Authors: Michael Harris
The way Duffy told it, it was either take the deal being proposed by the PMO or lose his Senate seat.
Whatever the machinations, Duffy agreed to what he later called a “dirty scheme.” Under the deal with the PMO, Duffy would repay his housing allowances, admit he made a mistake, and stop defending his entitlements in the media. And he was not to tell anyone about the special arrangement with the PMO. In return he would be reimbursed for the repayment, the Steering Committee would not attack him in the media, and he would be withdrawn from the Deloitte audit.
There was one last practical detail to establish: who would actually pay Duffy’s improper expenses? According to Nigel Wright, Senator Irving Gerstein had previously approached the PM’s chief of staff to ask if he could assist in any way. On February 22, Wright called the chair of the Conservative Party Fund and took him up on his offer. Gerstein agreed to pay $32,000, plus interest, in the matter of Duffy’s wrongful housing allowance expenses. The justification for the Fund’s involvement would be that Duffy had made the claims in error. Wright passed on the good news to PMO staff that the deal was all but done—a welcome turn of events for a
group that had been grappling with the Senate expenses scandal for months without much success.
After perusing Duffy’s diaries, and conferring many times with the embattled senator, Wright also agreed that “a senior government source” would confirm in a statement that Duffy was qualified to sit as a senator from PEI. “The PM will also give this answer is [
sic
] asked, as will other authorized spokespeople for the government,” Wright noted.
Wright even agreed to Payne’s request that Duffy be reimbursed for his legal fees in addition to his expenses, as long as he kept his part of the bargain. The party “would not inform anyone” of the payment, and Wright expected Duffy to keep their secret arrangement secret. But he wasn’t taking any chances. He asked Benjamin Perrin to go back to Duffy’s lawyer and confirm that everything was understood. “I would like it to be explicit. . . . I do not want to speak to the PM before everything is considered final.”
Less than an hour later, Wright did a follow-up email: “We are good to go from the PM once Ben has his confirmation from Payne.” An email from Perrin said that Duffy’s lawyer, Janice Payne, wanted the agreement in writing. Wright was indignant and refused. Perrin emailed Wright, “I explained that was not happening. We aren’t selling a car or settling a lawsuit here. She seemed to get it eventually.”
Wright directed that the “government lines” be sent to Senators Tkachuk and LeBreton, noting that Duffy still had to send his letter to the Steering Committee, “mimicking his public lines.” The PMO prepared talking points for both before and after the Senate Standing Committee met. The last line of Wright’s orchestrated response turned out to be wishful thinking: “The Committee considers all issues relating to Senator Duffy now resolved.”
As for the calamitous star at the centre of the controversy, he followed through on the agreement. On February 22, 2013,
Duffy wrote Senator Tkachuk to say he had filled out the expense forms in good faith but “may have been mistaken.” Even though he found the forms confusing, Duffy expressed his intention to repay the housing allowance, and asked for the amount. Duffy’s letter to Tkachuk had actually been drafted by Chris Woodcock in the PMO. Duffy’s legal bill landed on Wright’s desk in the PMO—28.7 hours at $475 per hour for a total of $13,632.50.
The experienced media star kept marching to Nigel Wright’s drum. Duffy went on CTV Atlantic from Charlottetown to say he would be repaying his housing allowance, blaming unclear Senate rules for the whole mess, and saying he “may have been mistaken” when he filled out the forms. “Canadians know Mike Duffy,” he said. “They’ve known me for years and they know that I would never do anything that was inappropriate and I would never, ever take advantage of my position.”
But at the moment of his triumph, the strings broke in the hands of the puppet master. Nigel Wright was told by the government house leader in the Senate that meals and per diems included, the total bailout bill for Mike Duffy was not $32,000 but approximately $80,000. Wright was apoplectic. “I am beyond furious,” he wrote. “This will all be repaid.” Wright fumed over the fact that Duffy was apparently getting paid for meals he ate in his own home in Ottawa.
More bad news was on the way. On February 27, 2013, Senator David Tkachuk informed the PMO that the full amount owed by Duffy since his appointment in 2008 was $90,172.24. It was a dicey situation. Tkachuk asked auditors from Deloitte at one of their briefings if they would stop their audit if Duffy made restitution for the improper expenses. It was a crucial question for the Conservatives. If the extent of the Senate expenses scandal became public, there would be hell to pay. The auditors just looked at Tkachuk and didn’t reply. They were, after all, independent professionals and this was a forensic investigation.
