Inside Montreal's Mafia Wars

In the back room of the Cosenza Social Club, a strip mall café in an Italian neighborhood of Montreal, the city's top mobster held court over piles of cash.

Hours of surveillance video captured by the RCMP, Canada's national police, show the since-assassinated godfather of Montreal's powerful Mafia, Nicolo Rizzuto, in variations of the same scene: counting bills, pausing only to lick his fingers, and stuffing the bundles in his knee-high socks.

No one is surprised that the mob conducts its illegal activities in cash. Shocking many, however, are revelations about the source of the money - a Mafia-controlled scheme that rigged bids and dispensed bribes on Montreal public construction contracts.

The scam, revealed in an ongoing corruption inquiry in Montreal, added an estimated 30 percent to the cost of municipal construction projects in Canada's second-largest city - a corruption tax paid, in the end, by the city's taxpayers.

The scheme reached deep inside city hall, and on Monday night it led to the downfall of Montreal's long-serving mayor, Gerald Tremblay. He announced his resignation while insisting he would eventually be cleared of wrongdoing, and blaming the scandal on political allies and close associates.

"The trust I had in some was inevitably betrayed. I assume the full responsibility," Tremblay said in a brief speech at city hall. "I now must suffer an unbearable injustice. I never thought my life would be subjected to such a fury in a society of law and justice. But one day, justice will prevail."

Tremblay, 70, is resigning a year before the end of his third mandate. He likely won't be the last politician in the French-speaking province of Quebec to see his career cut short by the widening scandal over the awarding of public works contracts. The corruption inquiry, appointed by the provincial government, has already raised suspicions about other mayors and senior politicians with the provincial Liberal Party.

The RCMP captured the café videos with hidden cameras during 2004 and 2005. They show a stream of bosses from major construction firms paying homage to Mafia boss Rizzuto, some by handing over wads of cash.

To the incredulity of many, the RCMP sat on the evidence. It was investigating the Rizzuto clan's drug-smuggling operations and considered the construction fraud "non-pertinent." The videos came to light when the corruption inquiry began its work last month and demanded they be introduced as evidence.

The most explosive testimony has come from Lino Zambito, one of the construction bosses seen in the café videos. He said construction firms paid 2.5 percent of the value of city contracts to Rizzuto and 3 percent to Union Montreal, the ruling municipal party headed by Tremblay.

"Yes, entrepreneurs ran a system that wasn't legal, but I can assure you that at other levels there were politicians who were aware of what was going on," testified Zambito, who faces criminal charges involving a municipal contract.

Captured on video visiting Rizzuto in the café are representatives of at least eight of the biggest companies dealing with Montreal city hall. These firms received $500 million worth of city contracts between 2006 and 2009.

City hall has responded to the bombshell accusations by suspending all non-emergency contracts for roads, waterworks and sewers. Tremblay, a former provincial cabinet minister with the Liberal Party, initially insisted he wouldn't resign.