10/28/2012 01:27 EDT | Updated 12/28/2012 05:12 EST

Liberals call for formal investigation of Penashue's election spending

OTTAWA - Interim Liberal Leader Bob Rae wants an investigation into what he calls spending irregularities in the campaign of Intergovernmental Affairs Minister Peter Penashue during the last federal election.

In a letter to the Commissioner of Canada Elections, Rae requests a formal probe into a number of questionable transactions by Penashue's campaign in the riding of Labrador during the 2011 election.

Penashue has blamed rookie mistakes and says he's working with Elections Canada after spending thousands of dollars more than the legal limit in the campaign.

An Elections Canada review showed Penashue spent $4,000 over his limit of just under $84,500.

And CBC News has cited documents alleging he also took thousands of dollars in free flights around his sprawling Labrador riding.

In addition, Rae wants elections commissioner Yves Cote to determine whether a $25,000 loan Penashue received from the Innu Development Limited Partnership came with a commercial rate of interest as required under the rules.

Penashue’s former campaign manager Reg Bowers has apologized to Elections Canada for mistakes and missing paperwork.

Rae says the potentially "serious infringements" could affect the ballot's outcome, given that Penashue defeated former Liberal MP Todd Russell by just 79 votes.

"While I have no doubt that Elections Canada continues to review Mr. Penashue's campaign return, it seems clear to me that there is enough public evidence to warrant the commencement of a formal investigation by you as Commissioner," Rae's letter says.

Russell has demanded that Penashue resign for a byelection, but Prime Minister Stephen Harper has brushed aside such concerns.

On Sunday, International Co-operation Minister Julian Fantino, a former police chief, had little to say on the matter.

"Let nature take its course, and I'm sure that those issues will be dealt with," Fantino said. "But we are in fact, as I understand it, co-operating with and working with Elections Canada to address those concerns."

Penalties for candidate overspending range from $1,000 to $5,000 in fines or three months to five years in jail, or both, depending on the seriousness of the offence.

Anyone convicted of an illegal practice may also be banned from election to the Commons for five years.

Government watchdog group Democracy Watch says penalties and enforcement should be toughened up to deter illicit overspending.