The Pacific Scandal and the Sponsorship Scandal
Michelle Desrochers
0665606
March 7, 2012
POLS*3440
Corruption, Scandal and Political Ethics
Geoffrey Stevens
Term Paper
The sponsorship scandal and the pacific scandal have been said to have caused the defeat
of Canadian federal governments, which have occurred because of similar pressures. The
possible pressures that caused these scandals include political, economic, cultural, and social
pressures. The reason to study and understand past faux pas of politicians is to decrease the
possibility of having a scandal reoccur.
Canadians are proud to be citizens of a country with a democratic, free, and fair
parliament. This paper will explore some occurrences of the less ethical side of the well thought
of Canadian government. This paper will discuss in length the pacific scandal of the 1870s and
the sponsorship scandal of the 1990s and identify the similarities and differences of the two
scandals. In further analysis, the scandals will be criticized by both ethical and legal viewpoints.
To conclude, the scandals will be evaluated by key characteristics to determine which scandal
was more serious.
The pacific scandal occurred in 1872-1873, when the Conservatives held a majority
government led by John A. Macdonald as Prime Minister.1 The pacific scandal is in the form of
conflict of interest and political patronage because the Conservatives received a donation for
choosing a certain company to build the railway. The reason behind the Canadian Pacific
Railway was to create a link between the western provinces to the central, more highly populated
areas of Canada. The concept of the railway included a track linking British Columbia and
Ontario to New Brunswick and Nova Scotia. The connection of the provinces was also to act as a
catalyst of British Columbia’s signing of the new confederation in 1871.2 The new confederation
signifies the official union of British Columbia and Canada in government. The final agreement
of the union included provisions for responsible government, pensions for the unelected officials,
assumption of debt, allotment of 3 senators and 6 members into parliament, and most importantly
the agreement to construct a permanent rail like to the west coast.3 Sir John A. Macdonald
thought it was in the project’s best interest to be handled by a private enterprise. This resulted in
only two major groups bidding for the work opportunity, one based in Toronto and one based in
Montreal. The Montreal group was led by Sir Hugh Allan and was awarded the contract for
reasons including John A. Macdonald’s favouritism.4 Allan was originally from the United
Kingdom and was highly involved with trade markets. He immigrated to Montreal and became
an owner of multiple railway stocks, networked with politicians such as John A. Macdonald, and
became experienced in government contracts.5 It is also mentionable that his company has many
American investors, who were irritated by the business being made within Canada. There are
allegations that Allan bought the contract by donating approximately $350,000 towards the
Conservative campaign fund.6. Allan’s company’s investors informed the Liberal party of
Canada about the generous donation made to the Conservatives, which sprouted the news of the
pacific scandal. Sir John A. Macdonald was forced to resign from his position and the
Conservative party lost their majority government.7 The political ramification that resulted from
this scandal is the resignation of the Conservative government. The core ethical issue of the
pacific scandal was created by political, social, and economic pressures. The Conservative party
was pressured politically because of the negotiations with British Columbia because the terms of
the new confederation that were decided upon included the Pacific Railway. 8 This created
pressure to pick a contractor to begin construction of the Pacific Railway. Macdonald was
pressured socially to create the contract with Allan because of their networking relationship.9
The Conservative party was also pressured economically because of Allan’s large donation for
their campaign. However, with these pressures in mind, using bribery to determine a political
contract is unethical.
The sponsorship scandal began in 1995, was scrutinized in 2004, and was resolved in
2006. The scandal is a form of political patronage because the Liberals are using their political
occupation to personally benefit. Patronage is when an individual uses public funds to reward
their supporters for their services. The sponsorship scandal is a form of patronage and
irresponsible spending because it involves using public funds to reward individuals outside of
their regular pay. The sponsorship program was created by the Liberal party under Jean Chretien.
