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Jacques Duchesneau, leader of the Unite Permanante Anticorruption (UPAC), gestures as he testifies during a parliamentary hearing at the National Assembly in Quebec City, Sept. 27, 2011.MATHIEU BELANGER/Reuters

A public inquiry into corruption, collusion and mafia infiltration in the Quebec construction industry would serve as a powerful deterrent to criminal activity, says Jacques Duchesneau, the head of the Transport Ministry's anti-collusion unit.

During testimony before a National Assembly committee Tuesday, Mr. Duchesneau said police investigations may help put criminals behind bars, but they were ineffective in eliminating a well-structured system of corrupt practices.

"You have to nab the criminals who are bleeding us dry, but you also need continued action against a system that never stops revamping itself," Mr. Duchesneau told the committee. "A public inquiry commission is the only means to reassure the public and redress what has become structural problems. This commission is urgent."

He proposed a two-pronged inquiry: the first part would hear witnesses behind closed doors in order to safeguard their identities and protect them against reprisals. "Many won't take the risk of talking unless they do so anonymously," he said.

The second phase of the inquiry would be held in public to allow experts to explain how the collusion system works. And if during closed-door hearings fingers point to the same individuals or companies involved in criminal activities, then they could be ordered to testify in public.

"It would up to the commissioners to say: 'Enough is enough, prepare the evidence, we want to hear their testimony.' … In order to get to bottom of their schemes," Mr. Duchesneau said.

Premier Jean Charest has repeatedly refused calls to hold a public inquiry but Mr. Duchesneau's proposal for closed-door hearings appeared to strike some interest among Liberal members on the committee.

However, the government has not yet taken a definitive stand on the proposal.

Without the rigorous political will needed to correct the problem, it will be impossible to launch an effective fight against collusion, Mr. Duchesneau said during his opening remarks before the committee.

"We can't redo the past but we can certainly act on the present and for the future," Mr. Duchesneau said, adding that in his "secret" report leaked to the media last week he outlined the major flaws and weaknesses that have led to a system of collusion controlled by organized crime.

"It is not true that it is only by throwing criminals into jail and by only advocating a police and judicial approach that we will succeed to stop the hemorrhaging," he said.

Mr. Duchesneau explained how huge amounts of cash circulated on construction sites as part of money-laundering activities or for illegal cash payments to construction companies.

Some of the money also found its way into the coffers of political parties, he said. "There were many such cases reported to us. … It is something that needs to be examined closely," Mr. Duchesneau said. "A lot of this is going on at the municipal level."

During his testimony, Mr. Duchesneau underscored many of the troubling revelations first outlined in his report. Fraudulent practices prevailed throughout the industry, he said. Intimidation, violence, money laundering and protection rackets were an integral part of an industry where people fear for their lives if they speak out.

"There is a small number of people that are profiting from this system," Mr. Duchesneau said. He explained that false invoices, bid-rigging and elaborate schemes to fraudulently manufacture cost overruns were rampant. The industry has become a haven for organized crime, which was becoming an important factor in the illegal funding of political parties, working hand in hand with corrupt engineering firms and construction companies, Mr. Duchesneau explained.

Influence peddling was also prevalent, he said, and political parties were vulnerable to organized-crime attempts at influencing government policies.

"There is a link to be made between people with criminal motives who participate in the financing of political parties, he said. "Organized crime is not just a simple parasite, it is a real actor in government affairs."