WESTON: Campaign expenses scandal could scorch Tories

Stephen Harper had been prime minister barely nine months when a suspect invoice for Conservative campaign expenses set off alarm bells in the audit department of Elections Canada.

Almost five years later, that one dubious document and a sharp-eyed federal auditor have ignited a political firestorm threatening to scorch the Harper government on the eve of a possible election.

Last week, the Director of Public Prosecutions filed charges against four former Conservative Party executives for election spending violations in the 2006 campaign.

Now the Federal Appeal Court has ruled the Conservative Party engaged in a deliberate scheme that circumvented election laws in 67 ridings.

The latest court ruling suggests the Conservative Party first elected on a promise of ethical and accountable government didnt get there playing by the rules.

Perhaps worst of all, if the so-called "in-and-out scheme" had been successful, Conservative candidates would have unjustly collected more than $800,000 of taxpayers' money from election rebates they weren't owed.

PM remains unrepentant

The prime minister and his party remain unrepentant, dismissing it all as much ado about nothing, apparently hoping the complexities of the issue will cause voters' eyes to glaze over.

"It is an administrative dispute with Elections Canada," as Harper put it Tuesday. "We have a difference of opinion on this."

So far, there are at least a few people in authority who think differently.

The Chief Electoral Officer, the Commissioner of Elections, the Director of Public Prosecutions, an entire three-judge panel of the Federal Appeal Court all have now taken actions against the Conservatives.

At the very least, the evidence presented to the courts so far suggests the in-and-out scheme was no simple misunderstanding.

Rewind to the 2006 election.

The plan was apparently hatched in the midst of the campaign as the national Conservative Party was reaching its legal spending limit of about $18 million, but wanted to spend more on advertising.

Local candidates involved

Individual Conservative candidates had their own legal election expense limit of about $80,000, and lots of them weren't planning to spend anything close to that amount.

To understand what happened next, take the case of one Ontario Conservative candidate.

Her campaign hadn't spent anything near the allowable $80,000 limit for the riding.

The party sent her campaign $29,999 on the strict condition her campaign immediately transfer the same amount back to the national party.

In return, the party issued an invoice showing her campaign had just bought local advertising worth $29,999.

The party used the money to continue its mostly national advertising blitz, while the local candidate later got to claim a 60 per cent rebate of her expenses from the government.

In her case, that meant a cheque for $18,000 from taxpayers for local advertising that never happened.

Well, she almost got the money.

Auditor became suspicious

Nine months after the campaign, Elections Canada auditor Rani Naoufal was reviewing the Conservative candidates' claims for rebates and became suspicious.

No wonder.

In total, 65 Conservative candidates had submitted nearly identical invoices; only the dollar amounts were different.

The invoices were on the letterhead of the Conservative Party's advertising purchasing agency, Retail Media.

But an Elections Canada investigator later reported that Retail Media didn't seem to know anything about the documents, with a company spokesperson saying they didnt even look remotely like the firm's standard invoices.

One executive of the ad company "speculated that this invoice must have been altered or created by someone."

So were the other 64 invoices, in total showing $1.3 million of local advertising expenses worth a federal rebate of more than $800,000.

Elections Canada discovered most Conservative candidates didn't seem to have a clue what they were claiming.

One is quoted in court documents as saying: "I think we contributed to TV national advertising. There was no way we could spend our limit so we were asked if we can help contribute."

The appeals court was blunt, saying the ads weren't local at all.

"The advertisements themselves were national in nature, had no connection with local issues, and did not feature the candidates."

In the end, Elections Canada ruled the Conservative candidates couldn't claim the invoices as expenses, and refused to issue the more than $800,000 in total rebates.

The Conservatives sued to get their cash, arguing in part that Elections Canada had no business verifying expense claims, or even checking to ensure the documents were authentic.

Court ruling

Two years ago, a federal court judge ruled the Conservatives should get their money.

Yesterday, the appeals court savaged that ruling and upheld Elections Canada's duty to protect the public purse.

The four senior Conservatives facing charges are due in court later this month.

Meanwhile, Harper and his party say they will appeal this week's appeal court ruling.

After all, it's just a difference of opinion.