More questions loom as Labrador votes in controversial by-election

Unresolved concerns over Peter Penashue’s 2011 campaign financing may undermine the integrity of the federal democratic process in Labrador as voters go to the polls.

Labradorians voting in today’s federal by-election will have to cast their ballot without knowing whether or not Conservative Party candidate and former MP Peter Penashue has outstanding legal issues related to his 2011 campaign finances and controversial election win.

The former Innu leader and businessman resigned as Minister of Intergovernmental Affairs and Member of Parliament for Labrador on March 14, less than 24 hours before Elections Canada made public the details of his revised campaign return, which revealed the Sheshatshiu native accepted a total of 28 illegal donations, exceeded his campaign spending limit by more than $5,000, and that the Conservatives had repaid a total of $44,350 of illegally obtained funds. Though his signature was on the return when Elections Canada received it, Penashue maintains the mistakes were the fault of his “inexperienced” but handpicked official agent Reginald Bowers.

On May 2, 2011 the 47-year-old husband, father and grandfather pulled off an election upset with his defeat of Liberal incumbent Todd Russell by 79 votes after leading an aggressive campaign that spent almost $60,000 on advertising, compared to Russell’s $16,384. The once fiery Innu rights activist brought an end to four decades of Liberal control in his federal riding and made history by becoming the first ever member of Labrador’s Innu Nation to earn a seat in the House of Commons. It was a significant day for the 2,400 people living in the impoverished communities of Natuashish and Sheshatshiu.

During Penashue’s time in office the federal government committed to a multi-billion dollar loan guarantee for the controversial Lower Churchill hydroelectric megaproject at Muskrat Falls, the terms of which Penashue, as Innu Nation Deputy Grand Chief, negotiated with the Government of Newfoundland and Labrador. The Harper administration also committed to paving part of the Trans-Labrador Highway while Penashue was MP. Then, on March 11—the same day he allegedly registered a website domain name for his as yet unannounced by-election campaign—Penashue made a $1.35 million spending announcement to enhance broadband service in Labrador.

Three days later, in the same breath he said he was resigning in light of the campaign scandal, and with the prime minister’s full support, Penashue announced his candidacy in the impending by-election, despite the possibility Canada Elections Commissioner Yves Côté was either investigating or intending to investigate other potential violations of the Canada Elections Act in relation to the Innu MP’s campaign finances.

New and unanswered questions

On March 22 Avalon MP Scott Andrews sent a letter to Elections Canada’s Chief Electoral Officer Marc Mayrand seeking clarification on the legality of Penashue’s candidacy in the by-election following allegations of corruption and the unclear nature of the 2011 campaign violations.

“Canadians need to have trust in the electoral system, and recent events have the potential to damage the integrity of this system,” Andrews said in the letter, asking for confirmation on whether or not Elections Canada was investigating the breaches. He also expressed concern about the “apparent loophole that allows a speedy re-nomination of Mr. Penashue before an investigation – that may lead to charges and a conviction thereby disqualifying Mr. Penashue from sitting in the House of Commons – is complete.”

Elections Canada Chief Electoral Officer Marc Mayrand's April 15 letter to Liberal MP Scott Andrews.
Elections Canada Chief Electoral Officer Marc Mayrand’s April 15 letter to Liberal MP Scott Andrews.

Mayrand responded in an April 15 letter explaining any investigation into the matter would be in the Commissioner’s hands, but that “Elections Canada does not in general comment on whether a particular matter has been referred to the Commissioner,” and therefore could not answer Andrews’ question.

The Chief Electoral Officer did explain, however, that if Côté “believes on reasonable grounds that an offence under the Canada Elections Act has been committed, he may refer the matter to the Director of Public Prosecutions who shall decide whether or not to institute a prosecution.”

For Côté to refer either or both Penashue and Bowers to the prosecutor for interrogation over the campaign overspending, their acceptance of corporate donations, or any other matter, he must have reasonable suspicion that either of them “willfully” contravened the laws — an unlikely outcome since Penashue has blamed Bowers for the violations and Bowers has stated he “only had probably a couple hours exposure to the (Canada Elections) Act prior” to the campaign.

