But opponents say the ruling makes clear that Redford, who has denied picking the law firm that employs Redford's ex-husband Robert Hawkes, did indeed make the decision.
Ethics commissioner Neil Wilkinson, in his report, said while Hawkes's firm was chosen by the Justice Department in late 2010 as part of a consortium to sue Big Tobacco, then-justice minister Redford took a hands-off approach with the selection committee.
He said Redford also didn't decide which firms would be short-listed.
And he said that Redford then properly and without bias exercised her responsibility as justice minister to "render a decision" picking International Tobacco Recovery Lawyers, or ITRL, which includes Hawkes' firm.
"There is no evidence of arbitrariness, unreasonableness, favouritism, nepotism, or anything untoward in Premier Redford's participation, as minister of justice, in the decision to direct ministry officials to commence negotiations with the ITRL consortium," wrote Wilkinson.
Wilkinson also found that ex-spouses do not come under the category of family members or associates who, if favoured by a politician through the public purse, would constitute a case of conflict of interest.
The issue, which has been under investigation by Wilkinson for almost a year, began with the publication of a memo that showed Redford directing officials to go with ITRL.
The lawsuit seeks to sue tobacco companies on behalf of the province for damages of $10 billion to pay for health costs of treating smokers since the 1950s.
The government has not made public the contract details, saying it would undermine their case.
Opposition politicians, who wrote letters to Wilkinson prompting him to launch the investigation, said regardless of the rules, Redford made the decision to direct a lucrative government contract to someone close to her and should have recused herself from doing so.
"Premier Redford's insistence that she wasn't involved in the decision has now been proven to be false, and she owes all Albertans an apology," said Opposition Wildrose Leader Danielle Smith.
Smith also noted that the government briefing document used by Redford to pick ITRL over two other firms was not made available to Wilkinson, again for reasons of competitive advantage. Instead, it was explained to him through an independent third party.
NDP critic Rachel Notley said the problem is that Alberta's ethics laws have so many loopholes, clear conflicts of interest are allowed to sail through.
"Most reasonable Albertans with a common-sense approach to this would know she (Redford) was in a conflict and should have recused herself from this decision," said Notley.
Liberal Leader Raj Sherman agreed, saying "Common sense would dictate that (the premier should say), 'Hey, I should probably recuse myself from this decision.'"
Redford has always maintained she didn't make the final decision.
She has said she made the preliminary decision to see if a contract could be struck with ITRL.
The final decision, she has said, came months later after she had left the justice portfolio to seek the leadership of the PC party.
Wilkinson's ruling does little to clarify the issue of when a decision becomes a decision.
Some parts of his report indicate he believes Redford directed the decision while in other parts he says she "took part in a decision."
Redford issued a statement saying she welcomed Wilkinson's findings.
"I have always taken my duties as an elected official extremely seriously and strive to uphold the public trust in everything I do," she wrote.
Hawkes and Redford divorced in 1991, but he worked closely with her in 2011 on her successful bid to become Progressive Conservative party leader and premier. He then stayed on to lead her transition team.
Smith also said the decision by Wilkinson is the last straw for her caucus.
She said while Wilkinson is supposed to be an independent officer of the legislature, he has consistently ruled in favour of Redford and her PCs.
"He has lost all credibility with our Wildrose caucus as well ... with the vast majority of Albertans," said Smith.
"Wildrose MLAs will no longer be meeting with Mr. Wilkinson for any reason. Nor will we submit any documentation to his office.
"As soon as possible, Wildrose will table a motion in the legislature to have Mr. Wilkinson removed as ethics commissioner."
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