A source within Canadian political and media circles informed CQ earlier this afternoon that the media will break a story on an almost-forgotten scandal involving Options Canada, where $4.8 million disappeared without much oversight from the Liberal government in 1995. The money came from the Heritage Canada office, which disbursed the grant in three rushed payments on the eve of the 1995 referendum on autonomy for Quebec. The Ottawa Citizen reported in 2000 that the Liberal government had buried the scandal and closed its investigation without ever determining what happened to the millions of dollars given to Options Canada, which later merged into the No campaign on the referendum:

The federal government has quietly closed the books on a controversial $4.8-million grant to an obscure Montreal federalist group, but how the money was spent is still a mystery.

The grant, made in three hastily arranged payments to Options Canada by Heritage Canada on the eve of the 1995 referendum, violated most of the department's key accounting rules.

An internal Heritage audit was launched two years ago after reports about the grant began appearing in the Montreal media. The audit noted that the money had been issued on an "urgent" basis and found that it had been handed over in a way that "lacked the rigour and scrutiny one would expect for such large sums of money being given to a new unproved client."

The internal auditor's report said the grant had been processed with unusual speed. "In most cases, it was a matter of several days to receive (applications) and approve funds with little justification being asked for in regard to the funds already advanced," said the report. "In all, only thirty-three days were needed to receive, consider, recommend and approve three submissions totaling $4,810,000 ... the whole process suffered from a lack of sufficient attention to detail." ...

When the controversy over the grant first broke in the media three years ago, it was suggested that Options Canada was a front for the Council for Canadian Unity, a well-established organization that stood to lose its favourable tax status if it engaged in openly partisan politics.

Interestingly, Claude Dauphin ran Options Canada in 1995, and went from there to run the Council for Canadian Unity, according to this biography (en Francais, je le regrette). Claude Dauphin also worked for Paul Martin in 1997, two years after the $4.8M went to Dauphin's group, as "Senior Advisor for Quebec to Finance Minister Paul Martin" and has been rumored to be an active political advisor to Martin since.

All of that is the background. Watch the news for more recent developments in the next couple of days -- especially, I'm told, the Globe & Mail -- on the Options Canada grant money.

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