Though Canada’s Criminal Code prohibits ignorance of the law as a defence (Section 19 states “ignorance of the law by a person who commits an offence is not an excuse for committing that offence”), the Elections Act does not require candidates, official agents or auditors of federal election campaigns to acknowledge a full, partial or any understanding of elections laws prior to participating in an election. However, Elections Canada posts the rules on its website.

Coupled with the necessity that convictions of “illegal practices” and “corrupt practices” (which consequently prohibit individuals from sitting in the House of Commons or running in elections and by-elections for five and seven years respectively, and can carry fines ranging from $1,000 to $5,000 and/or jail time) require evidence that an individual either “negligently” or “willfully” intended to contravene the act, the admission of ignorance as a defence is one plausible reason so few criminal prosecutions have materialized from the more than 3,000 complaints filed with Elections Canada over the past 15 years.

On May 3, however, Elections Canada announced it was laying charges against an aide to a Calgary Liberal candidate in the 2008 election for “willfully” failing to file a campaign return. Though it took the agency some time to lay the charges, Andrews believes Penashue, Bowers, or both of them, will face a similar fate. “I suspect sometime in the next four years we will see something come up on Labrador after this is all said and done,” he told The Independent last week.

“If (Penashue) gets re-elected (the Tories) will say, ‘The people spoke on this matter, and we don’t care what Elections Canada says on this matter,’ which is still wrong. And that was why they jumped the gun on this in the first place,” he continued, arguing Harper’s decision to call the election so soon was a tactic to create illusory credibility for Penashue and delegitimize the perception that Elections Canada should carry out its investigatory mandate.

Neither Penashue nor Bowers responded to messages left by The Independent requesting interviews for this story.

As a general rule Elections Canada does not confirm or deny whether it is investigating a particular file, but The Independent has learned its Public Enquiries Unit has received at least one formal complaint since the Labrador MP’s resignation.

In addition to the widely reported Elections Act violations — that the campaign accepted more than $18,000 worth of free flights from Provincial Airlines and Innu Mikun Ltd. Partnership, received a corporate cheque from St. John’s construction company Pennecon Ltd., listed at least 13 other businesses as contributors on its initial return, surpassed its spending limit by more than $5,000, and accepted an interest-free $25,000 loan from Innu Development Limited Partnership (IDLP), at the time headed by Penashue’s brother-in-law — in an April 15 post political blogger Brad Cabana claimed he had discovered most of the donations to Penashue’s campaign approved by Elections Canada were “corporate in nature” and may constitute serious violations of the Elections Act. “[T]he RCMP should be first in and last out here, and Peter Penashue should not have the audacity to run in a byelection that was caused by such obvious manipulations,” he concluded. Cabana, a retired military captain and resident of Hickman’s Harbour who is representing himself in a constitutional challenge over Muskrat Falls against the Government of Newfoundland and Labrador and the province’s crown energy corporation Nalcor, filed an official complaint with Elections Canada on April 24.

Upon closer inspection of the revised 2011 donor’s list, Cabana found many of the individuals were either employed by or running businesses that were profiting from their professional relationships with the Innu, many of them in partnerships orchestrated by Innu Development Limited Partnership, a registered for-profit company run by Penashue’s brother-in-law and former band chief Paul Rich at the time. Rich was behind the illegal $25,000 interest-free loan to Penashue’s campaign and came under heavy fire from residents of Sheshatshiu when it was discovered he earned $1 million in two years as CEO of IDLP, more than $650,000 in 2011 alone.

Cabana also found names of individuals who oversee finances for the Innu Nation and IDLP, have acted or are acting as consultants for the Innu, and three lawyers from a law firm that worked with Penashue in negotiating the New Dawn Agreement, including the impact benefits agreement for Muskrat Falls. The Independent has confirmed these findings, though the circumstances of each case are vague.

