.

At the provincial level, Mr. Cloutier described how, shortly after then-premier René Lévesque introduced tough new campaign finance laws in 1977, Liberals quickly found ways around them, using fake donors to launder cash from corporations looking for government business.

"People would line up to offer their names and get the tax credit," Mr. Cloutier said. "Take my ex-wife. Every time I went to a fundraiser, she'd ask me if I needed a cheque. It was very popular and the chief electoral officer wasn't checking."

As recently as the 2007 provincial campaign, Mr. Cloutier said he was enlisted by Liberal cabinet minister Michelle Courchesne to assist political neophyte and former police officer Guy Ouellette to organize his campaign.

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Mr. Cloutier said his salary and other election expenses were paid by his then-employer, engineering firm Dessau – a common practice throughout his organizing career.

Mr. Cloutier said Mr. Ouellette fired him in mid-campaign when he learned Mr. Cloutier was in trouble with the Competition Bureau for heading a cartel of snow-removal companies that were rigging bids in the Montreal region.

Visibly troubled by the testimony, Mr. Ouellette remained vague Tuesday when asked how he came to hire Mr. Cloutier. Mr. Ouellette said he would prefer to testify before the Charbonneau commission.

"It was recommended that I hire this organizer who only worked for me for 12 days," Mr. Ouellette said. "After he left, I informed the proper authorities as to how and why he came to work for me for only 12 days. I will testify if I am asked to appear. The proper authorities have all the information. "

The PQ's criticism of the Liberals was tempered by another of Mr. Cloutier's allegations: He said while the Liberal fundraising was about 80 per cent illegal, the PQ's more modest money machine was about 70 per cent illegal. (Barely 10 per cent of municipal financing is legitimate, according to Mr. Cloutier.)

Mr. Drainville rejected the charges and called into question Mr. Cloutier's credibility. "We are dealing with a Liberal bagman who admitted to have personally been involved in illegal financing activites," Mr. Drainville said.

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Liberal Opposition Leader Jean-Marc Fournier insisted the damage is not limited to his party, saying it is "a sad day, a sad period for Quebec."

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