A retired Quebec judge has concluded in a report that the federalist 'No' side in the 1995 Quebec referendum campaign illegally spent $539,000.

That figure is far short of the $5 million some sovereigntists had alleged was illicitly used in the campaign.

"It's what you would call a soggy firecracker," remarked Premier Jean Charest.

The money originated from the federal Heritage Department and was part of about $11 million spent prior to and during the campaign by Option Canada and the Council for Canadian Unity (CCU), Bernard Grenier said in his report.

Option Canada, a Montreal-based lobby group, was created by the CCU just eight weeks before the referendum.

The illegal use occurred during the referendum period, between Oct. 1 and 30, 1995.

Under Quebec election rules during the referendum period, the expenses to promote the 'No' option had to be authorized by the official agent of the 'No' committee.

The expenses had to also be paid from one source only, namely a "referendum fund" set up pursuant to the Special Version of the Election Act for the holding of a referendum (SVEAHR).

Grenier found that expenses of $539,460 were incurred during the referendum period, using monies that were not coming from the "referendum fund" and had not been authorized by the official agent.

In Ottawa, Bloc Quebecois Leader Gilles Duceppe demanded a public inquiry to provide more answers into the money's misuse.

"We want to know the truth. The whole truth," he said.

But the federal Liberals countered that any further investigation would also include a probe into the 'Yes' campaign, specifically allegations that scrutineers rejected a large number of 'No' votes in some ridings.

"Irregularities happened in the 'No' camp. What about the 'Yes' camp?" asked Liberal Leader Stephane Dion.

"We know at the ballot box something very untoward happened."

The 'No' side won the 1995 referendum by a razor-thin margin.

No direct blame

Grenier's report does not place direct blame on any major political figure from that era in his report.

"There's no question of criminal charges,'' he told reporters Tuesday.

"It's only an opinion. It's not a judgment of guilt or civil liability.''

Grenier did cite five lesser-known players on the 'No' side of the referendum but only said that he drew "unfavourable conclusions" about them:

René Lemaire, executive director of Option Canada as of Sept. 7, 1995, made several regulated expenses without having obtained the authorization of the official agent of the 'No' committee.

Jocelyn Beaudoin, executive director of the CCU, continued to be involved in certain decisions of Option Canada, which led to unauthorized expenses.

Réjean Roy, financial controller of the CCU and Option Canada, was also involved in the payment of regulated expenses that were not authorized by the official agent of the 'No' committee.

Claude Dauphin, president of Option Canada, while not acting in bad faith, showed a lack of vigilance by receiving remuneration that was not reported and not authorized.

Nathalie Bernier, official agent of the 'No' committee, accomplished her work with integrity, but chose not to make sure that Option Canada would not make unauthorized expenses and would report the regulated expenses that it made.

Option Canada was headed by Beaudoin who was later named by the Charest government as Quebec's representative in Toronto.

He later agreed to a paid leave of absence after the book, "Les Secrets d'Option Canada (The Secrets of Option Canada),'' exposed the scandal.

The book alleged that Option Canada received $5.2 million from the federal Heritage Department to promote linguistic duality but that the money was instead used to boost the 'No' committee finances.

Charest's former chief of staff, Alfred Pilon, and an aide to then-federal finance minister Paul Martin, Claude Dauphin, were also both key players in Option Canada.

Dauphin was mentioned in the report for lack of vigilance and for unauthorized and undeclared remuneration.

Unlike the Gomery Commission hearings into the federal sponsorship program, Grenier's witnesses testified in private -- including Quebec Premier Jean Charest in April.

There was speculation that Charest would be targeted as he had served as vice-president of the 'No' Committee. However, he emerged.

Quebec's political leaders are currently looking for a way to defuse a conflict over the provincial budget that could trigger the second provincial election in a matter of months.

Charest is looking to compromise on the provincial budget but will stop short of doing away with the massive tax cut that threatens his minority government.

With a report by CTV's Jed Kahane and files from The Canadian Press