In-and-out, explained

After watching the panel debate about in-and-out on The National last night, I decided an explainer is required to address some of the misunderstandings and misconceptions about what is clearly a complex matter.

What is the main issue in the in-and-out affair?
The Conservative Party and four of its officials have been accused of violating the elections law by breaking the party’s spending limit during the 2006 campaign. Charges have been laid under the Elections Act.

Why do spending limits matter?
The restrictions on party spending were put in place to limit the influence of money on the outcome of elections and to “level the playing field” between rich and poor parties. Some believe the limits are unnecessary because Canada also has limits on the amount a person can donate to a political party or its candidates in a year.

How did the Conservatives allegedly break their limit?
The national campaign was limited by law to $18.3 million in total election expenses during the 2006 campaign. Elections Canada believes the party used wire transfers to shift the costs of an additional $1.3 million in TV and radio ads to their candidates, who are covered by separate spending limits of about $80,000 for each riding.

Did the Conservatives alert Elections Canada to the in-and-out scheme?
Not exactly. An Elections Canada auditor noticed the unusual pattern of wire transfers. He spoke to an unsuccessful Conservative candidate and several campaign workers who explained how the national party instructed them to process the wire transfers. One of them called the transactions “in and outs,” giving the affair its name. So Elections Canada was first alerted by candidates or their agents, not the party.

Why did the Conservatives sue Elections Canada?
Because the Chief Electoral Officer of Canada (CEOC), Marc Mayrand, ruled that 67 Conservative candidates could not claim the cost of the disputed ads on their books. He said he did not believe the candidates legitimately “incurred’ the expenses. He refused to let them claim the 60 per cent reimbursement of the expenses to which they’d be entitled. The larger point, however, was that the $1.3 million in advertising costs would have to be claimed by someone else — and that meant the Conservative Party, which would put them over their spending limit, in violation of the Elections Act.

Does this depend on the distinction between national and local advertising?
No. Those distinctions are not an issue in this case. Although the disputed radio and TV ads promoted the national party and not the candidates, the CEOC says he did not consider this in his decision to reject the candidate’s expense claims. His concern was the absence of sufficient evidence that candidates — and not the party — had incurred the cost of the ads.

How much public money is involved?
Not much. If the CEOC allowed the candidates to claim the expenses, they would be entitled to reimbursement by taxpayers of 60 per cent. But if the Conservative Party had claimed the costs, they could have been reimbursed for 50 per cent. The difference is only about $130,000.

Didn’t the other parties do the same thing?
Not according to the CEOC. The major parties all transfer money back and forth between their national campaign and candidate campaigns, and between candidate campaigns. Some parties’ candidates have also participated in pooled media buys — typically, a group of candidates in nearby ridings buy an ad together and share the costs. The CEOC maintains this is fundamentally different because these candidates legitimately incurred the costs of the ads, whereas the cost of the ads claimed by the Conservatives candidates were incurred by the party.

Weren’t the Conservatives exonerated by the first Federal Court decision?
No. The Federal Court did not rule on whether the in-and-out scheme was legal. It said only that CEOC did not have the legal right to refuse to allow the Conservative candidates to claim the costs. The court agreed with the Conservatives on this point. That decision was later overturned by the Federal Court of Appeal.

Is Elections Canada’s position on the in-and-out transfer proved correct by the Federal Court of Appeal?
No. Again, the issue being tested was not the legality of the ad claims. The appeals court said that, contrary to the lower court, that the CEOC did have the right to refuse the expense claims.

Is this a “difference of opinion” between two courts?
The Federal Court of Appeal is a higher court and it has overturned a decision of the lower court. The appeals court is the decision that stands and there is no conflicting ruling outstanding in any other court.

Won’t this case ultimately be decided by the Supreme Court?
Maybe. The Conservatives say they plan to appeal the Federal Court of Appeal ruling. In fact, that means seeking leave for appeal to the Supreme Court — that is, asking the court to hear the case. Most leaves for appeal are rejected because they do not involve new, unresolved issues of law.

Are the charges against the four Conservative officials “administrative”?
Yes. They were charged under the Elections Act, not the Criminal code, so these are not criminal charges.  If convicted, those charged could face maximum penalties of $2,000 fine and one year in jail.

Did Stephen Harper know about the in-and-out scheme?
There has been no evidence presented showing Harper knew about the series of transfers to candidate accounts at the time.

Were there forged invoices submitted?
Elections Canada says they showed the invoices used to back up the candidates’ expense claims to an official with the company that issued them, Retail Media. A company official said she didn’t recognize one of the invoices. She “speculated that this invoice must have been altered or created by someone, because it did not conform to the appearance of invoices sent by Retail Media to the Conservative Party of Canada with respect to the media,” according to the affidavit used to obtain the search warrant for Conservative Party HQ. There is a common misspelling to all of these: “nvoice” instead of “invoice” that may be a result of the duplication of the original invoice. The Conservatives admitted that, for nine ridings, the original invoice sent by Retail Media to the party had been duplicated and customized — with amounts broken down for each riding, and an additional amount for the GST handwritten in. These were literally cut and pasted together. It is uncertain who at the party actually did this. The Conservatives said this was done because Retail Media had mistakenly included all these campaigns on one invoice. Currently, no one has been charged for uttering a forged document.

8 thoughts on “In-and-out, explained

  1. Funny… this blog doesn’t mention the invoicing by Retail Media. The invoices in this case were forged. That’s an important bit to mention:

    There is also no mention of the ethics (or lack thereof) involved. Aside from Inky Mark, Helena Guergis and Dave MacKenzie, no one’s else’s “alarm bells” rang. Seems to me that I would have found it also a little fishy, if asked to partake of it:

    Also, providing a context would be nice. Considering that the election was as close as it was, over-spending on advertising could have significantly altered the end results.

    Calling this is an administrative issue is a lazy, if not biased, comment. I’m not convinced that this is factual at all.

    1. Yeah, I probably should have included a section on the invoices. I’ll update this soonest. It is “administrative” because that is the type of law involved in the charges that were laid. i.e. not civil and not under the Criminal code.

  2. Finally, all of the information I wanted to know, in plain English. This was the only article where I could find out whether or not my MP was involved in the in and out transfer scheme. Thank you, Glen!

  3. The major parties all transfer money back and forth between their national campaign and candidate campaigns, and between candidate campaigns.

    Candidates can’t transfer to one another, in fact. Riding associations can though (I assume outside the election period, though perhaps during as well).

    I realize at a certain point the subtleties detract from the clarity of the overall explanation (and you’ve done an amazing job with that here), but on this one tiny point the distinction is made in the Act.


  4. During the raid of Conservative Party offices in April 2008, did Elections Canada obtain any new relevant material that they did not already possess or was not otherwise available to them absent the raid?

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