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Conservative Senator Leo Housakos is shown in Montreal on Jan., 9, 2009.Graham Hughe/The Canadian Press

Two top senators have reimbursed their disputed expenses in a bid to salvage the arbitration process that will allow their Senate colleagues to challenge the findings of the upcoming Auditor-General's report.

The Speaker of the Senate, Leo Housakos, and the Senate Opposition Leader, James Cowan, have paid back $6,000 and $10,000, respectively.

Last week, they announced that they would challenge the figures in front of an arbitrator, former Supreme Court judge Ian Binnie, whom they had helped to hire.

The two senators faced sharp attacks from inside and outside the Red Chamber over what was widely called a conflict of interest. By shifting gears and reimbursing the expenses, Mr. Housakos and Mr. Cowan aimed to contain an issue that was set to overshadow the Senate's response to the audit.

"That is why I have chosen, without reservation, to reimburse in full the amount relating to my Senate office as noted by the Auditor-General, rather than exercise my right to arbitration," Mr. Housakos said in a statement on Monday.

Over all, Auditor-General Michael Ferguson will call on Tuesday for an overhaul of the Senate's expense system, while urging 21 senators to repay disputed claims and referring nine other cases to the RCMP. The amounts in dispute total nearly $1-million.

The audit is expected to renew the debate over the types of expenses that senators can claim as part of their parliamentary functions, including participating in charitable functions or working for other organizations.

Conservative Senator Nicole Eaton has reimbursed $3,500 in travel expenses, but she slammed Mr. Ferguson for raising questions about Ottawa-Toronto trips that were part of her activities with non-profit organizations.

"Contrary to the Auditor-General's opinion, I am fully confident that not only did I act within the rules … but also undertook this in a manner expected of me as a senator," she said in a statement.

In addition, a Senate official said the Auditor-General took a mathematical approach to determining which senators can get an allowance for their secondary residence in Ottawa – an issue at the heart of suspended senator Mike Duffy's criminal trial in Ottawa.

Rod Zimmer, a retired Liberal senator who is facing a tab of $176,000, has accused the Auditor-General of "appearing to be interfering in the judicial proceedings."

There are also concerns in the Senate that the confidential audit was leaked by insiders last week, a matter that could lead to an investigation. Conservative Senator David Tkachuk said he would raise the issue during the Senate committee on internal economy on Thursday.

"I signed a confidentiality agreement. I may be old-school, but if you sign something, you expect it to be upheld," Mr. Tkachuk said in an interview. "When it's not, you say, well what's the point of this whole process? It puts everybody at a disadvantage."

By deciding to pay back the disputed amounts, Mr. Housakos and Mr. Cowan are forfeiting any right to claim that their expenses were beyond reproach. Their goal is to allow the arbitration process to proceed according to plan for the other senators who are named in the report.

In a statement, Mr. Cowan acknowledged that he decided not to go to arbitration after allegations were raised that he was in a conflict of interest.

"While I categorically deny such allegations, I have concluded that pursuing my right to arbitration, which I had intended to do, would cast a shadow in some minds over the fairness and independence of the process itself," said Mr. Cowan, who oversees the caucus of Liberal-appointed senators.

The Conservative Leader in the Senate, Claude Carignan, defended the arbitration process that has been in the works for months but was announced to the public only two weeks ago.

"It is by far preferable to have an independent, impartial person in place to arbitrate disputes between the Senate administration and senators, rather than having the matter decided by other senators, some of who have their own issues with the Auditor-General," Mr. Carignan said in an interview.

The Conservative government has argued that it is up to the Senate, as an independent body, to handle the controversy over its expenses.

After the Group of Seven summit wrapped up in Germany, Prime Minister Stephen Harper shot down NDP Leader Thomas Mulcair's proposal to abolish the Senate.

"The Supreme Court has ruled, as you know, that that question requires unanimity," Mr. Harper said of Senate abolition. "Among others – not the only one by any means – the government of Quebec does not support that position. In fact, the government of which Mr. Mulcair was a member in Quebec does not support that position.

"And I don't think Canadians have any appetite of returning to long, drawn-out sustained constitutional negotiations. That era has passed us, and I think everybody is glad."

With reports from Kim Mackrael, Steven Chase and The Canadian Press

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