Agreed Statement of Facts
- The Canada Elections Act (The Act) sets out a procedure for determining the spending limit for election expenses for a political party participating in a federal general election. The Act also indicates who can incur election expenses for a political party and how the election expenses are to be accurately reported after an election. The Chief Agent of a political party is responsible for administering and reporting the financial transactions of a political party. This includes incurring and paying expenses, and reporting on expenses.
- The Act also sets out spending limits for election expenses for a party’s candidates. A candidate’s Official Agent is responsible for administering a candidate’s financial transactions for his or her electoral campaign. This includes incurring and paying expenses and reporting all election expenses, according to the Act.
- A political party may transfer funds to its candidates but it may not transfer its own incurred expenses to its candidates’ campaigns. “
Election expense” is defined in s. 407 of the Act which reads:
407(1) An election expense includes any cost incurred, or non-monetary contribution received, by a registered party or a candidate, to the extent that the property or service for which the cost was incurred, or the non-monetary contribution received, is used to directly promote or oppose a registered party, its leader or a candidate during an election period.
- After an election, political party expense returns and individual candidate expense returns are filed with Elections Canada, setting out the financial aspects of their respective campaigns. The returns form the basis for statutory rebates from public funds. Candidates who received at least 10% of the vote receive rebates of 60% of paid election expenses up to their spending limit.
- The 39th federal general election campaign was held between November 29, 2005 and January 23, 2006. This campaign period of 56 days was longer than the usual campaign period. Campaign periods must be at least 36 days.
- In that election campaign, the Conservative Party of Canada (the Party) through its Chief Agent, the Conservative Fund Canada (the Fund), was limited to a statutory election expense spending limit, or ‘cap’ of $18,278,278.64, based on a formula provided in the Act.
- In addition, each candidate in each electoral district was limited to a statutory election expense spending cap that varied from electoral district to electoral district, based on a formula provided in the Act.
- Throughout the 39th general election, Doug Finley (“
Finley”) served as the Director of Political Operations for the Party, acted as National Campaign Manager of the Party for the election, and was responsible for campaign strategy, the apportioning of election budget expenses and the approval of all campaign expenditures. Michael Donison (“
Donison”), the Executive Director of the Party and ex-officio member of the Board of Directors of the Fund, carried out various tasks, including those assigned to him by Finley. Susan Kehoe (‘Kehoe”) was Chief Financial Officer of both the Party and the Fund and carried out tasks related to the control and expenditure of money and the apportionment of costs. Irving Gerstein (“
Gerstein”) was Chair of the Fund and an officer of the Party. He controlled the distribution of funds generally, and signed the Party’s election expense return. Campaign payments, including transfers of monies to candidate campaigns, in excess of $25,000 required the signature approval of both Kehoe and Gerstein, otherwise Kehoe’s signature sufficed. Finley, Donison, Kehoe and Gerstein were senior officers of the Party or of the Fund.
- Finley knew the Fund had access to funds that could not be reasonably spent prior to the calling of the election. One Party document identified this amount as being in excess of $2,111,916.87 as of November, 2005. In anticipation of an election, Finley wrote to Gerstein on November 22, 2005, asking his authorization to forward some of those funds, once the election was called, to ridings that would not be using the maximum of their respective spending caps. He stated that the national Party could use this spending space during the election campaign to pay for a number of election expenses. He asked if “
this perfectly legal” process appealed to Gerstein.
- On November 29, 2005, the first day of the campaign, Finley wrote to Gerstein and asked him for authorization to send monies to Electoral District Associations so Finley could have them “
return monies to me under their writ to pay for advertising for example”, through what Finley called “
a variety of perfectly legal artifices”. This in effect would transfer TV and radio advertising costs from the Party to local campaigns. Finley explained to Gerstein that this would allow the Party to “
pay for advertising for example” and “
run a major slam dunk in the extra two campaign weeks” over its competitors.
- Later on November 29, 2005 Gerstein agreed with the transfers stating that they should “
comport to all legal requirements”. He wrote this in response to an email from Kehoe in which she informed Finley and Donison that counsel for the Party had provided legal advice that the transfers could be moved to candidates and they could be asked to pay for regional advertising, but not for national advertising, and have the expenses go against their election limit if the regional advertising included a reflection that the advertising had been authorized by official agents for the named candidates.
- The same day Finley sent an email to Donison, assigning him the task of “
ascertaining cap availability” of ridings in Canada outside of Quebec, as a “
special project”, including negotiation for access to the cap room by the Party and the creation of a “
seamless process” to carry it out. Donison understood the goal to be to get local campaigns to allocate “
a certain amount of their individual candidate caps to this buy.”
