VZCZCXRO9995
PP RUEHGA RUEHHA RUEHQU RUEHVC
DE RUEHOT #0529/01 1071903
ZNR UUUUU ZZH
P 161903Z APR 08
FM AMEMBASSY OTTAWA
TO RUEHC/SECSTATE WASHDC PRIORITY 7697
INFO RUCNCAN/ALL CANADIAN POSTS COLLECTIVE

UNCLAS SECTION 01 OF 02 OTTAWA 000529 
 
SIPDIS 
 
SIPDIS 
 
SENSITIVE 
 
E.O. 12958: N/A 
TAGS: PGOV CA
SUBJECT: TORY "BRAND" SUFFERS ETHICAL BLOW 
 
REF: A.  OTTAWA 305 
 
-    B.  OTTAWA 452 
 
¶1. (SBU) SUMMARY: Royal Canadian Mounted Police (RCMP) officers 
executed a search warrant at federal Conservative Party headquarters 
in Ottawa on April 15, apparently related to an ongoing legal case 
involving possible Conservative election spending violations in the 
2006 federal election.  The incident thrust a media spotlight on an 
issue that had previously gained scant traction with the public. 
The politically loaded visuals of a police "raid" on a party that 
had vowed to deliver "clean" government likely will dent the 
Conservative "brand," but this is unlikely to be the catalyst that 
will force a new election in the near future.  End Summary 
 
Bad Press 
--------- 
 
 
¶2. (SBU) With extensive coverage both by the media and by 
representatives of the opposition Liberal Party, the RCMP -- acting 
on behalf of Elections Canada, the independent federal election 
administration -- entered the Ottawa federal headquarters of the 
Conservative Party of Canada on April 15 with a search warrant and 
left with a quantity of unspecified documents.  It was unclear who 
tipped off the press and the Liberals to cover this event. 
 
¶3.  (SBU)  In Question Period in the House of Commons later on April 
15, Prime Minister Stephen Harper  deflected opposition charges of 
"scandal," insisting that not only had his party cooperated fully 
with all requests by Elections Canada for documents, but also 
emphasizing that the Conservatives had initiated the civil case 
against Elections Canada, not vice versa.  He maintained that "our 
legal position is rock solid."  Liberal members tried to imply that 
RCMP involvement suggested the possibility of a separate criminal 
investigation, which Conservative members flatly denied. Liberal 
leader Stphane Dion commented that PM Harper "needs to answer very, 
very serious allegations and a behavior that is beyond what we have 
seen for a long time."  The heated exchanges continued in Question 
Period on April 16. 
 
Complicated case 
---------------- 
 
¶4.  (SBU)  Under Canadian law (ref a), political parties and 
candidates are subject to separate election campaign spending 
limits.  Elections Canada believes that the Conservatives in the 
2006 federal election operated a complex and so-called "in-and-out" 
scheme in which the party allegedly transferred more than C$1 
million in national campaign funds to 67 Tory candidates who were 
under their personal election spending limits in their ridings.  The 
candidates allegedly booked the money as local campaign advertising 
expenses, but then wired it back to the party, while applying to 
Elections Canada for reimbursement of the same funds under 
taxpayer-funded election spending rules. 
 
 
¶5. (SBU) After Elections Canada disallowed the claim by ruling that 
the expenses were actually incurred by the national party, the 
Conservatives filed a civil suit in the spring of 2007 to overturn 
the ruling.  The case is ongoing in the Federal Court of Canada.  If 
the Court rules in favor of Elections Canada, the disputed 2006 
expenses would be added to the Conservative Party's national 
campaign expenses and would put the party well over its spending 
cap, in violation of the election law, which prescribes a maximum 
penalty of C$25,000 for the offense.  However, if the Court convicts 
the party of the more serious charge of "willful collusion" to 
exceed spending limits, the party could lose its legal registration. 
 Opposition parties have also alleged that the candidates' claims 
for reimbursement amounted to election fraud as well. 
 
¶6.  (SBU)  Comment:  The Conservatives campaigned in 2006 on a 
pledge to deliver "clean," transparent, and accountable government, 
Qpledge to deliver "clean," transparent, and accountable government, 
riding a wave of public revulsion over the Liberals' "sponsorship" 
scandal of 2005.  The Conservative "brand" will likely take a 
beating from the unflattering video footage, and even more so if the 
Federal Court rules against the party.  Until now, the opposition 
had been stymied in its attempts to have a parliamentary committee 
investigate the "in-and-out" affair, nor had the public paid much 
attention.  The scheduled parliamentary recess during the week of 
April 21 will provide temporary relief for the Conservatives. 
However, the Liberals will undoubtedly try further to chip away at 
Conservative ethics and the party "brand," and to gain fresh 
traction with their hitherto unsuccessful attempts to link the 
government to other "scandals," such as an inquiry into connections 
between former Conservative Prime Minister Brian Mulroney and a 
German-Canadian lobbyist, and allegations that the Conservatives 
tried to "buy" the vote of independent MP Chuck Cadman (now 
deceased) in order to bring down the former Liberal government. 
Despite their glee at the Conservatives' latest discomfiture, the 
Liberals are probably still not ready to fight a national campaign 
(ref b), so they will try to embarrass the Conservatives without 
 
OTTAWA 00000529  002 OF 002 
 
 
actually bringing the government down in the near future.  For the 
Conservatives, the fallout could be most damaging in vote-rich 
Quebec, where voter disgust over the sponsorship scandal was 
strongest and where the Conservatives hope to add seats in the next 
election.  At a minimum, the latest developments will make it harder 
for the Conservatives to play the ethics card in the next campaign, 
whenever that may be. 
WILKINS