On March 22, Nigel Wright, Prime Minister Stephen Harper's right-hand man and top economic adviser, should have been celebrating the Conservative government's biggest accomplishment of the year – the tabling of the federal budget.

But Mr. Wright was involved in another, much messier, money matter. He was locked in last-minute and detailed discussions with Mike Duffy's lawyer about having the senator repay his expenses after weeks of back-and-forth negotiations.

By that time, Mr. Wright had already made the fateful decision that he would have to foot the bill himself.

Story continues below advertisement

In fact, he'd made it weeks earlier, on March 8, when he sent Chris Woodcock, the PMO's director of issues management, an e-mail that he would come to regret: "For you only: I am personally covering Duffy's $90K ..."

It was a decision that turned Mr. Wright's tightly controlled life upside down. The man charged with making Mr. Harper's political problems disappear had turned a bad political situation into a toxic issue that would ultimately lead to a police investigation. And it forced Mr. Wright, a millionaire and former Bay Street deal-maker, out of his job in the Prime Minister's Office.

Eighty pages of documents filed in court this week by RCMP Corporal Greg Horton provide an unprecedented look inside the workings of the Prime Minister's Office, the relationship between the PMO and the Senate, and the thinking of Mr. Wright as he attempted to diffuse the political turmoil. They include portions of hundreds of e-mails – whittled down from hundreds of thousands – and interviews with key players, including Mr. Wright. From that transcript and the e-mails, it is possible to piece together the tale though the eyes of the former chief of staff.

Conversations begin with Duffy

On Feb. 7, Mr. Wright had the first of what would become an ongoing series of conversations with Mr. Duffy. Two days earlier, Mr. Wright had decided that the issue could no longer be ignored after reports emerged that Mr. Duffy had applied for a health card in Prince Edward Island – presumably to reinforce his claim that his primary residence was on the island.

But there was more. The expenses of Mr. Duffy, Liberal Senator Mac Harb and Conservative Senator Patrick Brazeau were now being sent to Deloitte for an audit and, according to Mr. Wright, Mr. Duffy was "upset" during that call. He did not want to be lumped in with the other two senators who were in trouble over their expenses.

Mr. Wright told police he still believed, at this point, that Mr. Duffy had broken no rules. He fired off an internal e-mail saying a senator could primarily reside in Ottawa but, under the rules, could still be a senator from PEI. But "that leaves the very big problem of his having collected $900 per month," Mr. Wright wrote.

Story continues below advertisement

At first, Mr. Duffy seemed eager to make things right. In an e-mail he said: "If there is anything improper about these expense claims, I want to correct it."

When Mr. Duffy confirmed in a telephone call on Feb. 11 with Mr. Wright that he spends most of his time in Ottawa, Mr. Wright told the senator he "morally" should not be claiming his Ottawa residence as a secondary residence and should pay the money back.

At the end of that conversation, Mr. Wright apparently believed Mr. Duffy was willing to return any money to which he was not entitled. At that point, reporters had pegged it at about $32,000.

Negotiations go awry

Close to the middle of February, Mr. Wright could see things slipping out of his control. Even with the Pope resigning and a new premier taking over in Ontario, news about the Senate wouldn't die down. Mr. Brazeau was suspended from the Senate after being charged with assault and sexual assault, and Pamela Wallin, also under scrutiny for her expenses, began a spirited defence of her position with an op-ed in The Globe and Mail.

Mr. Wright noticed Mr. Duffy approach Mr. Harper after a caucus meeting. He interjected himself into the conversation to hear Mr. Duffy defending his expense claims to the Prime Minister and saying he should not have to repay them. Mr. Harper disagreed, telling Mr. Duffy that the public would not accept such claims. And, when Mr. Duffy did not challenge the Prime Minister, Mr. Wright thought the matter had been settled. It wasn't.

Story continues below advertisement

Mr. Wright and Mr. Duffy spoke again by telephone on Feb. 19, and Mr. Duffy was again arguing his position that his primary residence is in PEI. He told reporters in PEI that morning the same thing. Speaking out for the first time since the residency questions began, he explained that he spent time at his Cavendish cottage in summer but his winters in Charlottetown. "I'm confident that in the end it will all turn out. Canadians know I'm an honest man and that I wouldn't cheat on my expenses," Mr. Duffy said.

When Mr. Wright told him that his claim did not hold water, Mr. Duffy finally explained that he didn't have the money to make the repayment even if he wanted to.

That threw all of the negotiations up in the air.

A deal is struck

By Feb. 20, Mr. Wright was getting more than a little fed up with Mr. Duffy, who was asking to see a written analysis of why he was not entitled to the claims. Mr. Wright fired back that they might have to speak "only through lawyers going forward."

Senator David Tkachuk, the chair of the Red Chamber's internal economy committee, then called Mr. Wright to suggest that if Mr. Duffy would write a letter to Deloitte admitting his mistake and asking how much he needed to repay, the internal economy committee would stop the audit. Mr. Wright agreed that was a reasonable solution.

Story continues below advertisement

On Feb. 21, Mr. Duffy's lawyer, Janice Payne, wrote to the PMO saying Mr. Duffy would agree to repay the money, provided the internal economy committee confirmed that Mr. Duffy had been withdrawn from the audit and that he would not be subject to any further review.

She also insisted: "As his apparent ineligibility for the housing allowance stems from his time on the road on behalf of the party, there will be an arrangement to keep him whole on the repayment."