- Election advertising, or media buy, is a major expense in any election. By November 25, 2005, before the 39th general election was called, the Party had agreed with Retail Media Inc (RMI), a media placement company, on a television and radio advertising plan for the Party campaign involving advertising broadcasts costing $8,000,000, which RMI was to carry out once the election was called. The plan was designed in anticipation of receipt of the statutory allotment of broadcast time provided to political parties under the Act and administered by the Broadcast Arbitrator.
- Between November 29 and December 9, 2005 RMI, on behalf of the Party, booked statutorily allotted advertising time costing the aforementioned $8,000,000 based on the national campaign broadcast plan. Most of these bookings were paid for immediately in accordance with industry standards for political advertising. Through the remaining election period, additional Party advertising broadcast time was purchased by RMI in the amount of $1,026,921.44.
- From time to time through the election period, the Party and the Fund created and revised election spending budgets. Had the draft budget of December 3, 2005 been implemented, the Party would have overspent its election expenses cap by at least $515,679. That being said, the attribution of expenses to local campaigns was conceived well prior to the election, and did not originate with the budgetary issue identified above. Kehoe exchanged budget drafts with Finley on December 3, 2005 showing the effect on the Party budget of removing $2,100,000 in advertising costs, and adding back $1,575,064 in additional campaign activities other than advertising. On December 12, 2005, Kehoe wrote to Donison and others that Finley had “
asked for a $2.1M drop in this line item”, referring to the advertising budget.
- Commencing on December 3, 2005, the media buy was implemented. Donison, at the direction of Finley and through regional campaign organizers of the Party and others, sought consent from various local campaigns outside Quebec to their participation in the transfers of monies from the Fund to the local campaigns. He also sought consent from these local campaigns to pay for a portion of the advertising expenses.. The advertising expenses had previously been booked as part of the Party’s national advertising campaign. A number of local campaigns committed to the media buy transfer; however, a number of commitments received and acted upon by Donison were in respect of ridings where no candidate or Official Agent had yet been chosen or confirmed for the riding.
- The selling points used to persuade local campaigns to participate in the media buy were that it was without cost to the local campaigns, because the Fund would be providing the monies, and the promise that the media buy ‘expense’ to the local campaign would be eligible for the 60% rebate of paid election expenses from Elections Canada.
- On December 8, 2005 Gerstein telephoned David Campbell, the President and Chief Executive Officer of RMI. Campbell reported Gerstein’s call as advising RMI that the Party “
may be spending up to their legal limit” and that they were “
thinking of switching some of the time over to the ridings. It sounded like the reason was to legally maximize advertising expenditures.”
- On December 9, 2005, Donison provided lists of ridings outside of Quebec to RMI along with the amounts up to which the local campaigns were able to participate in the transfer of media buy expenses. The same day, RMI switched already purchased broadcast contracts from Party advertising to candidate advertising.
- Ridings in media market areas in Saskatchewan and Manitoba, in which little or no local or regional media broadcast contracts had been bought for Party advertising, were not accepted as participants in the media buy transfers. Donison later explained this omission to Don Plett, President of the Party National Council. Donison explained the omission of four (4) Manitoba ridings, as being due to the fact that “
we were in the hands of the ad people who had already made the market commitments on Day 1 of the campaign before we decided to do this
- By day’s end on December 9, 2005, RMI informed Finley and Gerstein that approximately $1,468,800 of advertising costs had been transferred to local campaigns. This amount included the entire advertising budget for Quebec though ultimately only approximately 80% of the advertising expenses in Quebec were allocated to candidates. By December 19, 27 Quebec local campaign ridings had been selected to participate in the switch and Donison and Kehoe had communicated this to RMI. In all, 67 ridings (40 ridings outside Quebec and 27 ridings within Quebec) participated in the media buy transfer.
- Following the transfer of these media buy expenses to candidate campaigns, the Party and the Fund’s election spending budgets of December 13 and December 20, 2005 included a column entry heading “
Transfer to Candidate Caps”. The transfer of media buy expenses, Quebec production costs and Montreal and Quebec City office expenses were listed in this column and were identified as an “
- RMI determined from those identified by the party, which campaigns could be assigned to take over existing national advertising campaign purchases within media broadcast markets. The determination of which local campaigns could participate in the media buy was based on the location of pre-purchased advertising and the availability of cap room in those local campaigns. Campaigns sharing the same regional media market subsequently had their individual media cost apportioned in proportion to their commitment amounts and spending cap room, rather than at any commercial value for the shared media service received. Kehoe communicated the amount to RMI for subsequent billing. In some regions these costs were shared equally, reflecting equal commitments, in other regions costs varied considerably in proportion to differing contributions, based on cap room.