In the first days of his 2011 election run Penashue told the CBC his campaign had to “start small” since there were “only 18 Conservative members in Labrador”. Within weeks, however, the rising Innu magnate’s campaign was spending tens of thousands of dollars on advertising, drawing from a campaign fund that consisted of at least $44,000 in donations that would not have been available had Penashue and Bowers followed the rules.

Humble beginnings, misguided ways

From activist and advocate of Aboriginal rights to Innu leader, IDLP advisor, and businessman — a seat in the House of Commons and membership in Canada’s majority governing party would complete Penashue’s rise through the ranks and solidify his status as the most powerful and influential person of Labrador’s nearly 2,500-member Innu Nation, whose inhabitance of and legal rights to Nitassinan—home to vast mineral resources worth untold fortunes to the Innu, the provincial government and eager foreign investors—dates back thousands of years.

As a young activist, Penashue fought alongside his mother, well-known and respected Innu elder Elizabeth Penashue, to oppose NATO’s low-level flying exercises, which terrorized people, including children and pregnant women, Mrs. Penashue told a peace assembly at McGill University in 1994.

But by the time he won the Conservative nomination for Labrador Penashue had completely changed his views on the military presence in his homeland. “I’m completely in favour of 5 Wing Goose Bay and I’m completely in favour of expanding the military activities in Labrador,” he told the CBC on March 30, 2011.

Somewhere along the way, Penashue “changed”, one Sheshatshiu resident recently told The Independent on condition of anonymity. “He used to be for Innu culture and protecting the land, now he is more interested in money,” explained the source, who said they have known Penashue for years but will not vote for him in Monday’s by-election because they don’t see his job in Ottawa as having any positive impact on addressing the immediate needs of Labrador’s Innu communities. Natuashish and Sheshatshiu are plagued with widespread drug and alcohol addiction, even among children, domestic violence, high suicide rates, frequently corrupt leadership and band councils, and other social problems associated with the loss of cultural values, a consequence of the Innu’s painful colonial past, and present.

Green Party leader Elizabeth May first worked with Penashue on the NATO low-level flying issue and has “a lot of admiration for the work he did as a young man,” she told The Independent last week from Ottawa, but wishes he “had chosen a different political course.

“As a young man he was a real leader and Innu rights (advocate) in opposing the NATO low flights,” she said. “It’s not a set of positions he took as a young person that would have predicted he would end up with Stephen Harper and the kind of politics Stephen Harper practices.”

Last Monday May called on the Ethics Commissioner to investigate whether Harper knew Penashue would be running in the by-election when he made the $1.35 million spending announcement four days before he resigned, and if Harper was advancing Penashue’s personal interests by calling the by-election before prosecutors could decide whether or not to lay charges for the 2011 campaign violations.

On Thursday Mary Dawson, the Ethics Commissioner, said May’s request didn’t set out reasonable grounds to believe Harper had violated the Conflict of Interest Act.

Penashue was born and raised in Sheshatshiu but finished high school and studied at Memorial University in St. John’s before returning to Labrador. At 26 he was elected President of the Innu Nation and held the position (later renamed ‘Grand Chief’) from 1990 to 1997 and 1999 to 2004, for a total of 12 years. In 2002 he oversaw Canada’s recognition of his people as status Indians under Canada’s Indian Act. His fourth term ended in 2004, but in 2007 Penashue returned to Innu politics after being elected as Deputy Grand Chief, a role that would enable him to be at the table for the ongoing effort to reclaim traditional Innu lands.

A 1977 land claim filed by the Naskapi Montagnais Innu Association (renamed ‘Innu Nation’ in 1990) is still outstanding but the ongoing negotiations, led by Penashue through much of the 1990s and early 2000s, reached a critical point in 2008 with the signing of The Tshash Petapen (“New Dawn”) Agreement. The bilateral contract between the Government of Newfoundland and Labrador and Innu Nation resolved three key issues: a land claim agreement-in-principle that the Innu could now take to the federal government, redress for the Upper Churchill hydro dam, which was built without Innu consent in 1969 on Mista Shipu (‘Grand River’ to many locals and ‘Churchill River’ to outsiders) and flooded traditional lands and burial grounds, and an impact benefit agreement for the Lower Churchill.

