PM's former chief of staff controlled secret Tory fund

CBC News has learned that Stephen Harpers former chief of staff, Nigel Wright, had control of a secretfund in the Prime Ministers Office when he cut the now infamous $90,000 "personal cheque" to disgraced Senator Mike Duffy.

In exclusive interviews, sources familiar with the fund tell CBC the money in it comes from Conservative Party coffers, and at times has reached almost $1 million.

Like all political party funds, more than half of all the cash in the secret PMO stash ultimately comes from taxpayers' pockets. Individual donors to political parties receive generous tax credits. Parties also receive millionsfrom taxpayers through aper-vote subsidy, which is being phased out by 2015.

Sources tell CBC that Harper's chief of staffto date, there have been four, including Wrighthas exclusive signing authority over the fund, which wasset up in the PMO when the Conservatives came to power in 2006.

Its existence has apparently been a closely guarded secret for the past seven years, even within the Prime Minister's Office. Only a few Conservative insiders know how the PMO cash stash has been spent.

Like all political party financing, there is little external oversight.The fund is completely off-limits to the auditor general and even Elections Canada, which monitors party donations but not expenses outside of an election period.

The onlyoversight outside the PMO appears to be the five-member board of the Conservative Fund of Canada, the partys fundraising arm and source of the money in the clandestine account.

'No funds used' for Duffy expenses

Nigel Wright was on the board when the secret PMO fund was set up, and he remained there until he became Harper's chief of staff in 2010.

Harper and other Conservatives have insisted that no government or party funds were involved in the $90,000 Wright-Duffy deal, and that the prime minister's former chief of staff used his personal funds to help the senator repay improper expense claims.

Officials in Harper's office and the party deny the money Wright gave to Duffy came from the secret PMO fund. But no one is denying the fund could have been used to reimburse Wright at a later date, had the deal with Duffy not erupted into a public scandal.

CBC posed a series of written questions about the fund to both the party and the Prime Ministers Office.

Harper's official spokesman, Andrew MacDougall, referred us to the Conservative Party.

Party spokesman Fred DeLorey, asked to explain various aspects of the secret fund, would say only that "the prime minister at times incurs expenses that are best paid by the party."

DeLorey was asked: Is there any reason those funds could not have been used in the Duffy-Wright deal?

He replied: "No funds were used for that."

MacDougall in the PMO was asked: Were any of these funds in any way connected to the Wright-Duffy deal?

He replied: "I can give you a clear, 'No.' The funds used were Mr. Wright's personal funds."

Questions about $90,000 'gift'

Despite all the official denials, a political storm continues to rage around Wright's unusual $90,000 "gift" to Duffy.

Day after raucous day in the Commons, the opposition parties have been demanding more details about the Wright-Duffy deal, including whether there was some secret plan to reimburse the PM's right-hand man for his generous personal gift to an errant senator.

The existence of a secret PMO fund under Wright's control at the time he cut the cheque to Duffy isn't likely to calm the political storm.

There's nothing illegal or particularly new about a prime minister and his staff using party funds for partisan and even personal purposesand stirring up a hornets' nest of political controversy in the process.

Brian Mulroney was relentlessly hit with stories of Progressive Conservative Party funds being spent on everything from home furnishings to his wife's clothing. John Turner caused a firestorm in his own Liberal ranks when it was revealed the party was paying for an upscale apartment in Toronto used mainly by his wife.

And of course the Liberals under Jean Chrtien will forever be tarred with the image of party bagmen exchanging envelopes stuffed with cash in the sponsorship fiasco that ultimately ran the Grits out of office.

But no one in any of those past administrations contacted by the CBC this week could recall any kind of secret fund in the Prime Ministers Office.

One of Chrtien's former staffers recalls: "When we had expenses that were clearly partisanlike sending our staff to a party event, for instance we just sent the bills to the party. It was all pretty above-board."

One former Conservative staffer says he recalls the fund being used for some polling and staff travel to a party event.

There is nothing illegal about some party funds being moved into a secret stash and spent on just about whatever the chief of staff decides.

Wright helped create secret fund

Wright's connection to the secret fund dates back to its creation in the PMO in 2006. In 2005, Wright was already a Bay Street superstar in his early 40s when he was recruited to the board of the Conservative Fund of Canada, the partys fundraising agency, by its self-proclaimed chief bagman, Peoples Jewellers magnate Irving Gerstein.

Together, Wright and Gerstein helped to build the country's most successful political fundraising machine.

By 2009, part of their winning strategy involved two high-profile former broadcast journalists: Mike Duffy and Pamela Wallin, both appointed to the Senate by Harper and promptly put to work packing Conservative fundraising events across the country.

Emails recently obtained by CBC showDuffy was expecting something in returnfrom Gersteins organization.

One email from Duffy says: "I am to speak to Irving Gerstein this evening about my expanded role with the party I suggested they make me a min without portfolio so I get staff, car and more resources."

In a subsequent email, Duffy talked about getting "fees."

Duffy never got a cabinet seat, and party officials say he was never paid to appear at fundraisers.

But by February of this year, he was under investigation over claims for travel expenses and living allowances.

Shortly after the investigation began, Duffy announced he and his wife had decided to pay back all of the expense claims in questionjust over $90,000 in all, including interest.

Duffy said he had paid the money with a bank loan.

But three months later, a media report revealed Wright had cut a personal cheque to Duffy for the $90,000.

Wright resigned, and Duffy is now the subject of a police investigation.

As for the secret stash in the PMO, it is now in the hands of Wright's successor, Ray Novak.

Wright's predecessor, Guy Giorno, declined CBC's request to talk about the secret fund. It seems unlikely Giorno will be saying much about it in future, either.

Giorno, a lawyer, reportedly may be acting for Wright in the matter of the $90,000 cheque. Giorno declined comment on that as well.