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Senate pages waits at the front door of the Senate chamber May 21, 2013 on Parliament Hill in Ottawa.Dave Chan

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Why did Nigel Wright pay Mike Duffy's expenses? What would the paper trail reveal if it came to light? Reporters and opposition politicians want to know. So do the Conservatives.

Conversations with senior government officials in recent days reveal an administration confused and deeply worried about what happened in the Senate expenses affair.

Conservatives realize that this scandal could defeat them in the next election. They also suspect it could lead to the abolition of the Senate itself. Here is an account of the thinking inside the government, based on conversations with two senior officials who spoke on condition of anonymity.

For months, the government has worried about the potential damage from revelations that three Conservative senators (and one Liberal) may have inappropriately claimed travel or living expenses. People were particularly concerned about accusations concerning Mike Duffy, for two reasons.

The first was that Mr. Duffy was a high-profile and popular figure in the party, and revelations that he might have billed tens of thousands of dollars in expenses that he shouldn't have would damage the party's brand as well as the senator's.

The second was that Mr. Duffy appears to have a tendency to offer conflicting explanations for past events.

The people I spoke to are convinced that the Prime Minister was telling the truth when he said he knew nothing about Mr. Wright's decision to personally pay Mr. Duffy's expenses. Although he initially thought it might be possible for Mr. Wright to remain in his position – Mr. Harper greatly trusted Wright's advice on economic issues – it soon became clear that the chief of staff had to go.

Mr. Harper has said he is angry and upset over Mr. Wright's actions. Those close to the PM say that's a considerable understatement.

Although Mr. Harper spoke in public to caucus and answered reporters' questions during his Latin American trip, many have wondered why he didn't hold a proper press conference to answer all of the questions surrounding Mr. Duffy and Mr. Wright. One reason offered by senior officials is that at this point the government doesn't know what it doesn't know.

There could be memorandums no one has seen yet, agreements no one is aware of. In the Prime Minister's Office itself there is great confusion over what Mr. Wright did and why he did it.

The wording of the audit on Mr. Duffy's expenses was toned down and some sentences redacted, officials said, because the money had been paid back. The committee came down harder on senators Patrick Brazeau (formerly a Conservative) and Mac Harb (formerly a Liberal) in hopes of shaming them into repaying what they owed voluntarily, because no one is certain there is a way to force them to, the sources said.

As to whether the PMO had advance notice of what the Senate committee's report on Mr. Duffy would say, officials said it is routine for senior party leaders to keep each other briefed on developments, and no one should take that amiss.

But the details of timelines and redactions are beside the larger – much larger – point: People who voted Conservative because they believed the government was honest – secretive, arrogant and careless with democratic niceties, perhaps, but honest – are furious that senators appointed by Stephen Harper may have abused the public trust by taking money from the taxpayers they weren't entitled to.

And the fact that the Prime Minister's most senior adviser cut a personal cheque in an effort to make the whole thing go away is salt in an open wound.

Conservatives also fear that things will get worse before they get better. The immediate problem is that Mr. Harper is now without a senior economic adviser in his office at a critical moment, when the government must decide whether to sign the proposed trade agreement with the European Union.

Ethics commissioner Mary Dawson is investigating the whole affair. No one inside the government knows how damning that report will be, but no one is expecting exoneration.

And there is now a general expectation that there will be a police investigation into senators' conduct – especially in areas related to double-billing – and possibly criminal charges.

The Conservatives are looking to one vital event as a possible avenue of rescue. The Supreme Court is scheduled to hear arguments this autumn over the constitutionality of proposed Conservative legislation that would elect senators to fixed terms.

But there is a second question before the court: How, if at all, might the Senate be abolished?

If the court were to say that both elections and abolition require the consent of the provinces, the feeling inside the government is that Mr. Harper might now be inclined to pursue the option of abolition, which would be easier to sell to the premiers, and which would demonstrate his resolve to clean up the Senate once and for all.

Though it would be beyond ironic if an entire House of Parliament were brought down over a $90,000 cheque.

John Ibbitson is the chief political writer in the Ottawa bureau.

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