In a letter to the Commissioner of Canada Elections, Rae says "a number of serious allegations" have come to light and if proven to be true, "they constitute serious infringements of the Canada Elections Act and may even bring into question the validity of the election result in a very close race."
Records obtained by CBC News, show that Penashue's 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 but he stepped down after the community expressed outrage that Rich earned 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.
In his letter, Rae said this matter is "quite serious because, taken together, these irregularities could have certainly had an impact on the election in Labrador."
Penashue won the 2011 federal election over Liberal incumbent Todd Russell by 79 votes.
Staffer blamed for overspending
A spokesperson for Penashue said the minister was not available for an interview on Sunday and other than repeating that a new agent was hired, his office would not comment on Rae's call for a formal investigation by Elections Canada.
"There is a new Official Agent in place to work with Elections Canada to correct any mistakes that were made by the previous Official Agent," Jonathan McDaniel said in an email to CBC News on Sunday.
Penashue blamed an inexperienced staffer for overspending on his campaign.
"Look, last year was my first election. I worked with an official agent, that was his first [and] all of this happened within four weeks, and I recognize that we need to clarify some issues," Penashue told CBC News.
But the staffer's inexperience did not prevent him from winning a federal appointment.
Reginald Bowers was appointed last December by the Conservative government to sit on the board of the Canada-Newfoundland Offshore Petroleum Board.
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 on Oct.17.
Penashue told CBC News he is still co-operating with Elections Canada — a message he has maintained since the summer, when his campaign spending first came to light.
Also on HuffPost