With the Innu evidently on their way to reclaiming the rights to their traditional lands, an impending public vote to ratify the New Dawn Agreement seemed inevitable. On May 9, 2010 Penashue stepped down before the end of his term as deputy grand chief, but following repeated decisions by the Innu Nation executive to postpone the referendum entered his bid once again for grand chief in the fall election. This time voters chose Joseph Riche, a respected man in his community who frequently reminded youth of their role in creating the Innu nation they wanted. He was also the first Innu Nation member to earn two university degrees, and was a chief land claims negotiator in the five years prior to his election. Sadly, Riche died suddenly last week after his canoe reportedly overturned on a lake about 80 kilometers from Happy Valley-Goose Bay.

Finally, on July 1, 2011, two months after Penashue’s federal election win, an overwhelming majority of Sheshatshiu and Natuashish voters chose to ratify Tshash Petapen, effectively eliminating the province’s biggest possible threat to its plans to build the multi-billion dollar hydro dam. Still, some expressed serious concerns about lumping together the terms of a land claim agreement-in-principle and compensation for past grievances with those of a new major development project. In light of the living conditions in the two Innu communities, where most families live below the poverty line, and where drug addiction and alcoholism are rampant, the promise of large sums of money would be too enticing for many to pass up, no matter what degree of environmental sacrifice and destruction of traditional and ancestral lands was attached to it.

Tshash Petapen was ratified in Nov. 2011.

The rules of the game democracy

Unlike Innu Nation elections in Sheshatshiu and Natuashish, where it is alleged candidates frequently bribe voters with tobacco and alcohol, federal elections are more heavily scrutinized by the media and public.

Donation limits to federal election candidates were introduced in 2004, and on Jan. 1, 2007 the Canada Elections Act was amended to prohibit corporations and unions from making political contributions. Individuals may contribute up to $1,100 to a federal election candidate so long as their donation doesn’t contravene other laws, such as the provisions of the Conflict of Interest Act, which prohibits public office holders and members of their family from accepting “any gift or other advantage … that might reasonably be seen to have been given to influence the public office holder in the exercise of an official power, duty or function.”

However, in recent years public campaigns have called on municipal, provincial and federal governments to pass stricter anti-corruption laws and, in the case of one charge led by Democracy Watch, to “close key loopholes in laws, regulations and ethics codes across Canada that allow for corrupting secret donations to many political candidates, and secret lobbying of politicians, political staff, appointees and government officials,” a spokesperson for the independent watchdog said in a 2011 press release.

Until and if that happens, unless candidates or their aides suspected of possible election fraud are audited or investigated more closely, and convicted if found to have contravened elections, conflict of interest, or other relevant laws, the door will remain open to corruption within Canada’s electoral system.

Facts and phone calls

Though no evidence of ‘willful’ wrongdoing in Penashue’s 2011 campaign has come to light, the trend of his campaign donations coming largely from individuals with business interests in Nitassinan may entice Commissioner Côté to take a closer look at Penashue’s campaign financing.

An Elections Canada document obtained by The Independent lists the names and addresses of more than 60 individual contributors to Penashue’s campaign as filed by his official agent sometime after the initial return. All but two of the 17 corporate donors had been removed from the list, but dozens of new individual’s names appeared, including several top executives of corporations which have business partnerships with the Innu and have been awarded contracts for work at Voisey’s Bay, Muskrat Falls, or both.

Almost half the names on the revised list are struck off, likely found to be ineligible or illegal since they do not appear on the most recent list posted on Elections Canada’s website.

