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Tories win 'in-and-out' advertising feud

The federal Conservatives have won a court victory over Elections Canada in a case that saw Mounties raid Tory party headquarters over $1.2-million in contested advertising expenses during the 2006 federal election.

But the opposition says the court ruling won't end the controversy.

Federal Court Judge Luc Martineau on Monday rejected claims by Elections Canada that advertising expenses attributed to Tory candidates should have been reported as expenses for the national Conservative campaign.

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The ruling means Elections Canada will have to reimburse 67 candidates for thousands of dollars each in campaign expenses.

It also means the Conservative party has dodged the prospect of having illegally exceeded its campaign spending limit by more than $1-million.

Still, Judge Martineau questioned the "legitimacy" of the so-called "in and out" advertising scheme because of the effect it could have on the fairness of electoral spending law.

The Liberals argued Judge Martineau restricted his ruling to technical aspects of the scheme. And they noted that he said a separate and ongoing investigation by the federal election commissioner will decide if election laws were violated.

"In no way is this settled," said Liberal MP Marlene Jennings.

She said Judge Martineau merely ruled that Elections Canada must certify that the expenses by 67 Conservative candidates qualify for a 60-per-cent rebate under federal election law.

New Democrats said the ruling has revealed a loophole in the Canada Elections Act that will allow parties with large campaign war chests to divert cash to local campaigns and avoid national spending limits.

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"It's still illegitimate," said NDP national director Brad Lavigne. "The whole point of having central and local spending limits is to level the playing field in all areas."

Nonetheless, the decision was a major victory for the Conservative party in the court case that was launched nearly three years ago.

Conservative MP Pierre Poilievre called it a "devastating blow" to Elections Canada and a "total vindication" for the party, claiming Elections Canada has wasted more than $1-million on its parallel investigation into the advertising.

Under the in-and-out scheme, party campaign headquarters transferred money to local candidates, which was immediately sent back to the national party to pay for campaign advertising. The ads were primarily national in nature, featuring Prime Minister Stephen Harper, then opposition leader, but were claimed as local expenses by the candidates.

In April 2007, Chief Electoral Officer Marc Mayrand ruled the candidates could not claim the advertising expenses because the ads did little to promote individual candidates and the cost had actually been incurred by the federal party.

But Judge Martineau cited Elections Canada handbooks and rules that contradict the election agency's claim that advertising must be limited to promoting or opposing the election of a candidate. Moreover, he said documentary evidence in the lengthy case showed the candidates themselves incurred the expenses even though the scheme was managed by the party.

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His decision was based on the cases of two official agents for candidates, one in Halifax and the other in London, Ont., but the ruling will likely apply to all 67 candidates.

Judge Martineau said election law allows the kind of financial transfers the Conservative party organized for its candidates, and also allows the candidates to then use the money to pay the party for advertising.

Past practice and the Canada Elections Act provisions show "it is not illegal for a party to incur expenses on behalf of a candidate and then bill a candidate for those expenses. Similarly, it is not illegal for a party to acquire goods or services and then resell them to a candidate."

Judge Martineau, however, expressed reservations about the system, and hinted Parliament should consider changes to the Elections Act.

"There is a fundamental distinction between legality and legitimacy," he said. "As far as the overall legitimacy of the ... program is concerned, this is a debatable issue, which is better left for public commentary and debate by all interested persons outside the courts."

Judge Martineau also ruled at least one of the candidates did not pay full market value for his share of the advertising and will have to report the amount as a non-monetary contribution from the party. That aspect will not affect spending ceilings for any of the candidates or the party.

Judge Martineau awarded costs in favour of the Conservatives, meaning Elections Canada will have to pay the party's legal bills on top of the $290,642 it spent on its own legal fees as of last August.

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