International News

By David Ljunggren

OTTAWA (Reuters) - Canadian Prime Minister Stephen Harper defended on Friday a top aide who is at the center of an expenses scandal that is becoming one of the biggest crises to hit the governing Conservatives since they took office in 2006.

Opposition parties want an inquiry into why Nigel Wright, Harper's chief of staff, secretly gave a personal check for C$90,000 ($88,000) to a senator who could not afford to repay housing allowances he had claimed improperly.

Critics said the deal made a mockery of the government's claims it would boost accountability in Ottawa. They also said it broke ethics rules preventing senators from accepting gifts.

"Mr. Wright has the full confidence of the prime minister ... Mr. Wright is staying on," Harper's chief spokesman, Andrew MacDougall, told reporters on Friday.

The senator, Mike Duffy, resigned from the Conservatives on Thursday and will sit as an independent.

The affair has the potential to damage Harper badly. Even before the scandal broke, polls showed his party trailing the opposition Liberals. The next election is not due until October 2015 and the next two years could prove painful unless he deals with the crisis.

"I think the prime minister really needs to understand that this is about as serious an ethical breach as it gets and he needs to take some action here," said Charlie Angus, ethics critic for the official opposition New Democrats.

"He can't keep Nigel Wright in his position and pretend that this is going to go away... This is really about the prime minister's personal credibility," Angus told Reuters.

Commentators across the political spectrum say Wright, a wealthy businessman who is on secondment to Harper's office from private equity firm Onex Corp, had made a shocking error of judgment and should resign.

MacDougall, asked why Wright had written the check, said Harper's office was in contact with federal Ethics Commissioner Mary Dawson, who is responsible for ensuring officials obey the rules.

MacDougall did not answer when asked how it was possible that Harper, who keeps a famously tight grip on government, could not have known about the C$90,000 check.

The Conservatives are now distancing themselves from Duffy, a former television journalist who Harper named to the Senate, the unelected upper chamber of Parliament, in late 2008, and who had proved particularly popular at fund-raising events.

"Some of the questions that were raised were a surprise to us and Senator Duffy will answer those questions as an independent senator," MacDougall said.

Separately, a Conservative official said the Senate would reopen a probe into Duffy's expenses that ended earlier this year after he repaid the allowances.

A second Conservative senator - expelled from caucus in February after he was charged with assault - is refusing to repay housing allowances.

(Editing by Janet Guttsman; and Peter Galloway)