Among the donors listed on the campaign’s revised return are five senior executives of Pennecon Ltd., whose flagship division ‘Pennecon Heavy Civil’ is in a business partnership with Penashue’s brother Max called Liannu Ltd., which was awarded a controversial contract to build the construction road to Muskrat Falls before the project was officially sanctioned. Donations of the maximum allowable amount from Ches Penney, Larry Puddister, Ed Murphy and Brad Cole were crossed off the revised return, but a $1,100 donation made two days after Penashue’s election win by Senior Vice President of Pennecon’s Energy Division Donald Noseworthy remains in Elections Canada’s database as an eligible contribution. His wife Geraldine’s $1,100 donation made on the same day, however, was not accepted. Mr. Noseworthy did not return calls from The Independent to his office and residence.

Three lawyers from Olthius Kleer Townshend (OKT) LLP, a Toronto law firm that has represented the Innu Nation for a number of years, also contributed to Penashue’s campaign. John Olthius and Nancy Kleer’s April 5 donations for $1,100 are among those accepted by Elections Canada, but the Apr. 24 donation of $550 from OKT lawyer and former Goose Bay resident Larry Innes is not.

Peter Penashue's 2011 campaign return. Photo by Justin Brake.
Peter Penashue’s 2011 campaign return. Photo by Justin Brake.

Contacted on his cell phone earlier this month, Innes told The Independent he was still waiting for an explanation from Elections Canada as to why his donation was disallowed. “It was made as an individual and it was within my limit,” he said.

The former Innu Nation staff member said he contributed to the campaign because he felt Penashue was an “excellent politician”.

Asked what he thought about the fact almost all contributions to Penashue’s campaign came from individuals with business interests with the Innu, he suggested it was “not an unlikely outcome for a new candidate who, when putting forward his name as a candidate, says, ‘Who are my friends and who can I call on to support me as I try to raise money to run an election campaign?’

“I’d suggest that every candidate in the history of the world has done that, and if you believe that Todd (Russell) was not so motivated or didn’t rely on a similar way of raising money for his campaign, I’d suggest that you probably need to look a little closer at his returns,” Innes continued.

Russell’s 2011 campaign return shows the Liberal incumbent claimed 25 individual donations totaling $14,775, all of which Elections Canada has deemed eligible. By comparison, Penashue, who began his campaign running for a party he said had 18 members in Labrador, based on the Conservative candidate’s statement of contributions as received by Elections Canada, by The Independent’s calculation accepted approximately 70 individual donations, 40 of which, totaling $28,300, are presently listed as eligible contributions in Elections Canada’s online database.

Among Russell’s contributors is Woodward Group CEO and former provincial Minister of Labrador Affairs in the Joey Smallwood administration, Melvin Woodward, who along with his wife Sibyl donated $1,100 each. Contacted by phone on Sunday, Mrs. Woodward said she doesn’t recall making the donation. “If I did, Mel and them did it in my name,” she explained, unaware that the circumstances of her donation may constitute an offence under the Elections Act.

Herbert Woodward, nephew of Melvin and owner of Hamilton Stores Ltd. and Hamilton Wholesalers Ltd. in Happy Valley-Goose Bay, also donated the maximum allowable amount to Russell’s campaign on April 28. On May 3, the day after the election, Elections Canada’s records show him making another contribution, this time to the newly elected Conservative MP. Reached by phone last week, Woodward declined comment for the story and ended the call.

The Independent was not able to determine if Russell or any of his campaign donors or their businesses or employers were in any conflicts of interest. Russell, who now sits as President of the NunatuKavut Community Council, was away last week and not able to be reached for comment.

Mrs. Woodward was not the only wife of a businessman Elections Canada had on record as having made a contribution to a Labrador candidate.

Rose Branton, wife of Edgar Branton, a financial controller for IDLP and co-director of Innu Rail Cantech Limited Partnership with Penashue’s brother-in-law Paul Rich, also donated the maximum allowable amount of $1,100. The joint partnership was created to profit from the construction, maintenance and operations of railways associated with iron mines in Labrador. When contacted at home, Mrs. Branton seemed surprised by the call and, aside from acknowledging she has “known him for a long time,” said she would not speak about Penashue. She then ended the call.

