UPDATED: Conservative Party Appeals Aspect of “In-and-Out” Ruling
May 21st, 2010
Joan Bryden of the Canadian Press is reporting some significant developments in the case concerning the proper method of accounting for advertising expenses by the Conservatives in the 2004 and 2006 elections — the so-called “In-and-Out” case.
[Here's that fantastic explanatory graphic again from the Ottawa Citizen's Robert Cross. Click on it to view the enlarged version.]
Recall that in January, Judge Martineau found that in-and-out transfers of funds per se are fine (as they always were), and that the content of a candidate’s ads can promote the candidate OR the party OR the leader, as always used to be the case. (The Chief Electoral Officer had argued that the ads *had* to promote the candidate in order to count as a candidate’s election expense.)
*** [UPDATE: I'm appending the full text of their original argument below, to do it proper justice, in case I've misunderstood some of the subtleties.]
But the court also ruled that there has to be a reasonable basis for allocating costs of regional ad buys between the local campaigns, based on their market value to the campaign (not on the basis of how much room they have left under their spending limit); and that the difference between what the candidate’s campaign paid and the market value of those ads to the candidate’s campaign is to be considered a contribution in kind (and thus counts towards the candidate’s spending limit; note that only paid expenses are rebatable under the Elections Act).
This last finding, however, requires further clarification in the view of the Conservative Party, who are asking in their appeal whether such an allocation can be forced on a candidate’s campaign. They are arguing that the effect of the ruling would be to prevent certain candidates within a given regional media market from participating in the regional buy, were every other candidate in the area unable to participate to the same extent. In other words, the riding campaign with the least means to participate should not determine the level of participation of its neighbouring ridings, they appear to be claiming.
While the Conservatives are arguing the point from a Charter freedom of speech perspective, we can also note that only an official agent can approve a candidate election expense. Indeed elsewhere in the same ruling Judge Martineau found that if a candidate’s official agent paid an expense, that in and of itself is sufficient evidence that the candidate’s campaign approved of the expenditure. However we can assume that the official agents did not agree to this revised market-based allocation. I suppose it’s for the Finance department of Elections Canada to decide whether a claimed market value is reasonable in other cases, though, so in the end if this ruling stands I guess they’ll have to do it here as well.
Anyways, in light of the appeal, Elections Canada has moved to request a stay of Judge Martineau’s ruling pending its outcome (i.e., they’ve asked that it not take effect right away until a decision on the appeal can be handed down). In doing so, they argue that the effect of that finding would be to retroactively put some 10 Conservative candidates over their 2006 spending limits. They calculated the hypothetical impact of that finding on the campaign expense returns of the 65 affected candidates, and found 10 who would be so affected, including 4 current Members of Parliament, 3 of whom now sit in Cabinet. According to the submission (here I’m quoting from the CP story that quotes the submission):
If the ruling is allowed to stand, the four sitting Tories and up to six former candidates could face charges. If convicted, they could be barred from running again or even be barred from sitting in the House of Commons, much less cabinet.
Because of the potentially grave consequences, Elections Canada is asking that Justice Luc Martineau’s ruling be stayed until the appeals are completed.
“These nine or 10 candidates could face prosecution and, if convicted, face significant consequences,” the independent elections watchdog argued in an affidavit filed with the Federal Court of Appeal late last month.
“In particular, three could lose their current appointments as ministers.”
“Apart from any conviction,” the agency goes on, “this option would cast doubt on the legitimacy of the election of the four candidates … who are current members of Parliament.”
According to the Canadian Press, the four sitting members are (click on the riding name to view the campaign finance metrics for the candidates in those ridings, which in turn link to the candidate’s returns at Elections Canada):
|$ Now Potentially
|BERNIER, Maxime||Beauce, QC||$81,497||97%||$20,138|
|CANNON, Lawrence||Pontiac, QC||$89,728||80%||$7,618|
|PARADIS, Christian||Mégantic – L’Érable, QC||$75,377||95%||$10,188|
|VERNER, Josée||Louis-Saint-Laurent, QC||$79,200||94%||$13,304|
Bryden is also reporting that while the Commissioner of Elections’ investigation of the allegedly fraudulent aspects of the advertising arrangement is continuing, Commissioner William Corbett had already referred the matter to the Director of Public Prosecutions last June. As yet no charges have been laid, nor has any decision been reached along those lines, according to the director’s spokesperson.
I’ve argued before that there are valid issues here both for the Chief Electoral Officer to examine, and for the Conservative Party to litigate in the interest of obtaining a clearer definition and direction in the manner of how, if at all, election expenses might be transferred from a central campaign to a candidate’s campaign or back again. It’s probably not helpful for any step along the way to be characterized as an utter defeat or a “sweeping” victory, as these are complex issues whose full impacts might not be fully appreciated on first examination, as we’ve just seen.
Meanwhile, if I’m able to obtain the names of the other six affected former candidates, I’ll update this post with their details as well.
*** Here are the relevant paragraphs from the original submission of Elections Canada on the point I tried to summarize:
145. Subsection 407(4) clarifies that “cost incurred” in subsection (1) means an expense that is incurred by a registered party or a candidate, whether it is paid or unpaid. An expense is incurred when the legal liability is created.
146. It should also be noted that the word “promote” in subsection 407(1) is used in its primary and broadest sense and captures any expense that supports the candidate in his or her effort to be elected, including, for example, office supplies. It is not confined to the narrow sense of promotion in relation to advertising content that explicitly endorses a named candidate or party.
147. Accordingly, an election expense is (i) an expense incurred by the entity reporting the expense, (ii) the goods or services in respect of which the expense is incurred were used during the election period, and (iii) the goods or services in respect of which the expense is incurred directly promote the entity incurring the expense. This third element is referred to as “the purpose test”.
148. The position of the Respondent has consistently been that the refusal to certify the RMB expenses claimed by candidates was based on the fact that the CEOC was not satisfied the expenses were incurred by the candidates.
149. The Applicants nevertheless insist that “although Elections Canada never admitted the importance of the content of the ads to the Decisions, [...] the CEO considered the “national” content of the ads” and that “this played a crucial role in the Decisions.” [para. 159] On that basis, the Applicants, in their memorandum, put forward an argument that it is permissible for candidates to incur expenses that promote a party or its leader.
Reference: Applicant’s Memorandum, para. 159, Applicant’s Record, Vol. VII, Tab 22, p. 2415.
150. The interpretation advanced by the Applicants is unnecessary if it only serves to justify expenses for advertisements that do not explicitly mention the candidate claiming the expense. Such an ad may well promote the candidate (in the broad sense in which “promote” is used in s. 407).
151. If, however, the interpretation advanced by the Applicants is that a candidate may incur elections expenses that promote the party in the broad sense, and vice-versa, the Respondent submits that such an interpretation, while irrelevant to these proceedings, is inconsistent with the legislative scheme of the Canada Elections Act, and would lead to an absurd result.