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Scandal Over Defense Contract Has Mulroney’s Government on Defensive

January 23, 1987

OTTAWA (AP) _ A scandal involving a $438 million defense contract and some vacant Quebec farmland that more than tripled in value in less than two weeks has Prime Minister Brian Mulroney’s administration on the defensive.

Mulroney’s Conservatives enjoy an overwhelming majority in Parliament and their term does not expire until mid-1989. But the latest Gallup Poll showed them in third place, behind the Liberals and the New Democratic Party, with just 28 percent voter support.

It was the first time an incumbent party has ranked third in a public opinion poll in Canadian history, and the scandals are seen as factors in its eroded popularity.

The opposition’s charges of corruption and cover-up were more extensively covered by local media than U.S. Vice President George Bush’s visit this week.

Minister of State for Transport Andre Bissonnette has been fired, and the Royal Canadian Mounted Police are investigating a land deal and allegations that the sacked Cabinet minister, his wife and a friend made illicit gains in the transaction.

The scandal is potentially more damaging than other controversies Mulroney has had to contend with since taking office in September 1984, including conflict-of-interest allegations concerning Industry Minister Sinclair Stevens and the dismissal or resignation of four Cabinet members.

In January 1986, idle farmland in Bissonnette’s electoral district of Saint-Jean, Quebec, more than tripled in value while the government was reviewing bids for the contract for a low-level air defense system.

Oerlikon Aerospace Inc., the Quebec-based subsidiary of the Swiss arms manufacturer Oerlikon-Buhrle, was awarded the contract in April. Shortly afterward, it took up its option, signed in January, to buy the land for $2.1 million to build a factory.

The company says it did not know that the tract had sold for $584,000 just 11 days before it signed the option to buy.

Oerlikon on Wednesday filed a $1.5 million suit against Normand Ouellette, a close friend and business associate of Bissonnette and former Conservative Party president in Saint-Jean. The company said Ouellette received $708,100 of the purchase price ″to which he had no right.″

Oerlikon bought the land from an entity known only as 148023 Canada Inc.

The Canadian Press news agency quoted an unidentified source Friday as saying that Bissonnette received an unspecified amount in the deal and that his wife received $292,000.

In a statement released in Zurich on Thursday, Oerlikon denied that it had paid any bribe to obtain the defense contract.

Liberal Party defense spokesman Doug Frith, leading the attack on the government, told The Associated Press he has no evidence of any wrongdoing by Oerlikon.

But he accused Mulroney’s government of giving preferential treatment to certain bidders ″because of the use of friends in the prime minister’s circle.″

Mulroney told Parliament he knew nothing about the land deal until Jan. 14. Four days later, he sacked Bissonnette and ordered a police investigation.

But he has been asked why, a month after the contract was signed, four civil servants involved in reviewing the bids went to work for Oerlikon.

In addition to the four, Sen. Jean Bazin, friend and adviser to Mulroney, became the company’s lawyer; Roger Nantel, a Conservative campaign adviser, took charge of Oerlikon’s public relations, and Peter Ohrt, formerly Mulroney’s appointments secretary, became an Oerlikon project manager, according to press reports.

Trying to limit the damage, Mulroney pledged in Parliament on Thursday that ″if anyone has violated anything,″ they will be punished. But he rejected opposition calls for a public inquiry, arguing it could impede the police investigation.

A factor in the scandal is Mulroney’s emphasis on his native Quebec province. A fluent French speaker, Mulroney led the Conservatives to stunning 1984 gains in Quebec, taking 58 of the province’s 75 parliamentary seats.

With one-quarter of Canada’s 25 million population, mostly French-speaking Quebec is traditionally Liberal. In the 1980 election, the Liberals won 74 seats to the Conservatives’ one.

Mulroney named 11 people from Quebec to his original Cabinet. The province also got a new federal prison and a lucrative maintenance contract for Canada’s CF-18 jet fighters.

Four of the 11 Quebec Cabinet members, including Bissonnette, have lost their jobs; a fifth minister, Roch LaSalle, is under fire for hiring two aides with criminal records, and Quebec member of Parliament Michel Gravel faces prosecution on bribery and influence-peddling charges.

LaSalle, minister of state without portfolio and an adviser on Quebec, was forced to fire the aides when they admitted to criminal records, disqualifying them for security clearances.

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