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Canadian Alliance Leader Stockwell Day is taking out a $60,000 mortgage on his home to help cover costs of a controversial defamation case that he acknowledged yesterday has hurt his embattled leadership.

Mr. Day, who had been dogged by the controversy for months, sought to put it behind him by issuing an apology, which he had refused to do since the news of the settlement broke.

At his news conference, however, the Alliance Leader raised further questions about his own lack of judgment, both in writing the letter that prompted the lawsuit and in refusing to apologize for it until it had caused a crisis in his leadership.

He has been criticized by allies and supporters -- including Alberta Premier Ralph Klein -- for leaving Alberta taxpayers on the hook for a $792,000 out-of-court settlement reached in December between Mr. Day and Red Deer lawyer Lorne Goddard. A special legislature risk-management fund covered the costs incurred by Mr. Day, who was Alberta's treasurer when he wrote the letter.

Yesterday, an emotional Mr. Day apologized to Mr. Goddard, saying he did not intend to hurt the lawyer and school trustee when he suggested in the letter to the Red Deer Advocate in 1999 that Mr. Goddard must agree with child pornographers because he was defending one in court.

"I deeply regret and apologize for any hurt he has borne," Mr. Day said, reading from a prepared text. "It was never my intention to hurt him. My only desire was to protect children."

He said he would take out a mortgage on his Red Deer home and write a personal cheque to the Alberta government to help defray the cost of settling the lawsuit. The house is now for sale, and the family is planning to buy in Penticton, B.C., in his federal riding.

Mr. Day said he is covering the $60,000 that went to Mr. Goddard in the settlement. The rest of the money went to lawyers representing both sides, including a Calgary law firm that later became involved in a controversy over a $70,000 donation to the Canadian Alliance by one of its partners.

The Alliance Leader said he has spoken to Mr. Goddard and "achieved closure with him."

Mr. Goddard said in an interview Mr. Day telephoned him late Sunday night to apologize personally to him and his family.

"I appreciate the fact that he's apologized, its nice that that happened. I think that's important."

He said Mr. Day offered no reason in the brief discussion for his decision to profess his regrets about the matter now.

Mr. Goddard would not comment on Mr. Day's $60,000 contribution against the costs of the lawsuit. "It has nothing to do with me as far as I'm concerned."

Mr. Day, looking emotionally drained yesterday, acknowledged he has been hurt politically by the controversy.

Last weekend, former Alliance MP Lee Morrison wrote in a Saskatchewan newspaper that the Goddard affair had destroyed Mr. Day's credibility and that the leader should resign.

"In some ways, I think it has [hurt]" Mr. Day said.

He said he should have "used better judgment" when he waded into the child-pornography controversy then raging in Red Deer and should have worded his letter differently so as not to suggest that Mr. Goddard himself supported child porn.

Two months ago, Mr. Day said he regretted the cost of the lawsuit but refused to apologize to Mr. Goddard and insisted he stood by the "principles" contained in the letter.