The sponsorship program began because there was a need to make the federal government more
visible throughout Canada and especially in Quebec. The program was to raise the profile of the
Federal government to counter the 1995 sovereignty movement in Quebec. PWGSC is the
advertising group that was assigned the task of buying advertising rights at events and promote
national unity. During the operation of the Sponsorship Program 1994- 2003 approximately $332
million was spent by the Government of Canada for PWGSC to fulfil the advertising duties set
by the federal government.10 The Access to Information Act provides the right to access
information under the control of the government, making it available to the public, but with
necessary exceptions.11 Under the Access to Information Act, reporters began to request
information about the Sponsorship Programs, which eventually lead to the order of an internal
audit in 2000. This audit showed irregularities and suspended the program. The audit made it
clear that serious administrative shortcomings were occurring, such as breakdown in internal
controls, poor documentation, and excessive costs.12 In 2002, rumours began to spread about
funds from the Sponsorship Program being diverted through advertising costs to closely linked
Liberals. In 2003, Paul Martin took office as Prime Minister and canceled the Sponsorship
Program. In 2005, confessions by marketing executive Jean Brault were given about donations of
$1.7 million to the Liberals from funneled taxpayer dollars.13 Jean Brault was an ad executive
involved in the sponsorship program, who was asked by the Liberals, “to pay in cash or put
election workers on his payroll in exchange for lucrative sponsorship contracts.”14
The political ramification that resulted from this scandal is the Federal Accountability
Act. The Federal Accountability Act is the action of the Conservative party to make the federal
government more accountable for their actions. The core ethical issue of the sponsorship scandal
was created by political and economic pressures. The Liberal government was pressured
politically in 1995 because of the Quebec sovereignty movement. This movement suggested that
there was a popular interest in Quebec to separate from Canada, which trigged the Liberal’s
counter attack to advertise the federal government of Canada. The Liberal government was
pressured economically because of the temptation of the large gap in what was allowed to be
spent and what was needed. The margin would need to be dispersed elsewhere and the
Sponsorship Program would see a decrease in future funding for the next year. However, with
the pressures in mind, the action of funnelling taxpayer money is unethical and illegal.
The main similarity of the two scandals is the theme a money transfer that would not be
capable without the position of the politicians involved. However, the reason and direction of the
transfer differs, classifying the two scandals differently. In the pacific scandal, a large donation is
made to the Conservative party by a company who was competing for the railway contract. This
donation is an act of bribery. Bribery is a transaction between two people to induce one person to
commit an improper act.15 The donation is the transaction is meant to induce the Conservatives
to choose Allan’s company over the other choice. In the sponsorship scandal, the funds given to
the program by the federal government from taxpayer dollars were filtered through
advertisement agencies back to involved Liberals. The other main similarity is the political
pressures ignited by the influences of other Canadian provinces. In the pacific scandal, British
Columbia was in negotiations to join the confederation of Canada. One of their terms to join the
confederation was the promise of the railway, which would join British Columbia to Ottawa.
This term lead to the competition between bids for the contract to build the historical railway and
the generous donation by Allan to the Conservative party, which created the rise of the scandal.
In the sponsorship scandal, Quebec went through a sovereignty movement to separate from
Canada. This movement created a need to increase the profile of the federal government in
Quebec via advertisements and promotions. The Liberals contracted various agencies to use the
funding that was available. This led to insufficient work and unused funding, which was filtered
back to individual liberals instead of being used for other programs.16 The main difference
between the pacific and the sponsorship scandal is the legality and ethical evaluation of them. In
the pacific scandal, a donation is given to the conservative party to increase the chance of
obtaining the pacific railway contract, which is a form of bribery. However, there is the
possibility that the Conservative party took more elements into consideration when choosing
which bid to take. The act of giving a donation is not illegal; however, acting upon a conflict of
interest is immoral for government officials. In the sponsorship scandal, money that was given to
agencies for advertising the federal government is funneled back to liberal party members. This
undocumented transaction is illegal because the Liberal party has a commitment to taxpayers to
use the money for what is promised. With this analysis in mind it can be assumed that the
sponsorship scandal is more serious because the Liberals used taxpayer money illegitimately.
The pacific scandal occurred because of a donation of investor money, which is a legitimate
transaction of money.
