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André Thouin, an official with Elections Canada, knocks on the door of Conservative Party headquarters in Ottawa in April 2008 during an RCMP raid of the office. ((Tom Hanson/Canadian Press))

Elections Canada has opened a second front in its battle with the Conservative Party over what it considers systematic attempts to hide national campaign expenses during the 2006 election.

The Canadian Press has learned that chief electoral officer Marc Mayrand has taken the governing party to task for what he describes as failing to properly report the cost of running two regional campaign offices in Quebec.

The $107,000 tab was divvied up and claimed as a shared expense by 15 candidates in Montreal and Quebec City.  

Elections Canada found many candidates never used the regional offices, which were staffed by central party workers involved in what appear to have been national campaign activities.

Mayrand said the regional offices should have been reported as a national campaign expense. Indeed, he says the party itself anticipated — in successive, early drafts of its campaign budget — that the offices would be paid for by the party and would constitute a national expense.

"It is clear that the party incurred all expenses related to both the Montreal and Quebec City offices," Mayrand wrote in a Sept. 8 letter to Senator Irving Gerstein, chairman of the Conservative Fund.

"It also appears clear that the [local] campaigns did not use or benefit from the offices, employees or office equipment."

The letter and related correspondence were uncovered by respected political website PunditsGuide.ca and provided to The Canadian Press.

The party has complied "under protest" with Mayrand's demand that it file a revised campaign financial return, adding on the cost of the regional offices.

But it has also served notice that it intends to challenge the watchdog's order in court.

'In-and-out-scheme' accusations in court

Elections Canada and the Conservatives are already in court over disputed advertising expenses from the 2006 campaign.

Under the so-called in-and-out scheme, Elections Canada maintains $1.3 million in national advertising was improperly reported as a shared expense by 67 Conservative candidates.

The agency alleges the scheme allowed the party to exceed its spending limit and the candidates to claim rebates on expenses they hadn't actually incurred.

Elections Canada lost a civil lawsuit launched by two of the candidates involved in the in-and-out gambit but both the agency and the Tory party, for different reasons, are appealing that ruling.

In the meantime, William Corbett, the commissioner of elections, is still conducting a separate criminal investigation into the in-and-out transactions and has referred the matter to the director of public prosecutions, who is still considering whether to lay charges.

Should Elections Canada prevail and the Conservatives be compelled to record both the advertising and regional office costs as national expenses, that would push the party almost $1 million over its $18.3 million spending limit for the 2006 campaign.

Elections Canada evidence includes leases, phone bills

Elections Canada has compiled a wealth of evidence to bolster its claim that the two regional offices in Quebec had little, if anything, to do with the 15 candidates who claimed expenses for them.

In his letter to Gerstein, Mayrand said an investigation by elections commissioner Corbett discovered leases for the two offices were entered into by the Conservative Fund on behalf of the party, phone accounts were opened in the name of the party and party headquarters in Ottawa was invoiced for office supplies and courier services.

Moreover, the 11 employees of the Montreal office were all included on the central party's roster of employees and their responsibilities appear to have been "far beyond the scope" of the local campaigns they were supposed to be helping.

Indeed, one employee told Corbett none of the staffers worked on any local campaigns and that the Montreal office was actually intended to serve the entire province.

Telephone bills for the Montreal office showed more than 2,000 long-distance calls throughout Quebec and even outside the province to places like Edmonton, Toronto, Malton, Ont., and Moncton, N.B.

Courier shipments from the office also went well beyond the confines of the 10 Montreal ridings the office was supposed to be serving.