- On December 9, RMI rebooked the existing advertising contracts with broadcasters under a new RMI client name, which RMI called “
the Official Agents for Conservative Party candidates” by means of a standardized email to media outlets. This message identified RMI as the purchasing agent for the Party. Each message said that they needed to “
shift dollars” from the Party to “
the Official Agents for Conservative Party candidates”. No specific candidates or ridings were identified. RMI noted that “
(t)his in no way changes the overall commitment we as agents have made on behalf of our clients.” RMI then specified that either “
all weight” or specified dollar amounts of the “
current bookings” were to be transferred from Party to the “
new advertiser name”.
- Taglines were subsequently added to the existing Party advertisements to meet the statutory requirement that candidate advertisements state they had been approved by the candidates or their Official Agents. All candidates advertisements switched pursuant to this program, whether on radio or television, bore such a tagline and were shown or heard in the candidate ridings which had assumed the expenses.
- When effecting the switch of advertising on December 9, RMI insisted that it was unwilling to deal with each local campaign which would be participating in this regional media buy program. It insisted that all media buys on behalf of candidates pursuant to this program be invoiced to the Party and paid by the Party. RMI received instructions regarding the switching of advertising and payment exclusively from the Party and the Fund. The candidate advertising broadcasts were the same in content as the national campaign advertising, but for the reflection in the taglines that they were authorized by the Official Agents for the candidates. RMI representatives did not personally deal with any of the participating campaigns, and no new broadcast media was purchased for the participating campaigns by RMI on December 9, 2005. Existing broadcast media purchases were simply rebooked. Participating candidates played no role in the content, production, payment or broadcast of the advertising.
- On instructions from Kehoe, RMI subsequently submitted invoices to the Fund on behalf of “
the Official Agents for Conservative Party candidates” for the advertising, with a single invoice listing 40 ridings outside Quebec, and with separate invoices to the Fund for each of the 27 Quebec ridings. The Fund paid these invoices. Authority for payment of these election expenses came from Finley and the payment authorizations were signed by Kehoe and Gerstein in accordance with the Fund procedures.
- In a similar fashion, the Party transferred 80% of French language advertising production costs in the amount of $121,137.28 to the 27 participating candidate campaigns in Quebec. By December 16, the Party had also decided to transfer a portion of Party office and staffing expenses in Montreal and Quebec City in the amount of $116,250.00 to a smaller group of 15 local campaigns. Officers and representatives of the Party and Fund exercised control over the nature of the transfer carried out, its planning, execution and payment.
- Kehoe wrote that she took “
Administrative steps” to process the transfer of expenses to the local campaigns. In some cases, these campaigns were to later claim reimbursement of 60% of these election expenditures from public funds.
- These “
Administrative steps” involved the transfer of funds from the Fund to the local campaigns and the return of the same monies to the Fund to pay for the campaign’s designated share of media or office costs. The Fund would not transfer monies to local campaigns unless the Official Agent first signed and provided to the Fund a wire transfer authorization allowing the monies to be returned to the Fund. The Fund executed the wire transfer authorizations as payment for the invoices in accordance with a schedule of transfers to campaigns, and invoiced the campaigns for media costs.
- The Fund created and sent invoices to the 67 campaigns for their portion of the media buy expenses. The invoices to Quebec ridings included Quebec production costs. Separate invoices were sent to the 15 Quebec campaigns participating in the transferred office expenses.
- The invoiced media costs were for the media costs as allocated by RMI, or as apportioned by the Party and the Fund for campaigns sharing regional media markets. In two cases in Quebec, Kehoe reduced the invoice costs from RMI amounts to avoid campaigns going over their spending limit. The amounts that could not be invoiced as first planned were then distributed as increased costs to the remaining campaigns.
- The Fund invoice costs matched the monies transferred from the Fund to the 67 media buy and the 15 office expense campaigns. In each case, the Fund recovered the monies from the campaigns by executing the wire authorizations directly with the various campaign banking facilities.
- Kehoe also provided instructions to participating campaigns concerning how the invoices and the transfers of money to and from the campaigns were to be reported in the post election candidate electoral campaign returns.
- After the election, on December 4, 2006, Gerstein as Chair of the Fund signed an election expense return for the Party that claimed total advertising costs of $9,174,392.60 and total election expenses of $18,019,179.28, against a spending cap of $18,278,278.64. In this return, he declared that, to the best of his knowledge and belief, the information contained in the return was correct and that all election expenses in respect of the conduct and management of the election had been properly recorded.
- The Party election expense return filed by the Fund showing the Party’s national election expenses was calculated by the Fund without including the cost of national advertising transferred to and claimed by the participating media buy local campaigns, as well as the transferred Quebec advertising production costs, and the transferred Montreal and Quebec City office expenses.
