When Justin Trudeau embraced Canada’s attorney general, Jody Wilson-Raybould, last year in the country’s House of Commons, it became a moment emblematic of the powerful friendship between the two, part of the government’s promise to mend the broken relationship between the government and indigenous peoples in Canada.

Now, Wilson-Raybould is out of her job and Trudeau has found himself on the defensive, fending off accusations that members of the Prime Minister’s Office (PMO) – a powerful body staffed with hand-picked confidants – put pressure on Wilson-Raybould to not pursue criminal charges against a large Canadian engineering firm. The scandal has cast a shadow over Trudeau’s domestic image of commitment to transparent government, potentially harming his electoral prospects.

“These guys campaigned on respect for cabinet government and having a more kind of open and accountable approach to how they make decisions,” said Lori Turnbull, the director of Dalhousie University’s school of public administration, pointing out the allegations against Trudeau’s team are more in line with his mercurial predecessor as prime minister, Stephen Harper, than the rosy “sunny ways” brand Trudeau has tried to cultivate.

According to claims first published in the Globe and Mail on 7 February, staff within the PMO allegedly put pressure on Wilson-Raybould, the attorney general at the time, to pursue a deferred prosecution agreement with the engineering firm SNC-Lavalin, meaning the company would avoid a trial and pay a fine in lieu of prosecution for allegations of bribery in Libya. Wilson-Raybould resisted, according to the Globe. In mid-January, Wilson-Raybould, the only Indigenous politician in cabinet, was shuffled from her role as top prosecutor to head of veterans affairs.

The allegations of bribery, used to secure lucrative construction contracts under the Muammar Gaddafi regime, mean the company faces the prospect of a decade-long ban on federal contracts if found guilty. Headquartered in Trudeau’s home province of Quebec, SNC-Lavalin employs 3,400 workers in the province – and its potential collapse could have deep political and economic reverberations for the region.

Wilson-Raybould arrives for a Liberal caucus meeting in Ottawa on Wednesday. Photograph: Chris Wattie/Reuters

Trudeau has called the Globe story “false” and repeatedly denied that he or his office had “directed” Wilson-Raybould in any way, or that she had been put under undue pressure. “Her presence in cabinet should actually speak for itself,” Trudeau said.

Hours after his comment, Wilson-Raybould resigned. She has so far remained silent, citing solicitor-client privilege. The ethics commissioner has opened an investigation into the matter.

With political opponents calling for blood, the turmoil claimed another casualty on Monday: Gerald Butts, a longtime friend and close adviser to the prime minister, resigned abruptly, denying any wrongdoing or exerting improper influence. “This is the guy who, when he speaks, everybody understands that’s Trudeau speaking,” said Nelson Wiseman, a professor of political science at the University of Toronto.

The scandal has also reinvigorated questions over the heavy influence people such as Butts held within the PMO – and the immense power wielded by the office in Canadian politics. “There’s lots of concern about PMO being too powerful. There are these advisers giving the prime minister advice behind closed doors making decisions that really affect cabinet caucus, without really being accountable or accessible to the public,” said Turnbull.

In the days that followed Wilson-Raybould’s resignation, a report by the Canadian Press highlighted anonymous criticisms of her from within her party, calling her “difficult” and casting her as a selfish and demanding member of cabinet.

Her resignation – and the barrage of criticism directed at her – have significantly eroded the critical goodwill with Indigenous leaders that Trudeau and his team have worked hard to cultivate, as well as casting doubt over his feminist bona fides.

“It was a real insult going from justice, a very senior portfolio, to a very, very junior and not terribly significant portfolio,” said Wiseman. “Trudeau and his entourage really messed up by badmouthing her.”

Justin Trudeau has suffered a sliding approval rating since the scandal broke. Photograph: Chris Wattie/Reuters

Indigenous leaders across the country quickly protested at what they saw as unfair treatment of Wilson-Raybould.

“If you do not condemn these harmful statements and apologise to minister Wilson-Raybould, you not only reaffirm a colonial belief system that Indigenous women are inferior and disposable, but the hypocrisy of your professed feminism and ‘most important relationship’ with Indigenous people will be laid bare for all Canadians to see,” wrote the Union of British Columbia Indian Chiefs in a letter to the prime minister immediately after Wilson-Raybould’s departure from cabinet.

A leading cabinet member has expressed support for Wilson-Raybould, as have other Liberal party MPs. “To the extent that there’s kind of a public relations war happening here, she’s winning,” said Turnbull.

The scandal has already shown signs of extracting political costs: one poll after Wilson-Raybould’s resignation showed Trudeau’s Liberals slipping behind the Conservatives. More damaging for the party, however, was the prime minister’s sliding approval rating.

“The only thing that’s going to make this story go away is if people introduce some facts that the public accepts as true, and if somebody took some sort of responsibility for something and then resigned,” said Turnbull.

While the damage at the moment is contained, Wiseman believes things could change quickly. “It’s not an existential threat yet unless something comes out from Wilson-Raybould, because she has a lot more credibility right now than anybody in the government.”