PC leadership candidate Mike Allen has fundraising effort shut down

With just weeks to go before New Brunswick Progressive Conservatives select a new provincial leader, former MP Mike Allen's campaign is being denied access to some of the money raised from donors after the party deemed one of the methods used to get it was illegal.

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Allen did not return a call asking about the issue but his official agent, MLA Kirk MacDonald said very little of Allen's campaign money is affected by the ruling.

"I don't have that number right off, but not a significant amount of money," said MacDonald.

In a crowded seven person field chasing many of the same people for money, Allen's campaign thought it hit on a great fundraising idea steer money through a friendly riding association, issue generous tax receipts to donors and access public money for Allen's bid.

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But according to the party, the scheme breaks provincial political funding laws.

Fredericton businessman Bob Hatheway,who is acting as the PC leadership race's financial compliance chair saidhe moved to shut the tax-receipt fundraiser down in a politely worded letter to Allen's campaign late last month.

"We just jumped in and asked them to modify their fundraising techniques," said Hatheway.

"I sent the note out suggesting the option to donate money to Mike Allen's campaign through the riding association would be a contravention of the [Political Process Financing]act."

Setback

The ruling is a setback for Allen's campaign which raised an undisclosed amount of its money by telling supporters they could donate to Allen through the Fredericton-York PC association, which is closely connected to Allen.

Allen himself is listed as the Fredericton-York treasurer in party records on file with Elections NB and last updated in April.

MacDonald is Fredericton-York's sitting MLA.

He insists Allen had nothing to do with the fundraising idea and has not been a signing officer for the riding since announcing his bid to become leader.

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Because donating to leadership campaigns is not tax deductible in New Brunswick, the plan involved donations for Allen going to the Fredericton-York riding first to make them eligible for provincial tax credits, with funds then forwarded to the Allen campaign.

"To make a donation to support the Mike Allen Leadership Campaign make your cheque payable to the Fredericton-York PC Association - Convention 2016 and specify Mike Allen," the letter said adding.

"Atax receipt will be issues for that contribution."

MacDonald said many supporters liked the idea of getting tax receipts for donations.

"For a number of people they felt very strongly that in order to participate they should be able to get a tax receipt and so we were simply providing them an option to do that," said MacDonald.

Not legal

But funnelling money through a riding association for a leadership candidate is not legal.

Paul Harpelle, anElections NB spokesperson, said riding associations are not eligible to donate money to leadership campaigns.

By law only individuals, corporations and unions are and Harpelle saidthose donations qualify for no public subsidies.

"The leadership contestants ... political financing manual posted on our website also make it clear that contributions made to leadership ... contestants are not eligiblefor a political contribution tax credit," Harpelle wrote in an email to CBC News.

The bottom line is Mike's campaign is really, I think, is fuelling a certain amount of the PC NB coffers.-Charles Wright

Allen has made deficit reduction a key element in his leadership campaign saying he would "control our finances to ensure that each dollar spent is in the best interest of all New Brunswickers."

But the plan to skirt provincial financing rules to issue tax receipts to Allen's supporters had the potential to cost New Brunswick taxpayers considerable amounts of money.

In a fundraising letter sent out by the Allen campaign in July it was explained to supporters that $500 donations to Allen made through the riding association would be eligible for $375 tax refunds from the province and cost donors only $125 of their own money.

Amount sent unknown

Neither MacDonald nor Allen's official representative Charles Wright, who wrote the fundraising letter, said they know how much money was sent to the riding association for Allen.

But the scheme appeared to operate for several weeks between July and late August before being shut down.

Hatheway saidwhatever came in to the riding association and generated a tax receipt cannot be transferred to the Allen campaign.

Although if the riding wants to subsidise convention costs for riding members no matter which of the seven candidates they support it is free to do that.

"The bottom line is Mike's campaign is really, I think, is fuelling a certain amount of the PC NB coffers," said Wright.

Leadership campaigns can be expensive to run in New Brunswick.

Brian Gallant raised $205,000 from 400 donors to contest the provincial Liberal leadership in 2012.But that race had three contestants.

Seven candidates are in the race to lead the Progressive Conservative Party, making fundraising more competitive.

The leadership convention is scheduled for the weekend ofOct. 21 and 22in Fredericton.