Tories overspent on election by $1M: warrant

The federal Conservatives are accused of exceeding their campaign spending limit by more than $1 million, and making "false and misleading" statements in their financial returns in the last election, Elections Canada says in the warrant for last week's raid on party headquarters in Ottawa.

According to the documents, Elections Canada alleges the Conservatives overspent on election ads by disguising national ads as local expenses in an elaborate plan that involved the participation of 67 candidates — including four cabinet ministers.

The documents, some 700 pages that include search warrants and a sworn affidavit supporting the raid, allege the Conservatives engaged in a so-called "in-and-out" scheme — directing money to local candidates, who then transferred the funds back to the party to spend on more advertising for the national campaign.

The affidavit, signed by Elections Canada investigator Robert Lamothe, said this scheme allowed the party "to spend more than $1 million over and above" the legal campaign limit of $18.3 million set out under the Canada Elections Act.

This funnelling was "entirely under the control of and at the direction of officials of the Conservative Fund Canada and/or the Conservative Party of Canada," the 68-page supporting affidavit for the warrant said. "The Conservative Party of Canada exceeded its election expense spending limit for the 39th federal general election."

The documents also allege the party's financial arm, the Conservative Fund of Canada, filed returns "that it knew or ought reasonably to have known contained a materially false or misleading statement."

The candidates were chosen because they had not reached the riding spending cap, according to the documents. In turn, they were encouraged to apply for rebates for expenses totalling $777,000 that were later rejected by Elections Canada, the CBC's Susan Bonner reported.

According to the documents, a legal representative for one of the Tories' candidates in Toronto expressed reservations about the accounting plan, saying he "found this move was being a little too creative."

The documents include an alleged e-mail to Conservatives from Retail Media, the company the Tories used to buy advertising time, in which the company writes: "While our thinking is that this option would be legal, we are not certain beyond all reasonable doubt."

Party bars some reporters

CBC News and the Canadian Press obtained a copy of the documents before they were released Monday by an Ontario court.

Other media, including the Toronto Star and CTVglobemedia, received the documents in a private briefing from the Conservatives on Sunday in Ottawa, the CBC's Keith Boag reported.

When other media organizations, including the CBC, learned of the meeting, party officials scrambled to avoid them, switching hotels, slamming doors and scampering down fire exits to escape pointed questions from journalists who weren't invited.

Boag said CBC News asked to attend the briefings, but was rejected and told by party spokesman Ryan Sparrow that it was a "private meeting."

Reporters from the Canadian Press, Maclean's magazine and Canwest Global Communications Corp., along with others, were also excluded.

Giving some reporters a briefing before Monday's court release of the warrant gives the party a chance to shape the story, but it also creates the impression that the Conservatives need to spin it, Boag said.

Allegations suggest Tories 'cheated': Dion

None of the allegations in the documents have been proven in court.

The Conservatives maintain they did nothing wrong and have said last week's raid is linked to a civil lawsuit the party has launched against Elections Canada.

But opposition parties said the matter is more than a debate over election spending rules. Liberal Leader Stéphane Dion said the documents suggest the Tories "cheated" in the last federal election campaign.

"The allegation is that the Conservative Party cheated at the last election, the Conservative headquarters of the campaign cheated at the last election, tried to cover it up after and [were] caught," he told reporters in Montreal on Monday.

Dion said the alleged scheme "may have had an effect" on the 2006 election results, which saw the Liberals ousted from power.

"We'll never know for sure, but you don't cheat for nothing," he said. "You cheat because you want to have an effect. You want to have more voters for you in an illegal way."

Liberal House leader Ralph Goodale also criticized Sunday's private media briefings, calling them part of the Conservatives' "control-freak mentality."

"They're scrambling desperately to control the spin," he said. 

NDP Leader Jack Layton echoed Dion's concerns about the 2006 election outcome, saying $1 million could have made a difference in a tight race.

"We all know the Conservatives have a lot of money in their political war chest, but it is very important that everybody follows the rules," Layton said Monday. "Otherwise, you haven't got a level playing field for democracy."

He also accused the Tories of abandoning their 2006 campaign pledge to improve transparency in the federal government in the wake of the sponsorship scandal.

"Canadians are wondering, 'Where is this ethical government we were promised? Where is this change from all these years of scandals?'" he said.

Bloc Québécois Leader Gilles Duceppe said the Tories' media strategy with the documents echoed Prime Minister Stephen Harper's desire to control the message. 

"I think this is a control freak," Duceppe told reporters Monday in Montreal. "The old Reformist Stephen Harper is reappearing. He is showing himself. The real nature of Stephen Harper is clear now, and this is not the kind of society we want to live in."

Difference in 'interpretation': Van Loan

In an interview with CBC News on Monday, government House leader Peter Van Loan reiterated the Conservatives' position that the matter was a "dispute" between the Tories and Elections Canada over what he called a "legal interpretation of what a local riding can advertise on."

He said his party "always encouraged" local riding campaigns to spend as fully as they could, and added Elections Canada was taking the position that local candidates can't advertise using the same message as their national parties.

"We disagree with them," Van Loan said. "We say that a local riding campaign should be free to advertise on national messages if it wishes, and that Elections Canada shouldn't get into controlling the content."

The search was "very unusual," he said, because the party has provided every document Elections Canada has requested.

"Everything we did was fully disclosed, fully transparent," he said.

Elections Canada said the RCMP executed the search warrant at the request of William Corbett, commissioner of elections.

Corbett, who enforces the Canada Elections Act, launched an investigation in April 2007 after chief electoral officer Marc Mayrand challenged Tory spending claims in the 2006 election.

Soon after Corbett launched his investigation, the Conservatives went to Federal Court in an attempt to force Mayrand to reimburse the expenses to the Conservative candidates. That case has not yet reached the hearing stage, with the party and Elections Canada still filing evidentiary briefs.

Candidates knew little of ad program

Even before last week's raid, Elections Canada had obtained numerous statements from party candidates and invoices from the Toronto-based advertising agency Retail Media.

Investigators also talked to Retail Media executives, including chief operating officer Marilyn Dixon, who when shown one candidate's invoice, speculated that it must have been "altered or created by someone" since it didn't conform to the appearance of the company's invoices.

Elections Canada investigators conducted interviews with 14 Conservative candidates and or their official agents. Sixteen others declined, saying they were advised by counsel to the Conservative Party of Canada not to speak with them without their lawyers present.

Conservative candidates and their agents appeared to have no knowledge of the party's advertising arrangement.

Douglas Lowry, agent for Toronto's Trinity-Spadina riding candidate Sam Goldstein, said he was contacted by the Conservative Party of Canada and asked if he was expecting to exceed his spending limitation cap.

He responded that he would likely be $50,000 below the cap. The party then proposed putting that amount into the candidate's campaign account, stating that if the candidate received at least 10 per cent of the vote, the campaign would receive a rebate of 60 per cent of those expenses, as is the rule under the election laws, Lowry says.

"There was no discussion pertaining to the advertising or its benefit to the Goldstein campaign," the affidavit says. "Mr. Lowry was simply instructed to post the funds as an advertising expense, and he did so."

Goldstein neither confirmed nor denied his involvement in the media funding program, the affidavit says.

Steve Halicki, the Conservative candidate in York South-Weston, said he doesn't believe the party did anything wrong.

He said anything that promotes the party's leader and policies helps local candidates and the party should get credit for that in its accounting.