Stephen Harper's Conservative government has been consumed by the Senate expenses scandal, which has overshadowed a major trade agreement with Europe, consigned a throne speech to political oblivion and undermined what was supposed to be this weekend's feel-good national convention in Calgary.
Few people despise the Senate more than Stephen Harper. And the Prime Minister's contempt for the Red Chamber was on full display this week as opposition MPs grilled him about the unfolding scandal. But something was wrong. He stumbled. A politician famous for his managerial competence – though also for his secretive and controlling ways – repeatedly kept changing his story.
One day, "very few" people in his office knew that former chief of staff Nigel Wright had cut a personal cheque to rescue Senator Mike Duffy when he claimed he couldn't repay his questionable expense claims. Before, Mr. Wright had acted alone. Then the Prime Minister seemed to suggest that Mr. Wright had not resigned but had in fact been fired. Strangest of all, Mr. Harper turned on his former confidant, accusing Mr. Wright of "deception."
How did a Prime Minister credited with being such a master political tactician get into such a mess? How, if at all, will Mr. Harper get himself out of it?
The Globe and Mail talked to people inside the government, and close to it, about how Mr. Harper has handled the growing Senate scandal. What emerges is a picture of turmoil in the Prime Minister's Office following Mr. Wright's resignation, of a government moving to contain one blow after another, and of a growing resolve within the government that the only way out may be to hold a referendum on the Senate's abolition.
A problem at the Centre
Such a referendum would be a fitting resolution to a political crusade that Mr. Harper has waged for decades. As far back as the 1980s, when he was a policy adviser for the new Reform Party, Mr. Harper publicly demanded that the Senate be either reformed or abolished. As Prime Minister, he tried to get several bills through Parliament that would have seen senators elected to fixed terms and held off making appointments while waiting for those bills to pass. But opposition politicians and Tory senators blocked them all. Indeed, a recurring element of this ongoing affair has been the resistance of Conservative senators who refuse to be dictated to by the Centre, as the Prime Minister's Office is called.
Frustrated, Mr. Harper appointed a flurry of senators to fill a raft of vacancies, starting in late 2008. Many of those appointments were highly partisan. Two of the most prominent were former broadcasters Mike Duffy and Pamela Wallin.
The Conservative brand is the Stephen Harper brand – the two are inseparable. But Mike Duffy and Pamela Wallin have brands of their own, built on decades in the public eye. The party used their popularity to generate support and donations through public appearances.
That is why, when the first questions about Mr. Duffy's residency began to surface in December of 2012, Mr. Wright took charge of the file, writing an e-mail to Mr. Duffy discounting a news story on his housing expense claims as a "smear" and saying he believed the senator "complied with all the applicable rules."
Had the accused senators been less well known, their fate would have been left to the Senate leadership. But with Mr. Duffy and Ms. Wallin at the centre of the storm, the cases were too big to ignore, especially when allegations reached the boiling point in February that the two, along with another Harper appointee, Patrick Brazeau, and then-Liberal senator Mac Harb, had improperly billed taxpayers for many thousands of dollars in living expenses. At first, the Prime Minister's advisers tried to protect their star senators. When it became clear that there was strong evidence of improper charges, the government tried to distance itself from the now-discredited politicians. But, as one government official put it, "it was like trying to hold a bowl of Jell-O in your hands without the bowl."
As winter turned to spring, the Prime Minister's advisers, according to people close to the situation, became increasingly convinced that they had to lay this issue to rest – and that Mr. Harper had to be kept far from the affair. For that reason, Mr. Wright decided to act on his own by paying Mr. Duffy's expenses, to the tune of $90,000, not realizing that his actions placed his boss in political peril.