In conclusion, the pacific and the sponsorship scandal have very similar causes but
different ramifications. The causes that have contributed to both the scandals are economic and
political pressures. Economic pressure is always present in government because of funding and
public money, which is available to fund different programs. One way to decrease the ability to
act on these pressures is by giving an individual less power over decisions about spending by
possibly adding more management or evaluation and accounting processes. In the sponsorship
scandal, extra processes would have been able to catch large discrepancies in account statements
during the first year of the program to figure out proper funding. In the pacific scandal more
management over the decision of which bid to contract would make the choice seem less corrupt.
Political pressure is always present in government because they must come to agreements to
satisfy everyone. However, this pressure cannot be limited more than it has by the voting system.
The two scandals discussed in this case have caused the defeat of Canadian federal governments
because of reoccurring pressures. Political and economic pressures had the most influence on the
government, which led to immoral and illegal actions.
Canada in the Making, “Building the National Railways (1851 - 1885),” Accessed March 5, 2012,
http://www.canadiana.ca/citm/themes/pioneers/pioneers9_e.html.
2
Canadian Pacific, “Our History,” Accessed March 5, 2012, http://www.cpr.ca/en/about-cp/our-past-present-andfuture/Pages/our-history.aspx.
3
Library and Archives Canada, “Canadian Confederation: British Columbia,” Accessed March 5, 2012,
http://www.collectionscanada.gc.ca/confederation/023001-3030-e.html.
4
Rae, M, The essentials of Canadian history: Canada since 1867, the post-confederate nation, New Jersey:
Research & Eduction Assoc. (1993): Page 8.
5
Dictionary of Canadian Biography Online, “Allan, Sir Hugh,” Accessed March 5, 2012,
http://www.biographi.ca/009004-119.01-e.php?BioId=39458&query=allan.
6
The Canasian Encyclopedia, “Sir Hugh Allan,” Accessed March 5, 2012,
http://www.thecanadianencyclopedia.com/articles/sir-hugh-allan.
7
Rae, M, The essentials of Canadian history: Canada since 1867, the post-confederate nation, New Jersey:
Research & Eduction Assoc. (1993): Page 8.
8
Canadian Pacific, “Our History,” Accessed March 5, 2012, http://www.cpr.ca/en/about-cp/our-past-present-andfuture/Pages/our-history.aspx.
9
Dictionary of Canadian Biography Online, “Allan, Sir Hugh,” Accessed March 5, 2012,
http://www.biographi.ca/009004-119.01-e.php?BioId=39458&query=allan.
10
CBC, “History of the Sponsorship Program,” Accessed March 5, 2012,
http://www.cbc.ca/news/background/groupaction/report/ES_history_v01.pdf.
11
Department of Justice, “Access to Information Act 1985,” Accessed on March 6, 2012, http://lawslois.justice.gc.ca/eng/acts/A-1/page-1.html.
1
CBC, “History of the Sponsorship Program,” Accessed March 6, 2012,
http://www.cbc.ca/news/background/groupaction/report/ES_history_v01.pdf
13
CBCnews, “Government May sue liberals for sponsorship funds: report,” Last modified May 11, 2006. Found
March 6, 2012, http://www.cbc.ca/news/canada/story/2006/05/11/sponsorship-suit.html.
14
CBCnews, “Jean Brault’s testimony,” Last modified March 2, 2006. Found March 6, 2012,
http://www.cbc.ca/news/background/groupaction/brault_testimony.html.
15
Kendall D’Andrade, “Bribery,” Journal of Business Ethics 4 (1985): 239-248. doi: 10.1007/BF00381765.
16
CBCnews, “Government May sue liberals for sponsorship funds: report,” Last modified May 11, 2006. Found
March 6, 2012, http://www.cbc.ca/news/canada/story/2006/05/11/sponsorship-suit.html.
12
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http://www.canadiana.ca/citm/themes/pioneers/pioneers9_e.html.
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http://www.cbc.ca/news/background/groupaction/report/ES_history_v01.pdf
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