"Peter was a cheater. It's as simple as that," said Russell, who was the Liberal incumbent but lost by a mere 79 votes in last year's election.
He said he was robbed of his job.
"He cheated not only me out of this election, Todd Russell out of this election, but I believe he cheated the people of Labrador out of this election."
Penashue faced some heat this week when CBC News discovered his campaign bills amounted to $24,711 in flights to remote communities during the 2011 federal election. But Provincial Airlines wrote off all costs over $7,000. The Tory cabinet minister was also thousands of dollars over his spending limit.
Penashue is blaming the overspending on his inexperience, and that of his campaign manager, Reg Bowers.
Russell said news of Penashue's overspending wasn't a huge shock.
"There was a sense even during our campaign that there was a hell of a lot of money being spread around [on Penashue's campaign]," he said.
"Some of the details, some of the amounts certainly do surprise you, but generally speaking there was a sense that something wasn't fair about this."
'Slap on the wrist is not adequate'
Russell, who's now the president of the NunatuKavut Community Council, said the minister should face consequences for his actions.
"When people knowingly, I believe, break these [election] rules, these limits, these laws, there should be severe penalties attached to that. This is about the integrity of the democratic system," he said.
"A slap on the wrist is not adequate."
Russell said there's supposed to be a level playing field for all candidates, and if Penashue had played by the spending rules, he may not have been elected last May.
"If everybody would've abided by the same rules, abided by the same laws, and honoured the limits, then yes, the outcome [for the 2011 election] would've been different."
Residents unhappy with Penashue's response
Some residents in Happy Valley-Goose Bay aren't buying Penashue's explanation that these were rookie mistakes.
"I don't think he should keep his job if it's true," said Bernie Goudie.
"Not knowing the rules is not an excuse as far as I'm concerned."
Russell said he's backing the idea of a new election.
"Maybe [Penashue] should do the honourable thing and say, 'We made very, very bad errors of judgement, we didn't play by the rules. We didn't follow the laws as they were written, and maybe it's time to go back to the people of Labrador and let the people of Labrador decide once again.'"
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