Sources who spoke to The Globe discounted Mr. Duffy's allegation, made this week, that officials in the PMO had coached him to lie to the public about where the money had come from. But they acknowledge that Mr. Wright had consulted others in the office before deciding to write the cheque. Mr. Harper, they insist, was kept in the dark for his own political protection. According to Mr. Duffy, he met privately with Mr. Harper and Mr. Wright – "just the three of us" – after a caucus meeting on Feb. 13 and insisted he had not broken any rules. The allegation is the first time the three men have been placed alone in the same room in connection with the Senate affair.
When news of the payment became public in May, the blow was staggering. Mr. Wright's actions brought the police into the picture, hugely magnifying the scandal's political importance. Mr. Harper, sources say, was personally devastated by what his chief aide had done.
And at a critical moment in the life of the government, the Prime Minister's trusted chief of staff – a wealthy businessman who was described by one official as "almost like a deputy prime minister" – was no longer available to advise Mr. Harper. Perhaps even more important, there was no one to stand up to a prime minister with a reputation for a hot temper and reluctant to take advice.
By August, a new team was in place, with the young but trusted adviser Ray Novak as the new chief of staff and with Jenni Byrne, who had managed the 2011 election campaign, as deputy chief of staff in charge of political operations.
There have been questions, too, about their involvement in this affair. But there may have been little alternative. As one close observer pointed out, although the PMO is large and getting larger, the people with their hands on the levers are becoming steadily fewer and younger. After almost eight years of governing – much of it in a tense minority situation – burnout has taken its toll and trusted, experienced aides are getting harder to find.
Enter the Senate
When Parliament resumed this fall, the government's newly appointed leader in the Senate, Claude Carignan, returned with a plan to put an end to a scandal that had showed no signs of disappearing.
Mr. Carignan held a meeting with Conservative senators in October to discuss three options for dealing with the ongoing problem: They could accept the status quo and allow Mr. Duffy, Ms. Wallin and Mr. Brazeau to continue to sit as senators; they could suspend the three without pay; or they could expel them from the Senate entirely. After walking senators through those options, the Conservative leadership was confident that it had reached a consensus to suspend the senators without pay and believed it "had the numbers" to get the motions through the Senate quickly.
Sources said Mr. Carignan and his office have yet to master the complex dynamics of the Senate, including ensuring that independents are included in the process and don't use their powers to slow down the proceedings. In addition, the Conservatives failed to predict how the events – including Mr. Duffy's speeches – would start to erode their own consensus, to the point where the numbers were no longer sufficient to swiftly impose the sanctions.
Aware that the proposals were losing support within his own caucus, Mr. Carignan publicly floated the idea of lighter sanctions. A source said he was considering the possibility of allowing the three senators to keep their medical benefits if they are suspended and changing the length of the proposed suspensions.
He convened Conservative senators for a three-hour meeting on Tuesday to discuss possible amendments. During that meeting, senators came up with a new consensus that would allow the three to keep their life insurance and medical benefits if they are suspended. The amendment did not convince all dissenting Conservatives, sources said, but the process – and the resulting concession – was seen to be helpful in convincing some senators to side with the government despite their continued doubts about whether the senators were being given due process.
But still the government stumbles and staggers, with the latest strategy – effectively expelling Mr. Duffy, Ms. Wallin and Mr. Brazeau from the Senate – mired in mismanagement. Why, for example, didn't the Prime Minister's Office leak the fact that there was another cheque – for $13,000, to cover Mr. Duffy's legal expenses – instead of letting Mr. Duffy spring the news in the Senate this week?
That revelation was part of a counteroffensive by Mr. Duffy and Ms. Wallin against the proposed suspension. They used all of their skills as former broadcast journalists to make their case, with Mr. Duffy making repeated allegations of close and active participation by the Prime Minister's Office in a coverup.
A number of Conservative senators and MPs have rebelled, claiming the suspensions deprive the accused of a fair hearing. One of them is former Environment Minister Peter Kent, who still sits as a Conservative MP.