On the same day, Janice Payne also informed the PMO of the revised amount of her client’s expenses. In a note to Benjamin Perrin, Payne said that her client still required assurances from the Internal Economy Committee that repayment would result in his being withdrawn from the audit. In a second email sent the same day, Payne said, “Essentially, we need confirmation expenses are in order, withdrawal from Deloitte, and the $ arrangements.”
Perrin passed Payne’s request on to Nigel Wright, who was still fuming and was now even angrier: “Ben, I do find this frustrating. There is a letter from the Subcommittee stating precisely what expenses are owed relating to the primary residence claim. Once those are paid, the subcommittee can scarcely say that it got the amount wrong and needs more. Does Janice truly understand that if Mike has improperly charged for travel on Senate business when no Senate business actually took place that we cannot now say to him that those expenses are in order? . . . Withdrawal of Deloitte is as we noted earlier—I agree that the Subcommittee has to do its work on that.”
Another serious problem loomed up. With the new, much higher figure for Duffy’s expenses, which included possibly dubious per diem and meal claims, the Conservative Party Fund backed out of its agreement to ante up the cash.
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Nigel Wright now had to find a new source of funds to pay off Duffy’s expenses. It was an unwanted task, since he was also a man caught between two audits—the internal audit in the Senate and the external forensic investigation by Deloitte. In order to close the deal on Duffy, Wright had to meet the senator’s demands, a task that required influencing or even controlling the conclusions of both investigations. It was necessary to portray Duffy in the right light. With a Conservative majority in the Senate, Wright had reason to believe that things would go smoothly there. They didn’t. Senators resented Duffy’s outbursts in caucus and felt that his questionable expense claims made them all look bad.
Wright’s go-to person in the Senate was Carolyn Stewart Olsen. On February 28, 2013, news broke that a Senate investigation found that there were no other questionable housing expenses beyond those of Senators Harb, Brazeau, and Duffy. Stewart Olsen emailed Wright saying she was “always ready to do exactly what is asked” of her by the PMO, but needed “to know in advance what the strategy was.” Wright told her to stay close to Chris Woodcock, the director of issues management and Patrick Rogers, manager of parliamentary affairs in the PMO. “As for strategy,” he continued, “I am extremely frustrated that we seem to be unable to get either the subcommittee or Deloitte to the point where it is agreed that the Deloitte examination of Duffy’s secondary residence claim is completed by the combination of (i) Deloitte determining the amount of expenses incurred by reason of the claim of secondary residence, and (ii) Mike agreeing to repay that amount. Once we know that repayment will permit the subcommittee and Deloitte to state that that matter is resolved, then the repayment will follow forthwith.”
Wright also registered his displeasure at the lacklustre support he was getting from the Senate leadership on the matter of controlling the Deloitte audit. He believed there had been a deal with Senators Stewart Olsen, David Tkachuk, and Marjory LeBreton and they weren’t keeping it. “No one on the Senate side is delivering,” he wrote to Stewart Olsen. In her reply, Stewart Olsen offered Nigel a nugget of inside information: “Confidentially both Marj [LeBreton] and David [Tkachuk] are telling each other the audit will not be pulled. . . . I think the only way to do this is to tell Deloitte that we are satisfied with the repayment and end the audit. The non-partisan nature of the committee is a problem, as is the Clerk, who seems to have his own agenda.”
As for Wright, he had definite ideas of what the Deloitte audit should report about Senator Duffy, responding to Stewart Olsen, “I agree that the auditor (it’s not really an audit) should report. But
the report can be—if Kanata were a primary residence, here is how much would be owed. It shouldn’t conclude that ‘Kanata is the primary residence,’ and it doesn’t need to conclude that because Mike has committed to repay the money as if that were the case. I could use your help getting them to understand that and making it happen.”
