Court hits Conservatives over ad spending

VANCOUVER (Reuters) - A court ruled against Canada’s governing Conservative Party on Tuesday in a long-running battle over whether it violated campaign spending rules in the 2006 election that brought it to power.

The Federal Court of Appeals said election officials had reasonable grounds to not accept the way the Conservatives accounted for advertising money that was transferred between the national party and local candidates.

The decision overturned a lower court ruling that had sided with the party over what was known as “in and out” financing, that opposition parties said allowed the Conservatives to spend more than allowed on advertising.

The Conservatives went to court against Elections Canada over its refusal to reimburse C$1.2 million in expenses that 67 Conservative candidates had claimed for television and radio ads produced by the national party.

The independent agency contends the party had illegally assigned national advertising expenditures to local candidates, who have their own separate campaign spending accounts.

The Conservatives won a minority government in 2006, partly by campaigning on accountability in the wake of a series of scandals in the former Liberal government.

They won re-election with a stronger minority in 2008, and the latest court decision comes amid speculation that Canadians will face another election this spring.

A poll released on Tuesday indicated the Conservatives might win a majority government. The Ipsos Reid survey showed the Conservatives with 43 percent support, compared with 27 percent for the main opposition Liberals and 13 percent for the New Democrats.

The Conservatives will likely appeal the latest court ruling to the Supreme Court of Canada. They have denied wrongdoing, and argue they have acted no differently than other parties in handling their finances.

Last year the Federal Court ruled that the local Conservative candidates had not broken election financing rules.

However, Elections Canada charged four senior party officials last week with violating the rules by willfully breaking the C$18.3 million spending cap placed on parties in the 2006 election.

The Commissioner of Canada Elections, the nonpartisan officer who is responsible for ensuring compliance with federal election rules, is also bringing charges against the Conservative Party itself.

($1=$0.97 Canadian)

Reporting Allan Dowd; editing by Rob Wilson