Convicted councillor who smeared rival 'broke no code of conduct'.
The Standards Board for England ruled there is "no evidence" that Lib-Dem Cllr Steve Hurst broke the code of conduct by handing out leaflets smearing opposition members.
They used the case of former Mayor of London Ken Livingstone - who was cleared of any wrongdoing on appeal in the High Court after likening a Jewish journalist to a Nazi concentration camp guard - as justification for their decision.
The Board found that Cllr Hurst, like Mr Livingstone, had not been acting in his capacity as a councillor when he delivered leaflets claiming Labour councillor Pauline Walton left meetings early to go "lap dancing" during the May 2007 elections.
Cllr Hurst, who was convicted under the Representation of the People's Act in December, was found to have committed the offence on May 2, the day before a new code of conduct came into force on May 3, 2007.
The city council did not adopt the new code until July 2007 and so Cllr Hurst was judged under the 2001 version of the code.
Cllr Hurst has always denied the allegations and is appealing the conviction.
Cllr Walton said: "This undermines confidence in the Standards Board. You think to yourself, what's the point of complaining to them because nothing happens.
"You've got someone found guilty under the Representation of the People Act yet the standards board says he was not acting in his official capacity.
"As far as I'm concerned, every time I step out of the front door I'm acting in my official capacity."
Steve Hurst: Lib-Dem councillor handed out derogatory leaflets