MONTREAL — A federal bureaucrat told the sponsorship inquiry Tuesday that she helped to hide a paper trail related to a federally sponsored event in Italy, acting on a request from former public works minister Alfonso Gagliano.

Huguette Tremblay, who worked in the Public Works department in the 1990s, is the second bureaucrat to allege the department took steps to prevent sponsorship transactions from appearing on its books.

Tremblay said the event in question was a $6,850 contract used for a "Piazza Canada" plaque to be erected a town square in San Martino, Italy. The money was spent despite the fact the sponsorship program was created to increase the federal profile in Canada -- not foreign countries.

Tremblay said her boss, Chuck Guite, came to her in 1997 with directives from Gagliano to hide the true source of the plaque project's funding.

"Guite told me Mr. Gagliano wanted to put money from the sponsorship program into this event that was taking place in Italy, but that there must not be a paper trail in our government (office)," she said under questioning from commission lawyer Guy Cournoyer.

Asked by Cournoyer whether the directives came from Gagliano himself or officials in his office, Tremblay replied: "Mr. Guite told me the minister himself."

She said Guite wanted to make sure that the event did not appear on a list of sponsored events that was stored in the department's computer files.

Tremblay's version of events was corroborated during testimony later by Mario Parent, a former communications executive at a Montreal firm that handled the contract.

The inquiry has already heard the Piazza Canada project was among several events paid for by a $500,000 annual discretionary sponsorship fund for "unforeseen events."

Most of the events were Italian-themed or took place either in Gagliano's riding or the riding of former prime minister Jean Chretien.

Gagliano's lawyer, Anouk Fournier, said during cross-examination of Tremblay that it was unlikely Gagliano was involved in a coverup.

The lawyer noted he posed for photographs at a ceremony in Italy related to the plaque.

In a second case that took place under Gagliano's watch, Tremblay said bureaucrats were asked in 1998 to remove any proof that $5,000 in sponsorship money financed a benefit dinner held by an Italian community group.

Jean Carle, once an adviser to Chretien, admitted last month to creating a fake paper trail related to another sponsorship file.

Inquiry judge John Gomery compared the operation to "money-laundering."

Also on Tuesday, the inquiry heard that taxpayers doled out $283,000 from 1997 to 1999 for a luxury box at Ottawa's Corel Centre.

Documents show Gosselin Communications Strategiques, a major sponsorship contractor at the time, bought the box but then sent a bill to the government.

The documents also indicate Gosselin employees often billed taxpayers for time spent in the box during events such as concerts by popstars Neil Diamond and the Backstreet Boys.

Staff also used the suite during a World Wrestling Federation show.

Company president Gilles-Andre Gosselin told the inquiry that Guite asked him to the purchase the box, which he and the bureaucrat used to entertain clients.

Asked why taxpayers footed the bill, Gosselin replied: "All the bills for the all of the events were sent to Mr. Guite ... He decided who went to the box."