Conservatives planned to repay Duffy's expenses from party funds, files show

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The Conservative Party of Canada initially planned to repay Senator Mike Duffy's improperly claimed expenses from its taxpayer-subsidized war chest, but balked after learning the debt was nearly three times as big as it was expecting, court documents say.

Prime Minister Stephen Harper's chief of staff at the time, Nigel Wright, then offered to provide Mr. Duffy with $90,172 of his own money secretly to repay what the senator owed to taxpayers on the condition he would do it "right away" and "stop talking to the media about it," according to court documents dated June 24 obtained by The Globe and Mail.

The documents, which are part of the information the RCMP provided to an Ontario judge in their investigation of Mr. Duffy, shed new light on how the Harper government tried to resolve the embarrassing spectacle of a Tory senator who claimed tens of thousands of dollars from public coffers in living expenses to which he was not entitled.

Lawyers for Mr. Wright told the Mounties that while their client kept Mr. Harper in the dark about his personal gift to Mr. Duffy, he did tell a small circle of four, the documents show. This included three people in the Prime Minister's Office: David van Hemmen, who was Mr. Wright's executive assistant; Benjamin Perrin, then a PMO legal adviser, and Chris Woodcock, PMO director of issues management, whose job it is to handle hot political files.

The fourth person who knew Mr. Wright was personally repaying Mr. Duffy's debts was Senator Irving Gerstein, chair of the Conservative Fund Canada.

Mr. Wright quit the Prime Minister's Office in May, only a few days after his payment to Mr. Duffy was made public, news that dragged the PMO into the Senate expenses scandal.

The revelation that the Tories were inclined to dip into their funds to cover Mr. Duffy's repayments runs contrary to Mr. Wright's main justification for his actions after they came to light in May. The Bay Street businessman and the PMO had said "the government believes that taxpayers should not be on the hook for improper expense claims made by Senators."

Party funds come from per-vote taxpayer subsidies (which the Harper government is phasing out) and donations, which are subsidized by tax credits.

"The Conservative Party was initially going to repay the money for Duffy, from a Conservative fund, when it was believed the amount he owed was approximately $32,000. The fund is controlled by Senator Gerstein," the RCMP said in the court documents, citing discussions with Peter Mantas and Patrick McCann, lawyers for Mr. Wright.

"When it was realized that the cost was actually $90,000, it was too much money to ask the Conservative Party to cover," the RCMP said. "Wright then offered to cover the cost for Duffy, believing it was the proper ethical decision that taxpayers not be out that amount of money."

The filings show Mr. Wright saw it as his role to "deal with matters that could cause embarrassment" and that Mr. Duffy had said "he did not have the money to cover the reimbursement."

The documents indicate that during a June 19 meeting, the RCMP advised Mr. Wright's lawyers "that a decision on whether to interview Wright as a suspect or witness had not been made."

RCMP Corporal Greg Horton said in the filing that he believes Mr. Duffy and Mr. Wright had an agreement "constituting an offence of frauds on the government" that a Senate probe's criticisms of the PEI politician's expense claims would be toned down as long as the $90,000 was repaid.

The Ontario Court of Justice documents are applications for production orders, or search warrants, seeking records and billing statements from the Senate related to Mr. Duffy's expense claims. The documents were sealed, but The Globe and Mail and CTV applied to the court to have them made public.

Mr. Wright declined to comment on Thursday in a statement released by his lawyers.

"I have offered and given my assistance to the investigation and I intend to continue to do so," Mr. Wright said.

The court records reveal Mr. Duffy is being investigated for two counts of alleged breach of trust in connection with his expense claims and one count of alleged fraud against the government in connection with the money he received from Mr. Wright. Public officials are barred from accepting money from anyone who "has dealings" with the government without written permission.

Corporal Greg Horton alleges in the documents that the PEI senator demonstrated "a pattern of filing fraudulent expense claims," including per diem claims he made while campaigning for Conservative Party candidates.

In addition, the RCMP allege that Mr. Duffy is claiming different primary residences based on the benefit he could derive from them.

"He maintains that his primary residence is in PEI so that he can collect housing and travel allowances from the Senate, however uses his Ottawa residence as his primary residence when convenient, such as when dealing with OHIP [Ontario Health Insurance Plan] so that he can obtain medical coverage in Ontario," the court documents say.

Filings also show that Mr. Duffy tried to contact PEI's Health Minister personally while his application for a provincial health card was under review. When questions were raised about the residency claims of Mr. Duffy and other senators in the media last year, senators were asked to submit documentation supporting the claims by Jan. 31, 2013, including a driver's license, health card, provincial tax information and a statement indicating where they last voted.

NDP ethics critic Charlie Angus called the Conservative government to explain itself after the RCMP documents were made public Thursday.

"According to the RCMP, at least three people in Stephen Harper's inner circle knew of the Senator's financial problems and plans to cover it up with a secret payment," Mr. Angus said. "It is long past time Conservatives come forward and come clean about their role in this affair."