It is well known that I rarely disagree with Ed, for the simple reason is that he is very good in the area of Laws, but I think he is wrong here.
Ok, let us go through it again. Lead out of turn, declarer chooses an option, LHO cannot, Law 59 applies. The idea of the TD giving declarer a second choice is pretty amazing!!!!!!

Now there is no penalty card any more. RHO gets on lead. How does he know partner is void of clubs? Correct: from the TD's ruling, and that is ruling is
authorised.Aha, I hear you say, but this all comes from the original infraction. True!

Time to read Law 10C4.
Subject to Law 16D2, after rectification of an infraction it is appropriate for the offenders to make any call or play advantageous to their side, even though they thereby appear to profit through their own infraction (but see Laws 27 and 50).
Sorry guys, Your explanation does not seem fair to me.
If West plays any other suit, it would be obvious to East that his partner (West) does not have any clubs, and so, after cashing his Ace of D, returns a club, knowing full well that West is going to 'ruff' his club lead. This seems to me to give an unfair advantage to E/W (who are, in fact, the offenders.
Can the Director apply Law 50E3 in this situation?
If not, then I think the "Law is an Ass"
Sorry, behley, we just interpret and apply the Laws. If you do not think it is fair, you can always write to the WBFLC and say so, but you still have to follow the Laws. It is a fact that every so often there will be unlooked-for conclusions that seem to benefit the offending side. But assuming the Law is an ass because of a specific case is usually just an over-simplification.