"Public opinion shouldn't trump due process," Mr. Kent said in an interview. "I'm angry. I'm frustrated. I'm disappointed" over the alleged abuse of expense accounts, he said. "I've got the spectrum of emotions that I think everybody else in government has, from the Prime Minister on down. But again, the suspensions aren't addressing any of those."
Mr. Kent blames the rush to impose these sanctions for bringing the scandal to a boil on the eve of this weekend's Conservative convention, comparing those motions and Mr. Duffy's furious reaction to "throwing gasoline on what was a smouldering fire."
So what happens next?
What does not happen is a public inquiry or an inquiry by a parliamentary committee. Mr. Harper watched and learned as Paul Martin's government was brought down by the judicial inquiry he appointed into the sponsorship scandal. The Prime Minister decided that on his watch information would be closely guarded and released only when necessary or advantageous to the government.
That approach has kept the Conservatives in power for almost eight years, through three elections. While it may have contributed to this scandal, nothing will change as a result of it. Mr. Harper rarely changes his mind – and never his style.
The government – according to insiders – has three assets, though each comes with a liability attached. The first is the Prime Minister's personal credibility. He has never been implicated in personal impropriety. The Conservatives can only hope that Mr. Harper's personal brand will see him through. But although Mr. Harper insists he had no knowledge of Mr. Wright's cheque to Mr. Duffy, 65 per cent of Canadians believe he did know, according to a recent Ipsos Reid poll.
The second asset is time. An election is not scheduled for two years. Eventually, the Tories hope, the three former Conservative senators will leave the Senate without pay, taking them out of the public eye, and other issues will move to the front burner. People will forget.
But this controversy may prove more enduring. Criminal charges, if any are laid, would likely take place before the end of the year. Conservatives are confident that Mr. Wright, if he testifies in any trial, will support the government's narrative. But a trial into alleged illegal activities by figures associated with this government would bring the scandal back to the forefront, for weeks on end.
As well, the Auditor-General is examining the expenses of all senators. His first reports could arrive late in 2014 and stretch into 2015, which could keep the scandal alive right into the next election.
Most important, the Supreme Court is expected to deliver its ruling in the winter or spring on whether the Conservatives' proposed legislation to have senators elected to fixed terms is constitutional. If the judges clear the legislation to proceed, then expect two things: Mr. Harper will fill six Senate seats that are currently vacant with appointees who will promise to support the reform legislation, and Conservative senators who oppose it, and who have been holding it up, will be told loudly and publicly to get behind the bill.
But many legal experts expect the court to agree with a recent ruling of the Quebec Court of Appeal, which declared that Senate reform requires the consent not only of both houses of Parliament but of seven provinces representing half the population.
In that case, according to sources inside and close to the government, Mr. Harper is expected to go to the people with a referendum on the Senate. Although he could propose reform, different parts of the country have such differing views on what form reform should take that sources are certain Mr. Harper will proceed with a proposal to abolish the Senate entirely.
Given the deep unpopularity of the Senate with the public, a referendum on such a proposal might receive a strong mandate.
The big question might be when to hold the referendum. One option would be to run it in tandem with the federal election, slated for Oct. 19, 2015, according to the fixed election-date law. But that would risk making Senate reform the key issue of the election itself, and all Conservatives agree Mr. Harper would rather fight that campaign on the government's economic record.
The alternative would be to hold a separate vote after the Supreme Court ruling next year. The advantage would be that the government could settle the matter before the election is called. The downside is that the issue could eat up the government's entire agenda through 2014.
At his address to the Conservative convention on Friday night, a determined Mr. Harper did everything in his power to convince the party faithful that he understood the public's anger.
"While we do not know whether these actions were criminal, that is not relevant," he declared. "In private life, you would be fired for doing anything resembling this."
But if Mr. Harper is to avoid being fired by the voters over this affair, he will need to finally bring this political torment under control.
With reports from Daniel Leblanc and Kim Mackrael in Ottawa