Documents in Penashue's Elections Canada file show he and his campaign spent $24,711 in flights during the 2011 election campaign, but an airline in his Labrador riding wrote off most of that amount under an agreement that appears to have been made months after the election was over.
The cost of the flights that were written off would have put Penashue well over his spending limit. CBC News has previously reported that Penashue's campaign spending records show he was already nearly $4,000 over his limit.
It also appears Penashue still owes $15,000 plus interest on a loan provided by Innu Development Limited Partnership, a company run by two Innu communities to develop business partnerships. Penashue's brother-in-law, Paul Rich, was the CEO of IDLP before he stepped down after the community expressed outrage that Rich made more than $1 million in salary over two years.
Candidate travel isn't subject to spending limits under Canadian election laws, but the travel expenses of a candidate's family, staff and volunteers are. That means the airline invoiced Penashue for $18,163 of travel that falls under campaign expense limits.
A calculation by CBC News of the travel expense invoices, the previous overspending and a portion of a flat rate charged by the airline for travel shows that Penashue's campaign overspent its limit by $17,469.06, or about 21 per cent.
A spokesman for Penashue, who won the Labrador riding by 79 votes, says they're working with Elections Canada to make any changes needed.
"We have taken steps to appoint a new official agent to work with Elections Canada to help correct any mistakes that were made by the inexperienced campaign volunteer," Cory Hann said in an email Tuesday.
Reginald Bowers, the "inexperienced campaign volunteer" Hann referred to, was appointed last December by the Conservative government to sit on the board of the Canada-Newfoundland Offshore Petroleum Board.
On Wednesday, Hann released an emailed statement from Penashue that avoided calling Bowers inexperienced.
"We have appointed a new official agent who is working with Elections Canada to help correct any mistakes that were made by the previous Official Agent. I am proud to serve as the Member of Parliament for Labrador," Penashue's statement said.
Interim Liberal Leader Bob Rae called the flat rate a "ridiculous giveaway" and says if it's true, Penashue must resign his seat.
"I'm saying the election was bought. Yes, no question," Rae said Wednesday.
The overspending gave Penashue access to constituents living in remote communities that are otherwise hard to reach, Rae said.
"You simply have to look at the size of Labrador and understand if you're able to travel throughout the entire region of Labrador for $7,000, which is a ridiculous giveaway, you've got an enormous advantage over anybody else. Enormous."
"He won by  votes. At some point you say the overspending was so abusive. Particularly when we know for example even in terms of the aircraft contract that similar contracts were not offered to any other candidate, so you have a situation clearly in which a company is giving an entirely unfair advantage to one candidate. It's just not on," Rae said.
'Not playing by the rules'
In question period, Prime Minister Stephen Harper fired back at Rae, pointing to a Liberal MP whose campaign was fined by the CRTC over an election robocall that didn't identify who paid for it.
"The leader of the Liberal Party is asking us for a completely different standard than his own. He accepts in his party an MP whose campaign was found to have broken the law with his automated calls," Harper said.
"As has been conceded some time ago, there were some errors in the filings of the official agent in this case. That is the individual responsible. A new official agent was named. That agent has been working for some time with Elections Canada to correct these problems."
New Democrat MP Jack Harris, who represents the riding of St. John's East, says the overspending could have provided an unfair advantage for Penashue over the other candidates.
"It's another example of the Conservatives not playing by the rules," Harris said.
"But if it affected the result of the election, then clearly it questions the legitimacy of the result and the legitimacy of the Conservatives having an additional member sitting in the caucus and in the cabinet, and I think that's something Canadians are very concerned about."
Penashue did not attend question period on Wednesday.
Liberal MP Scott Andrews got cut off by the House Speaker Andrew Scheer for using unparliamentary language.
"The member for Labrador is a cheater," Andrews said.
Not 'financially capable' of paying more
A letter from the lawyer for Provincial Airlines, sent to Elections Canada, says the airline wrote off anything over $7,000.
"We understand that our client was advised in the fall of 2011 by representatives of the campaign that the campaign was only financially capable of paying the sum of $7,000 for air travel. Accordingly, our client … wrote off the remaining balance."
Penashue's campaign submitted documents to Elections Canada showing his official agent worked out an agreement with Provincial Airlines Ltd. in Labrador on April 4, 2011. The airline would supply unlimited travel to Penashue and his family during the campaign for $7,000, the agreement said.
The letter of agreement says it was Rich who negotiated the deal. IDLP and Provincial Airlines co-own a regional airline, Innu Mikun, which provided $14,010 in charter flights for the campaign. Rich is also listed as a passenger with the campaign on an invoice for an April 5, 2011, flight with Penashue and his wife.
The new records, including an invoice for the $7,000 charge, show the agreement wasn't negotiated and finalized until Sept. 16, 2011, more than four months after Canadians cast their ballots, and five months after the date on the written deal.
A letter sent to Elections Canada by Conservative Party lawyer Arthur Hamilton says the contract submitted by Bowers, the official agent, "is not reliable in its costing, and does not represent the minimum commercial value Provincial Air believes the campaign received in the 2011 election period."
A discount on the commercial value of an item or service provided to candidates counts as a political donation. Corporate donations are illegal in Canada.
Hamilton also notes in the Aug. 7, 2012, letter that Bowers has been replaced by Sandra Troster, the Conservative Party's chief financial officer. He says the party is working with Elections Canada to review the election return for any corrections.
Loan to be repaid after election expenses refunded
The loan from IDLP was supposed to be repaid next month, but Troster has requested an extension until next spring.
Troster says in an email to the election agency that the campaign will repay the loan once it gets its refund.
"Kindly consider an extension of a further six (6) months to May 2, 2013, but I do anticipate that we should be able to close this file before then and hope we will have our refund much earlier," she wrote to Elections Canada.
Records show the campaign received a $25,000 loan from IDLP, authorized by Rich, on June 1, 2011, after several cheques bounced. Penashue's campaign repaid $10,000 of the loan two months later. A supporting document laying out the terms of the loan was dated Dec. 8, 2011, seven months after the campaign ended.
Hamilton, the party's lawyer, declined to comment. Phone calls to a lawyer for Provincial Airlines and to Calvin Ash, the airline's director of commercial operations, weren't returned.
Elections Canada won't comment on specific files.
The penalty for wilfully breaking expense limit rules is up to $5,000 and a five-year ban on running for MP. The penalty for accidental overspending is a fine up to $1,000 or three months in prison.
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