The Victoria lawyer who warned the Conservative party that local campaign organizers were furious over ads placed as part of the so-called "in-and-out" ad scheme in the 2006 federal election says the party did nothing wrong.

Bruce Hallsor, former B.C. campaign co-chairman for the Conservative party, said the national ads that ran in the ridings of Nanaimo-Cowichan and Esquimalt-Juan de Fuca -- now part of an RCMP investigation on behalf of the Office of the Commissioner of Canada Elections--were regional, and legitimately claimed as such, because they ran on Vancouver Island.

"Every political party runs ads in the local media market that are locally developed, and every political party runs ads in local media markets that are canned ads from the national campaign," Hallsor said. "I don't think there's anything wrong with that."

However, Elections Canada alleges the party tried to bypass national advertising-spending rules, thereby allowing it to buy an extra $1.1 million in advertising -- over its national limit of $18.3 million over the six-week campaign -- and making it eligible for more than $700,000 in taxpayer-funded election campaign rebates.

Esquimalt-Juan de Fuca Liberal MP Keith Martin said other parties don't transfer funds because it's illegal. "It's money laundering through the ridings -- allowing the central party to use more money than it's allowed," Martin said.

The Conservatives bought up advertising room remaining in local campaigns -- subject to separate spending limits -- to run national ads to sway voters from the Liberals towards the Conservatives. Sixty-seven local ridings participated. They sent the national party a cheque for the ads and then got the money back to claim as part of their local spending.

The in-and-out scheme was used in two Vancouver Island ridings. Saanich-Gulf Islands Conservative MP Gary Lunn, with a healthy campaign war chest, never used the scheme. He ran ads with national content but paid for it locally -- fully spending his local limit.

"The party feels very strong it has a rock-solid case," Lunn said. "It's absolutely legitimate to put money from national office to poor ridings. They do it all the time."

This time, however, the media buy was more organized, he said.

"If [Elections Canada] wants to change the interpretation of the existing rules, fair enough, as long as they apply to everybody," Lunn said, noting that joint-ad buys are a "grey interpretation" of the rules.

Nanaimo-Cowichan Conservative candidate Norm Sowden's campaign, in a fight against NDP incumbent Jean Crowder, took up the request from national headquarters and sent $8,089.20.

Conservative Troy DeSouza's campaign in Esquimalt-Juan de Fuca, running against Liberal incumbent Keith Martin, also participated -- sending in $9,999.15 and receiving back $10,016.

However, the Liberal attack ads didn't help Sowden because he was in a fierce fight with the NDP. Court documents cite an e-mail from Hallsor to party headquarters which relays the Nanaimo-Cowichan campaign was "really pissed off" its money was being wasted.

"The fact I sent an e-mail suggesting maybe we should be targeting the NDP voters instead isn't evidence of anything other than there was lots of local discussion over what ads they wanted to have," Hallsor said.

Both Sowden and Desouza lost to their opponents despite the ads.

Hallsor says there was no attempt to hide the national transfer: "Everything the Conservatives did was transparent... Nobody had any concerns, only concerns about the content of the ads."

However, others did raise questions, part of court documents in which the RCMP alleges the Conservative Party of Canada filed expenses "that it knew or ought reasonably to have known contained a materially false or misleading statement" contrary to the Elections Canada Act.

ceharnett@tc.canwest.com