Gladys MacKenzie, wife of former Nova Scotia Liberal leader and current Grand River Ironsands President Francis MacKenzie, also appears on the list as having made an accepted donation of $1,100. Penashue cited the Grand River Ironsands project during a candidate’s by-election debate hosted by VOCM on April 23 as a significant forthcoming development project for Labrador. The proposed mining site is located near Muskrat Falls and is intended to be powered by the hydro dam once it’s built. Mrs. MacKenzie too seemed surprised by the inquiry and said only, “I have no comment, I have nothing to say, thank you,” before abruptly hanging up the phone.


Even though corporate donations to federal political parties and election candidates are now prohibited by law, there are countless ways for money to exchange hands and be disguised as legal contributions. When election laws allow for ignorance to be used as a defence against charges of corruption, a government’s democratic integrity is severely compromised, according to Democracy Watch spokesperson Tyler Sommers.

“It’s important for corporations to not make donations to candidates because our members of parliament are elected to represent individual voters, not corporations,” he said.  “The owners and employees of corporations are all able to make individual donations, support, and vote for the candidates they support (since) one of the fundamental principles of our democratic system is that each person be given equal representation – the principle of one person, one vote.

“It is especially important for corporations and governments to be careful with relationships because of conflicts of interest,” he continued. “Even if officials are not being influenced by donations from corporations who have government contracts, the appearance of a conflict of interest can cause serious damage to the reputation of our government and democratic systems.

“Politicians are supposed to decide what is in the public’s interest and it is important to prevent wealthy private interests from buying off or influencing politicians with huge donations.

“In order to ensure that each voter has equal representation governments across the country must pass laws that stop secret donations and limit donations to parties, candidates, et cetera, to an amount that every Canadian can afford,” Sommers explained. “At this point in time only Quebec has done this.”

In Newfoundland and Labrador, provincial election laws permit large corporate donations. Pennecon, for example, made 20 contributions totaling $15,200 in the 2011 provincial election, 18 to members of the Progressive Conservative Party and two to the Liberals, the largest single donation, of $2,000, going to the candidate for Virgina Waters, Kathy Dunderdale.

Campaign scandals aside, Sheshatshiu resident Mike Rossignol sees political financing and other forms of corporate influence in politics as one problem. He sees the visible deterioration of indigenous values among some leaders as a much more urgent one for his family, community, and all of Labrador.

“The fact that Peter voted for Bill C-38 and Bill C-45 — that goes against what the Innu have struggled for for so long,” he said, referring to the Harper government’s recent controversial omnibus budget bills that effectively gutted environmental protection laws across Turtle Island.

Photo by Denise Cole.
Photo by Denise Cole.

“For one, in all of Canada you had millions of protected lakes and rivers, and now in all of Labrador and Newfoundland there’s only one, and that’s Lake Melville,” he continued. “It doesn’t sound very Innu to me, when we fought so hard against NATO and demanded recognition, to have our rights recognized, and so on. We were working on land claims … and a lot of stuff was happening a long time ago. And then to just sign off on those two bills, where environmental (assessment) studies are reduced to a maximum of two years … to say ‘yes’ to those things is mind boggling — that the transport minister can overrule pretty much everything makes no sense,” he said.

“If it’s not for profit then what is it for really?” he asked, rhetorically.

It is not clear if Elections Canada is investigating any of the possible conflict of interest violations brought to its attention by Cabana’s request for an audit.

Corporate corruption of politics and electoral processes is most common among parties that aim to liberalize economies by lifting environmental protections, weakening access to information laws, silencing dissent, doing away with scientific data, and removing or implementing other necessary legislation to prevent interference with their mandate, which is generally to attract outside investment to a particular geographical area, like Nitassinan, and sell off the resources to the highest bidders, until those resources are gone.

If you want to know more about how shortsightedness and greed threaten our environment and cultures, just ask someone like Elizabeth Penashue, or Mike Rossignol. They seem to have it figured out.

Correction: An earlier version of this article incorrectly stated that Brad Cabana is a part-time Newfoundland resident. He in fact makes his home in Hickman’s Harbour and travels to work.

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