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Minister of Intergovernmental Affairs Peter Penashue.

Conservative cabinet minister Peter Penashue has resigned his seat as a result of accusations of overspending during the 2011 campaign and allegations that he improperly accepted corporate donations including free flights around his riding.

Mr. Penashue, the Minister of Intergovernmental Affairs and President of the Queen's Privy Council, announced in a statement on Thursday afternoon that he was stepping down as a member of Parliament as a result of the irregularities and would run again in a by-election.

Mr. Penashue is the second member of Prime Minister Stephen Harper's cabinet to resign this year. In February, John Duncan resigned as Aboriginal Affairs minister over an inappropriate letter he wrote to the Tax Court two years ago.

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Mr. Penashue, who defeated incumbent Liberal MP Todd Russell by just 79 votes in Labrador, has been in the hot seat since last year when Elections Canada discovered that Mr. Penashue's campaign had spent nearly $4,000 more than the legal limit.

He was later accused of accepting thousands of dollars in free flights from an airline in his province and he is alleged to have received a donation from a construction company in St. John's. Corporate donations have not been permitted since the Conservatives changed election laws in 2006.

Mr. Penashue's campaign manager, Reginald Bowers, took responsibility in a letter he wrote to the chief electoral officer last May for what he said were "mistakes." Mr. Penashue subsequently made it clear in a letter to constituents that Mr. Bowers was to blame and the MP had no plans to resign. But he has now changed his mind.

"Due to mistakes that were made by an inexperienced volunteer in filing the Elections Canada return from the last campaign, I appointed a new official agent to work with Elections Canada to make any needed amendments to my campaign return," Mr. Penashue said in his statement.

"During the examination we became aware that there were ineligible donations accepted by the former official agent," he said. "Although I was unaware of the inaccuracies in the return, I believe I must be accountable to the people who elected me and therefore I am stepping down as the member of Parliament for Labrador and will seek re-election through a by-election."

The Conservative Party said Thursday that Mr. Penashue has paid the government $30,000 to compensate for the irregularities.

Mr. Harper moved quickly to appoint Denis Lebel, the Transportation Minister, to take over Mr. Penashue's cabinet duties.

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The government placed Mr. Bowers on the board of the Canada-Newfoundland and Labrador Offshore Petroleum Board in December, 2011 – a job that pays $5,000 per year plus $300 per meeting.

Elections Canada has not released its report on Mr. Penashue's activities. Opposition members suggested that its contents may have prompted the resignation.

"They have been defiant about whether or not they bought the election in Labrador and accepted illegal donations," said Charlie Angus, the NDP ethics critic. "My question is, did this move come as an attempt to forestall legal action?"

Dominic LeBlanc, the Liberal House Leader, said his party wondered why it took so long for Mr. Penashue to step down.

"Mr. Penashue, in our view, should have resigned months ago," said Mr. LeBlanc, "not only for an appalling lack of ethics in his own campaign but for the fact that he was simply unable to get up in the House of Commons and speak either for Newfoundland and Labrador or even in his own portfolio."

Mr. Penashue, the first Innu cabinet minister in Canadian history, has been one of the quietest of all of the Conservative cabinet ministers.

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Mr. Russell, who is now president of the NunatuKavut Community Council, which represents Inuit in southern Labrador, said he would take a few days to decide whether he would run again in the by-election. "But certainly in my view this is a vindication for the people of Labrador," Mr. Russell said, "for all of those who go to the ballot box and believe that when they put a ballot in the box that it is done with fairness and everybody is on a level playing field."

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