The Surete du Quebec arrested a former Montreal bureaucrat and another man Wednesday after city computer contracts were allegedly defrauded of up to $10 million.

Former computer-department manager Gilles Parent and alleged accomplice Benoit Bissonette are charged with fraud, breach of trust and making false documents.

Both men appeared at the Montreal courthouse on Wednesday afternoon and were released on a $15,000 bail.

Inside man

Parent once ran the city's computer department and had the power to award lucrative contracts to consulting firms. The city noticed accounting problems in his department last year and Parent was subsequently fired.

Killer Whale

The police operation, dubbed Epaulard (Killer Whale), began in July 2008 after the city called in the police to investigate apparent wrongdoing.

The city suspects that subcontractors were overbilled through a system of fake invoices and that someone pocketed the difference.

Suppliers are now on the hook for some of the cash - only $6 million of the $10 million has been found.

Defence

Parent's lawyer, Philip Schneider, says the city is exaggerating the amount of the fraud.

"It's a fraud of approximately $4 million," Schneider told reporters at the Montreal courthouse.

Bissonnette's lawyer says his client might actually be able to clear his name.

"Sure there can be an explanation, there will be explanations in due time," said Marc Labelle.

A pattern?

The case is just one of five police investigations regarding alleged illegal activities at city hall as Mayor Gerald Tremblay runs for re-election in November.

Tremblay's administration claims the arrests prove that the city is able to clean house.