- After the election, Official Agents of the participating local campaigns submitted electoral campaign returns. They reported the transfers of money from the Fund to the local campaigns as transfers, and claimed as expenses the media buy costs purported to have been incurred by them for TV and radio advertising and, in the applicable Quebec ridings, Quebec advertising production and office expenses. Sixty five (65) of the 67 media buy campaigns qualified for a reimbursement of their paid election expenses by virtue of having received at least 10% of the total vote, as did 13 of the 15 Quebec office expense ridings. Based on these returns, reimbursements of $840,621.51 would have been paid out of public funds to candidate campaigns, had these not been challenged by Elections Canada. As it was, reimbursements of $230,198.01 were paid to 15 campaigns for claimed media buy expenses and to 8 campaigns for office expenses before reimbursements were suspended by Elections Canada.
- In November, 2006 and January, 2007 the Chief Electoral Officer asked some campaigns to submit documentation in support of their media buy expense claims. The Party drafted and arranged for RMI to review and sign a letter to be sent to Elections Canada. This letter said, amongst other things, that RMI was the supplier/agency of record for media buys made by the Party and by the Official Agents for participating Conservative candidates, and that “
we mutually entered into an agreement to provide media buys”. Further, that in respect of the candidate media buy, the letter by RMI included the following: “
Retail Media was advised of which Conservative candidates were interested in participating in additional regional media buys,” and “
(a)ppropriate regional markets were identified for all participating candidates and specific media buys purchased in those markets”. It also stated that “
appropriate tag lines were used in all advertisements identifying on whose behalf the advertisement was authorized.”
- It is the Crown’s position that the true cost of advertising, including Quebec advertising production costs that the Fund ought to have reported to Elections Canada, but did not, totalled $10,560,675.66, rather than the $9,174,392.60 that was reported in the Party return. The Crown alleges that the total cost of the advertising expenses not reported was $1,386,283.06. However, the Party and the Fund admit only that the costs of advertising, including Quebec advertising production costs, that the Fund ought to have reported to Elections Canada, but did not, totalled $9,737,722.11, rather than the $9,174,392.60 that was reported. Thus the Party and Fund admit that the cost of the advertising expenses not reported was $563,329.51.
- The cost of the office expenses for the Party offices in Montreal and Quebec City not reported by the Fund in its election expense return of the Party’s national election expenses was $116,250. Thus the Party and the Fund admit that the total amount of expenses that the Fund failed to report to Elections Canada was $679,579.51.
- It is the Crown’s position that taking into account the transferred expenses that the Fund should have reported to Elections Canada, but did not, the total of the Party election expenses for the 39th federal general election amounted to $19,550,224 or $1,243,433 over the statutory spending limit of $18,278,278.64. However, the Party and the Fund admit only that, taking into account the expenses the Party and the Fund failed to report to Elections Canada of $679,579.51, the total of the Party election expenses amounted to $18,698,758.79. Thus the Party and the Fund admit to spending $420,480.15 over the statutory spending limit.
- The Party and the Fund’s position is that the regional media buy program was intended to be, and was in principle, in compliance with the Act but that the flaws in its implementation mean that a number of expenses assumed by some candidates, (such as those attributed to candidates before those candidates or their official agents were formally in place), were properly attributable to the Party as its incurred expenses. By adding those incurred expenses to those of the Party, the Party exceeded its cap. In particular, the Party and the Fund admit that all of the office expenses referred to in this agreed statement of facts totalling $116,250, and, in 29 instances, the media expenses attributed to candidates totalling $563,329.51 were, instead, appropriately attributable to the Party.
- This agreed statement of facts is filed in support of guilty pleas by the Fund to the following two strict liability offences: being a chief agent, it contravened subsection 423(1) by exceeding the Party’s election expense limit, contrary to s. 497(1)(l) of the Act, and being a chief agent, it contravened paragraph 431(b) of the Act by providing an incomplete election expenses return that failed to include all expenses incurred by the Party contrary to s. 497(1)(q.01) of the Act. For strict liability offences, the Fund could only have escaped liability by establishing on a balance of probabilities that it met the standard of due diligence or reasonable care so as to avoid any non-compliance. The Fund admits that it has failed to demonstrate that it met that standard of care. The maximum penalties available for these summary conviction offences as against entities are $1,000 fines pursuant to s. 500(1) of the Act.
- This agreed statement of fact is also filed in support of guilty pleas by the Party to the following strict liability offences: being a registered party whose chief agent committed an offence under s. 479(1)(l) and under s. 497(1)(q.01) of the Act. The maximum penalties available under these summary conviction offences as against entities are $25,000 fines pursuant to s. 507 of the “
- The parties jointly submit that a total fine of $2,000 be imposed on the Fund ($1,000 on each count), and that a total fine of $50,000 ($25,000 on each count) be imposed on the Party.
- Mr. Gerstein, Mr. Donison, Mr. Finley and Ms. Kehoe participated in the preparation of this agreed statement of facts.
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