OTTAWA–It was the Conservative party's friends, not its political enemies, that aroused Elections Canada suspicions about overspending in the 2006 election campaign.

According to a sworn affidavit, executives with Retail Media Inc., the Toronto "media buying" firm for the Conservatives, balked when investigators showed them an invoice on the company's letterhead.

The executives "didn't recognize" the invoice, similar to that filed by about 15 Conservative candidates among 67 from the 2006 election seeking more than $825,000 in taxpayer-funded rebates.

Marilyn Dixon, chief operating officer, suggested the invoice "must have been altered or created by someone" because they didn't look like the ones her firm submitted to the Conservative Party of Canada.

Now, the party is under investigation for filing returns with Elections Canada "that it knew or ought reasonably to have known contained a materially false or misleading statement" on advertising expenses.

It is also facing allegations, unproven in court, that it conceived a scheme that would allow the national party to spend $1.1 million over its legal $18.2 million election expenses limit, leading to angry opposition charges yesterday that the Conservatives stole the election.

No formal charges have been laid under the Canada Elections Act, though three are under consideration. A lawsuit the Tory party launched to challenge the chief electoral officer's decision to deny rebates to candidates is on hold.

The details about the suspicious Retail Media invoice for $39,999.91 were laid out in a sworn affidavit filed by an elections investigator who sought a warrant to raid Conservative headquarters last week.

In the information sworn to obtain the warrant, investigator Ronald Lamothe, with the office of the Commissioner of Canada Elections, described a deliberate "in-and-out" scheme conceived to move money from national coffers into and out of the accounts of local campaigns, which have their own spending limits, in order to skirt the national spending limit.

An added benefit to any candidate who participated would be a "60 per cent windfall reimbursement" through the taxpayer-funded rebate, the affidavit said.

The invoice Lamothe showed Retail Media had been sent to candidate Steve Halicki's campaign for the riding of York South-Weston.

His official agent, Barbro Soderberg, told auditors she was uneasy about the advertising spending from the get-go but was assured by the party "this process is legal."

"As a bookkeeper, I know that sometimes you have to use creative accounting between small companies but I found this move was being a little too creative," Soderberg would later tell Elections Canada investigators.

Though unproven in court, the allegations are political dynamite.

A charge against a party's chief agent of providing returns containing false or misleading statements is liable to a range of penalties that include a $5,000 fine, five years' imprisonment or both, the deregistration of the party and liquidation of its assets, or for the party a $25,000 fine. The penalty for knowingly exceeding the election expense limit for a party's chief agent is a $1,000 fine, three months' imprisonment or both. A registered party is liable to a $25,000 fine.

Yesterday, the Conservative party denied any documents were doctored or falsified. "I don't think anything was supplied that was misleading," said government House leader Peter Van Loan. "The documents all laid out in some detail who was spending on what."

The explanation for the altered invoice? Party officials liken it to someone breaking out his share of a restaurant tab for expense purposes.

The affidavit documents how the Tory party figured out at the outset which candidates would buy into a regional TV and radio advertising plan and, based on pledges, booked airtime through Retail Media, for which the party paid in advance.

Retail Media later tallied the costs, broke down the amounts according to instructions from the national party officials, and sent invoices back to Conservative headquarters in Ottawa listing all the ridings and their allocation of costs.

Party officials say headquarters staff then stripped out the costs borne by other campaigns and showed only the amount pledged by the particular local campaign in the invoice it mailed to a candidate so he or she could claim advertising expenses, and reap rebates of 60 per cent of the invoiced spending.

They say there's nothing sinister about changing the original document and withholding the total spending on advertising because it was not information local campaigns needed.

Elections Canada doesn't buy it.

"Funds were transferred into and out of each of the bank accounts of the 67 campaigns ... entirely under the control of and at the direction of officials of the Conservative Fund of Canada and/or the Conservative Party of Canada," the affidavit alleges. "The purpose of the in and out transfers was to provide participating candidates with documentation to support their reimbursement claims for these election expenses."