Pressure was building. On March 1, Janice Payne requested an update from Benjamin Perrin on ending the audit for her client. Wright needed to know if Deloitte were amenable to dropping Duffy from the audit after repayment of his troubled expenses. He forwarded his email exchange with Senator Stewart Olsen to Woodcock and Rogers in the PMO and then wrote to Benjamin Perrin about a highly questionable new strategy:
Today I asked Sen. Gerstein to actually work through senior contacts at Deloitte and with Sen. LeBreton. . . . the outcome we are pushing for is for Deloitte to report publicly that IF Kanata were the primary residence then the amount owing would be the $90 thousand figure and that since Sen. Duffy has committed to repay this amount then Deloitte’s work in determining primary residence is no longer needed. . . . The nub of what I said to Mike is that his expenses would have to be repaid, so his choice was between having that plus a finding that they were inappropriate or that without such a finding. That is what we are working towards.
Despite pre-clearing his plan with the senators on the subcommittee, Nigel Wright told Perrin, “I am no longer 100% sure we can deliver, but if we can’t then we and Mike have a bigger problem.”
On March 1, 2013, Senator Irving Gerstein, Conservative Party lawyer Arthur Hamilton, and the executive director of the Conservative Party, Dan Hilton, received an email from Nigel Wright advising them that he had a solution to the Duffy
problem. In the course of a telephone call with Senator Gerstein, Wright revealed that he had decided to pay Duffy’s expenses personally. Gerstein was surprised, but agreed that the Conservative Party Fund would pick up Duffy’s legal bill, through party lawyer Arthur Hamilton.
Wright’s plan was finally beginning to roll. On March 4, 2013, Janice Payne invoiced Conservative Party lawyer Arthur Hamilton at Cassels Brock & Blackwell LLP for $13,560. A few days later, on March 8, Wright got good news from the PMO’s manager of parliamentary affairs. Senator Irving Gerstein had spoken to his contact at Deloitte, senior partner Michael Runia, and asked about getting Duffy removed from the forensic investigation if he paid back his improper expenses. In an email to Wright, Patrick Rogers reported, “Senator Gerstein has just called. He agrees with our understanding of the situation and his Deloitte contact agrees. The stage we’re at now is waiting for the Senator’s contact to get the actual Deloitte auditor on the file to agree. The Senator will call back once we have Deloitte locked in.”
The PMO was now apparently in the business of interfering in an independent forensic investigation ordered by a parliamentary body. With so many negotiations going on, word was bound to leak out that something big was happening in the Langevin Block. On March 8, 2013, the PMO received a media inquiry asking if the Conservative Party was paying off Duffy’s expenses. Chris Woodcock alerted Nigel Wright, who replied in part, “. . . For you only: I am personally covering Duffy’s $90,000. . . .” The executive director of the Conservative Party, the Conservative Party lawyer, and the chair of the Conservative Party Fund all knew about Wright’s momentous, and highly unusual, deal to pay off Duffy’s expenses. Now the word had spread to a senior staffer in the PMO.
As the month of March guttered down, Janice Payne was still pushing Benjamin Perrin and Arthur Hamilton about ending
the audit of her client upon repayment of his expenses. She also emailed Senator David Tkachuk seeking confirmation that with payment by her client, the audit would stop. Tkachuk contacted the PMO for a suggested response. PMO staffer Chris Woodcock passed along the senator’s question and Nigel Wright offered a sharp answer: “Very dangerous tactic by her. Also, I wonder if she is paying attention, because Ben [Perrin] will have explained to her several times that it is not ‘the audit being called off,’ but rather Deloitte not having to come to a conclusion on primary vs secondary residence. . . .”
On March 21, 2013, the day then federal finance minister Jim Flaherty was slipping into new shoes and delivering the 2013 federal budget, Senator Gerstein contacted Patrick Rogers in the PMO with the final word from Deloitte and his insider contact. Deloitte would not be stopping the audit because it was part of their mandate to determine residency. But Rogers had some very good news for Nigel Wright: “. . . However, they [Deloitte] can’t reach a conclusion on residency because Duffy’s lawyer has not provided them anything.”
It was a remarkable note. The PMO appeared to know what Deloitte would say even though their report would not be issued for weeks. The question is how? Was it through Michael Runia, who had made inquiries at Deloitte for Senator Gerstein, who was in turn acting on behalf of Nigel Wright? Or was it through the Senate? Deloitte auditors had provided verbal briefings to two Senate committees in late February, including the one that was examining Senator Duffy’s expenses. That committee had three members: Senators Furey, Tkachuk, and Stewart Olsen.