In less legal language, Mr. Wright had to find the money to pay Mr. Duffy before Mr. Duffy would pay back the amount owed.

Conservative Senator Irving Gerstein, the chair of the Conservative Fund of Canada, had previously approached Mr. Wright to ask if he could assist in any way. So, on Feb. 22, Mr. Wright called Mr. Gerstein and inquired whether the fund would pay expenses, which he still believed were about $32,000. Mr. Gerstein confirmed it would.

On Feb. 23, Mr. Duffy was before the television cameras saying he might have made a mistake and would repay the thousands of dollars he claimed improperly.

Wright writes $90,172.24 cheque

Story continues below advertisement

But Mr. Wright's problems were anything but over. On Feb. 26, he learned Mr. Duffy had been charging meals and per diems – and that the bill would be roughly $80,000, rather than $32,000.

"I am beyond furious. This will all be repaid," Mr. Wright wrote in one e-mail.

The next day, the final tab came in – $90,172.24. Whatever deal to have the party pay was off.

By March 8, he had decided to pay it himself. Mr. Wright told police why he wrote the cheque: He is financially comfortable and it was his global view that taxpayers should not be on the hook for the money. When he travelled for work, he chose to pay his own expenses, he told police. He did not view his decision to pay for Mr. Duffy as something out of the norm – it was part of being a good person.

On May 10, CTV reported that the RCMP was looking into the travel and housing expenses of Mr. Duffy, Mr. Harb and Mr. Brazeau – a report that was confirmed three days later.

News of the cheque was about to be revealed. On May 14, Andrew MacDougall, who was then Mr. Harper's director of communications, sent an e-mail to Mr. Wright saying he had received a request from a reporter about Mr. Wright signing a loan to repay the money for Mr. Duffy.

Story continues below advertisement

"Would the PM know the actual answer to the question, just in case he asked us," asked Press Secretary Carl Vallee.

"The PM knows, in broad terms only, that I personally assisted Duffy ..." replied Mr. Wright.

That night, CTV reported that Mr. Wright had personally intervened, with a "secret deal" to help Mr. Duffy repay his expenses, and the issue blew open.

The RCMP now allege that it was altogether enough to warrant a criminal investigation, though no charges have been laid. Mr. Duffy and Mr. Wright are now the subject of an investigation by the Mounties, who accuse them of bribery, fraud and breach of trust. Mr. Duffy has been suspended from the Senate without pay.

For Mr. Wright, the damage has been severe. The man once considered indispensable, sitting with the Prime Minister at the apex of Canada's political system, didn't just lose his job. As Mr. Harper struggles to contain political damage from a steady drip of allegations, he has cut Mr. Wright loose – accusing him of "deception" and laying the sole responsibility for the affair on his, and Mr. Duffy's, shoulders.

"There are two individuals who are responsible and who are under investigation," Mr. Harper told a news conference in Winnipeg Friday. "As we said from the outset, they are Mr. Duffy and Mr. Wright, and we will do everything to make sure the investigation proceeds and those who acted improperly are held accountable."

The man behind the money

As chief of staff, Nigel Wright was Prime Minister Stephen Harper's top aide and economic adviser. He knew his boss for decades and commanded respect as few others could. Until he joined the Prime Minister's Office in 2010, he was a universally respected broker of multimillion-dollar deals for Onex Corp., the private-equity giant. But he also has a long history as a political operative. He has quietly been active at every stage in the evolution of the modern Conservative Party – he was one of three founding directors of Conservative Fund Canada, which supervises party financing.

Described by his peers as both diligent and a workaholic, Mr. Wright was born in Hamilton and raised in Burlington. He attended the University of Toronto's Trinity College with contemporaries that included Jim Balsillie, co-founder of Research in Motion (now BlackBerry) and writer and thinker Malcolm Gladwell. After graduating in 1988 from U of T's law school, he went on to a master's degree at Harvard.

Did he resign or was he fired?

Mr. Wright offered to resign at the outset of the Senate scandal, shortly after revelations that he gave a $90,000 cheque to personally refund Senator Mike Duffy's illegitimate expense claims, sources told The Globe in May. But Stephen Harper initially refused the offer, as the Prime Minister and his office decided to weather the storm, with Mr. Harper sending out the message that he stood by his top aide. Mr. Wright issued a resignation statement May 19 – a day after his 50th birthday – accepting "sole responsibility" and saying he did "not advise the Prime Minister of the means by which Sen. Duffy's expenses were repaid, either before or after the fact."

In October, Mr. Harper changed his story, saying Mr. Wright was fired. "As you know I had a chief of staff who made an inappropriate payment to Mr. Duffy," Mr. Harper said in a Halifax radio interview. "He was dismissed."

Two days later, struggling to deal with new allegations in the controversy, Mr. Harper upped the ante, accusing Mr. Wright of "deception." Since then, friends and former business associates of the veteran Bay Street executive have rallied to his defence. "I talk to a lot of people by virtue of my work," Tom Long, a friend and managing director at executive search firm Russell Reynolds Associates in Toronto, told The Globe. "People's fundamental view of him hasn't been altered one iota. Not one iota."

Editor's Note: The original version of this story attributed the quote "would the PM know the actual answer this story, just in case he asked us," to then PMO communications director Andrew MacDougall. It is now correctly attributed to PMO Press Secretary Carl Vallee .

Staff