Tories plead guilty in 'in-and-out' affair

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Glen McGregor – November 11, 2011

After four years of denying any wrongdoing, the Conservative Party and its fundraising arm have pleaded guilty to overspending on advertising in the 2006 election campaign and violating Canada's electoral law in the long-running "in-and-out" case.

The party and its fundraising arm, the Conservative Fund Canada, each entered guilty pleas to two reduced Elections Act offences in an Ottawa courtroom Thursday afternoon after forging an agreement with Crown prosecutors.

The Tories admitted to exceeding the $18.3-million spending limit imposed by law during the 2006 campaign and filing an election return that did not report all the expenses incurred.

The Crown agreed to withdraw related charges against four Conservative officials, including two sitting senators, Irving Gerstein and Doug Finley, saying it wouldn't be in the public interest to continue to prosecute.

Judge Celynne Dorval of the Ontario Court of Justice assigned the stiffest penalties available under the law for the two counts each against the party and fund. In total, they will pay $52,000 in fines - the statutory maximum - but just a fraction of the amount prosecutors say was illegally transferred from the party to its candidates to fund advertising purchases during the final weeks of the 2006 election race.

The total fines also represent only a small share of the costs Elections Canada and prosecutors spent investigating the politically-charged allegations.

Even as the party admitted it had broken the law, the Tories showed no sign of contrition and issued a statement claiming they had scored "a big victory" in the long-running case, noting that no individuals were found to have done anything wrong.

"The Conservative Party of Canada plays by the same rules as everyone else; we acted under the law as it was understood by Elections Canada at that time," the party said.

With the agreement of the Crown, the party and fund pleaded guilty to different charges than what was originally brought against them in February after long investigations by the Commissioner of Canada Elections and, later, the director of public prosecutions.

In court, lawyer Mark Sandler, who represented the party and the fund, claimed the reduced "strict liability" charges his clients pleaded to reflect any mistakes made were unintentional.

But speaking to reporters after the hearing, Crown prosecutor Richard Roy said the penalty would have been the same, no matter which charge was pleaded to.

Dorval congratulated both parties for reaching a resolution, noting that a conviction on the original charges would not have changed the amount the defendants paid in the maximum sentence.

"These offences are regulatory in nature but, nonetheless, are significant to the democratic process," she said. "Establishing the limit to election expenses is important to the fair democratic process. These offences show negligence by the party in respecting those limits."

Asked why he withdrew charges against party officials, Roy said once the party had agreed to plead guilty, there was no longer any public interest in persisting against Gerstein, Finley and two other former party executives, Michael Donison and Susan Kehoe.

The plea agreement saves the Tories from risking the potential embarrassment of having two of its Senate appointees found in violation of the act, while the reduced charges enable the party to spin that it made an honest mistake in its accounting. Prosecutors walk away having secured the same maximum penalties available had the court issued a verdict against the defendants, without the time and expense of a long trial.

The prosecution of the offences that concluded Thursday is related, but distinct in law from the ongoing litigation between the Conservatives and Elections Canada over interpretation of law governing the transferring of expenses. The Federal Court of Appeal ruled against the Conservatives in the civil litigation earlier this year, but the Supreme Court of Canada last month agreed to hear an appeal.

"Elections Canada notes that the prosecution reinforces the importance of the spending limits for ensuring the fairness of our electoral system, including the distinct election spending limits for candidates and political parties," the agency said in a statement released Thursday.

At issue in both the Elections Act charges and the civil case were attempts by the Conservatives to offload advertising costs onto its candidates as it approached its spending limit in a lengthy campaign that spanned from November 2005 to January 2006, a campaign the Tories won.

The party used a series of wire transfers to move money into and then out of the local campaigns. An advertising agency later issued invoices to the local campaign, which are covered under their own spending limits. Elections Canada contended the transfers were a scheme to evade the national campaign's spending limits.

The prosecution said the Tories overspent their limit by $1.2 million but, in the statement of facts, the Tories acknowledge exceeding the cap by only $420,000.

Since the Citizen first revealed the in-and-out scheme in a series of stories in August 2007, the Tories have maintained the transfers were legal and common practice among other parties. Conservative MPs went so far as to allege Chief Electoral Officer Marc Mayrand - who was appointed by Prime Minister Stephen Harper - was acting out of a bias against their party.

The plea Thursday marks the first time the Conservatives have admitted they broke the law.

The in-and-out case, sometimes hard for observers to follow for all its accounting intricacies, became politically electric when Elections Canada investigators raided the Conservative Party headquarters on Albert Street in April 2008, with the assistance of RCMP investigators.

Original article on Ottawa Citizen website