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Former cabinet minister Peter Penashue is pictured at a news conference in November, 2012. Prime Minister Stephen Harper has announced a by-election for the seat vacated by Mr. Penashue last month, after he acknowledged his campaign received ineligible donations in the 2011 general election.Andrew Vaughan/The Canadian Press

Peter Penashue has lost his gambit that the voters of Labrador would prefer to have a seat at the Conservative cabinet table than punish him for spending more than he was allowed in the general election two years ago.

Mr. Penashue, former minister of Intergovernmental Affairs, was roundly defeated Monday by Liberal candidate Yvonne Jones, a former leader of the provincial Liberals in Newfoundland and Labrador and a former mayor of Mary's Harbour.

When all the votes were counted, Ms. Jones had 48.2 per cent of the vote. Mr. Penashue had 32.5 per cent and NDP candidate Harry Borlase had 18.8 per cent.

"The people of Labrador wanted change," she told a roaring crowd of supporters at her victory party in Happy Valley-Goose Bay. "They want representation that's going to put Labrador first and I can guarantee you, they've got it tonight."

The voter turnout during by-elections is usually lower than for general elections but more voters cast ballots this time than two years ago.

Ms. Jones was not a hugely popular politician as a member of the Newfoundland legislature. But the voters of Labrador, the riding with the smallest population in Canada, were not ready to elect a man who admitted his previous campaign had violated election spending laws – even if he was willing to quit and run again.

For the Liberals, the win represented the first good electoral news in some time.

Some pundits had characterized the campaign as the first test of Leader Justin Trudeau's ability to draw the kind of support his party needs to begin the climb back from third place in the House of Commons.

Mr. Trudeau, in Montreal on Monday, said in a statement that he was immensely proud of his candidate.

"Today we have demonstrated that the Liberal message of hope and hard work is resonating," he said, "and that Canadians are tired of the Conservatives' politics of cynicism, division and fear."

But Labrador is not a microcosm of federal politics. The Liberals lost by a scant 79 votes in 2011. And the result could more easily be viewed as a statement about the unwillingness of voters to reward politicians who are seen to have strayed outside the lines.

In an address to supporters after his defeat was certain, the CBC reported that Mr. Penashue said "Labrador lost, in my view."

When reporters asked what was next for him, he replied: "I've always landed on my feet."

Mr. Penashue resigned from Parliament in March after an Elections Canada investigation found that his 2011 campaign accepted illegal donations. He exceeded his campaign spending limit of $84,468.09 by $5,529.76 while also accepting tens of thousands of dollars in off-limits donations. They included cash from 16 listed corporations and non-monetary contributions from two airlines that flew him around the riding.

He has since repaid almost $48,000 with the help of the Conservative party, but it's not known whether files were referred to the Commissioner of Elections. The commissioner can issue compliance orders or seek criminal charges through the Office of the Public Prosecutor.

Even before Mr. Trudeau was elected as his party's leader on April 14, polls were suggesting that Mr. Penashue faced an uphill climb.

Although NDP Leader Thomas Mulcair visited the riding more than once in support of Mr. Borlase, it seemed from the outset that it was the Liberals' contest to lose.

Mr. Penashue told the voters of Labrador that they had a choice. They could elect him or they could settle for someone who will not have the same kind of clout around the cabinet table of the Harper government.

He said it was critical that Labrador be represented when the ministers discussed plans for military projects such as a long-range unmanned aerial vehicle squadron and a new rapid reaction army battalion – items that have been on the table for seven years.

And as proof of sway with the Conservative government, Mr. Penashue told The Labradorian newspaper that he had withheld federal funding from Newfoundland projects to persuade the province to pay for the paving of the Trans-Labrador Highway.

But the opposition responded by suggesting the Conservative party was trying to skew the by-election in Mr. Penashue's favour.

Green Party Leader Elizabeth May, who decided against running one of her own candidates in the race to prevent vote-splitting on the left, asked for the federal Ethics Commissioner to investigate a $1.4-million spending announcement Mr. Penashue made in his riding just four days before he resigned over the illegal donations to his 2011 campaign.

In the end, the voters agreed with the opposition and it is Ms. Jones who will be taking a seat in the House of Commons.

With a report from The Canadian Press

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