It was first brought to the public attention in 2002 when it was revealed that a number of sponsorship deals for events in Quebec were mishandled. Money was paid to marketing firms for events that were never sponsored, and standard vetting and bidding procedures were ignored. The most notable firm to benefit from the program was Montreal's GroupAction. This scandal forced the resignation of Minister of Public Works Alfonso Gagliano who was made ambassador to Denmark. Another company, Group Polygone, is later alleged to have been given $40 million in dodgy contracts.

The scandal reemerged into the public spotlight in February 2004 when the Auditor General's investigation of the affair was revealed. She blamed not only Public Works, but powerful Crown Corporations including VIA Rail and Canada Post. Given the scandal's breadth, the report also raised question as to what involvement, if any, the Prime Minister's Office played in the misuse of funds. The report found that over $100 million CDN were misused.

New Prime Minister Paul Martin responded to the latest events by firing Gagliano from his position in Denmark, and immediately launching a public enquiry in to the matter. He also blamed the problems on the previous administration of Jean Chretien under whose watch the spending occurred. However. Martin's more recent statements limit the focus to a few conspirators. A number of the people most closely embroiled in the scandal are Chretien loyalists, such as CEO of Canada Post André Ouillet and head of Via Rail Jean Pelletier. Opposition critics allege that Martin could not have been unaware of the activities, as he was Finance Minister, a senior Quebec cabinet minister and a member of the Treasury Board during the time of the scandal. Martin has insisted the scandal was orchestrated by a very select group of individuals and that he had no knowledge of their actions. He also apparently put his job on the line by stating, "Anybody who is found to have known that people are kiting cheques, that people are falsifying invoices -- me or anybody else -- should resign." [1]

In the weeks following the Auditor General's report, it became clear that the expected spring election would be affected in some way. Some argue that voters should know the outcome of the enquiry before going to the polls, in order to have an informed decision; others feel the Martin government should not continue for long without seeking a mandate.

On February 24, 2004, Prime Minister Martin suspended the Presidents of the Business Development Bank of Canada Michel Vennat, Via Rail president Marc LeFrançois and Canada Post president André Ouellet.

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