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Quebec Liberal funds slammed for mismanagement

QUEBEC -- The Quebec government's regional venture-capital funds failed to comply with conflict-of-interest rules, according to a provincial auditor's report released yesterday, fuelling opposition charges of political favouritism.

Provincial auditor Renaud Lachance concluded that while there was no evidence of fraud or misuse of public funds, he found a number of shabby management practices and unethical conduct.

The report was released just as the Parti Québécois accused Premier Jean Charest's government of playing favourites in the granting of spaces to private daycare operators who had contributed to the Quebec Liberal Party.

The auditor's report showed that in 23 projects, regional fund administrators voted to approve an investment even though it involved one of their companies. As required by the fund's rules of conduct, the administrators had divulged their interests in the projects. But the provincial auditor said the administrators should not have participated in the votes.

The report underscored not only potential conflicts of interest, but also examples of unreported remuneration to fund administrators, the negligent application of investment rules and the lack of strict criteria in determining which companies received money.

Some of the province's 30 regional funds were administrated by only three people, and Mr. Lachance noted that conflict-of-interest situations made it difficult to allocate the money beyond reproach.

In another instance, the auditor found that part of a $1-million investment awarded to a company had been transformed into a personal loan when the company was sold, violating a rule that barred the regional fund from making personal loans.

The auditor was asked last May by government-owned Investment Quebec to examine whether money was being properly managed. The request came on the heels of opposition charges that money was being funnelled into companies owned by provincial Liberals.

Minister of Economic Development Clément Gignac yesterday unveiled new rules for the regional funds that are aimed at preventing conflicts of interest by imposing stricter disclosure requirements.

"There were no illegal acts, no fraud, and no misappropriation of funds. I am acting by telling Investment Quebec to tighten certain rules to make sure there is no conflict of interest or the appearance of conflict of interest," Mr. Gignac said in a news conference yesterday.

© 2007 The Globe and Mail. All rights reserved.

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