OTTAWA -- The Prime Minister's Chief of Staff has resigned in light of the controversy around his handling of expense payments involving Senator Mike Duffy.
In a statement issued Sunday morning, Nigel Wright says Stephen Harper has accepted his resignation.
MORE FROM CP: Emerging from a dramatic week that has seen him lose two senators and his chief of staff, Stephen Harper will focus now on calming down his anxious caucus and righting a listing Conservative ship.
Tory MPs have been hearing from upset constituents about the expenses controversy that has become one of the most serious challenges for the prime minister's administration.
The situation has the potential to further weaken Harper's hold on caucus, where MPs had already been agitating for more autonomy from his office in the Commons. The Tories have also lost ground recently in the polls.
Harper will address caucus Tuesday morning, with a new -- but very familiar -- chief of staff by his side. Longtime friend and adviser Ray Novak is taking over from Nigel Wright, who announced his resignation from the post early Sunday.
Wright had secretly given a $90,000 gift to Sen. Mike Duffy back in March, to help him cover the repayment of improper housing expenses. But following Wright's gift, Duffy stopped co-operating with an audit of his expense claims. The Conservatives declared the matter closed.
But with the revelation of the gift and more troubling details about Duffy's expenses, the controversy began to spiral and MPs got the blowback back home during a break week from Parliament.
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Nigel Wright Resigns: Twitter Reactions
"Tarring all politicians with the same brush is disappointing,'' said Conservative MP Gord Brown, whose constituents have weighed in.
"There's a lot of good people who work hard for their constituents and work hard for their country, and wouldn't think of abusing their expenses.''
Wright's resignation followed that of Duffy, who left caucus on Thursday facing a potentially humiliating showdown with his Senate colleagues. Colleague Pamela Wallin resigned on Friday. She is facing her own expenses audit.
"My actions were intended solely to secure the repayment of funds, which I considered to be in the public interest, and I accept sole responsibility,'' Wright said in a statement.
"I did not advise the prime minister of the means by which Sen. Duffy's expenses were repaid, either before or after the fact.''
Harper expressed "great regret'' in Wright's decision. He had stood behind Wright throughout the fallout from last week's bombshell about his $90,000 gift.
"I accept that Nigel believed he was acting in the public interest, but I understand the decision he has taken to resign,'' the prime minister said.
"I want to thank Nigel for his tremendous contribution to our government over the past two and a half years.''
Novak, an adviser to Harper since 2001, is also a familiar face to MPs and Senators. A low-key figure in his mid-30s, he has been through the highs and lows of the party since opposition days.
Former Harper adviser Keith Beardsley, says Novak is respected by caucus and will have a calming influence.
"The main thing will be to basically settle things down... settle the PMO down and he's going to have to do the same with caucus,'' said Beardsley.
Caucus members are expected to have a lot to say about the events of the past week when they convene on Tuesday. The party's stock and trade with voters has been their commitment not only to ethics and accountability, but also to law and order.
"My office received calls and emails from taxpayers and I also heard directly from many constituents while at home on the recess week,'' said New Brunswick MP John Williamson. "Duffy's misuse of tax dollars is indefensible and a police investigation is warranted.''
Alberta colleague Brent Rathgeber, who is an outspoken advocate for the independence of MPs, said the Wright gift exacerbated the lack of separation between the executive and legislative branches of government.
"When there's inadequate separation between those two institutions, it appears to me that both are compromised,'' said Rathgeber told Global TV's West Block with Tom Clark program.
"I mean I don't...as a legislator I don't want to be beholden or indebted to individuals from the executive at any level.''
The MPs and Senators will also be facing an aggressive opposition in both house. In the Senate, Liberals will be giving the Tories a rough ride on a set of expense reports. In the Commons, the opposition parties will be feasting on the controversy.
NDP ethics critic Charlie Angus is calling for a full explanation of the $90,000 repayment of Duffy's expenses, and whether there was a cover-up of the senator's housing claims.
"What we're looking now is a government is absolute panic mode, and the people who are being tossed under the bus are not just 21-year-old staff but absolutely key people to Harper and the Conservative party,'' said Angus.
"It shows the extent of the damage to the prime minister.''
The ethics commissioner is looking into Wright's repayment of Duffy's expenses. Duffy, a former broadcaster, quit the Conservative caucus late Thursday.
Meanwhile, two other senators are also facing demands that they repay improper housing expense claims -- and both are fighting back.
Sen. Mac Harb was deemed to owe $51,482 in housing-related expenses, a finding that prompted him to quit the Liberal caucus and sit as an independent.
Sen. Patrick Brazeau -- kicked out of the Conservative caucus after he was charged in February with assault and sexual assault -- was assessed $48,744.
A spokesman for the prime minister has said neither Harb nor Brazeau was offered the same financial assistance as Duffy.
Wright's official statement:
In light of the controversy surrounding my handling of matters involving Senator Duffy, the Prime Minister has accepted my resignation as Chief of Staff.
My actions were intended solely to secure the repayment of funds, which I considered to be in the public interest, and I accept sole responsibility. I did not advise the Prime Minister of the means by which Sen. Duffy's expenses were repaid, either before or after the fact.
I regret the impact of this matter on the Government, our Caucus, and all of my colleagues, for whom I have the highest regard. I came to Ottawa to do my part in providing good government for Canada, and that is all that I ever wanted and worked for in this role.
The Prime Minister has also issued a statement on Wright's resignation:
It is with great regret that I have accepted the resignation of Nigel Wright as my Chief of Staff. I accept that Nigel believed he was acting in the public interest, but I understand the decision he has taken to resign. I want to thank Nigel for his tremendous contribution to our Government over the past two and a half years.
Our Government's top priority is, and will continue to be, securing jobs and economic growth for Canada. This is the focus of all our efforts and attention.