06/04/2015 02:33 EDT | Updated 06/04/2016 05:59 EDT

Senate Leaders Caught Up In AG Expenses Audit, Sources Say

The three most powerful figures in the Senate will be among those flagged by the auditor general to repay inappropriate expenses, sources tell CBC News.

Senate Speaker Leo Housakos, Claude Carignan, the government leader in the Senate, and Opposition Leader James Cowan — who sit on the subcommittee handling the response to the audits — are among 21 senators found to have filed ineligible expenses, the sources say.

Another nine senators were found to have "big problems" with ineligible expenses and will be referred to the RCMP for criminal investigation following the auditor general's exhaustive two-year review.

CBC News has also learned that 50 copies of the auditor general's report will be handed over the Senate today as well as to the Prime Minister's Office. The report won't be made public until next Tuesday, giving staff the weekend to craft talking points in response to the auditors' potentially damaging findings.

Multiple sources tell CBC News the revelation that the current leadership are among those with inappropriate spending has left other senators fuming about a recent change in the Senate's handling of the audits.

Arbitration process

Housakos, Carignan and Cowan took over as the Senate's liaisons with the Auditor General's Office earlier this spring, replacing three other senators — after letters from the auditor general went out to all of the 30 senators identified as having problematic spending.

The three Senate leaders then decided an outside arbiter would be appointed to adjudicate disputes over expense claims and the auditors' findings. Housakos named former Supreme Court Justice Ian Binnie to the role on May 26, saying Binnie would arbitrate all disputes over repayment of funds, including those cases referred for criminal investigation.

Sources have told CBC that the amounts owed by Housakos and Carignan are in the low thousands of dollars. The amount to be re-paid by Cowan is unknown.

CBC News spoke to Housakos Thursday and he would not comment on whether he is among the 21 flagged for problematic spending. A spokesman for Cowan said the senator would not comment until the report had been released, and Carignan told CBC News the same thing. All three cited a confidentiality pledge senators signed as part of the audit process.

Housakos did address whether it was appropriate for the Senate leadership to be the ones setting up the mechanism to settle disputes over the auditors' findings.

"I think we brought in an arbitration process that is completely arms-length, an arbitration process that's completely independent precisely for reasons like that," Housakos said.

"I hope no one questions the credibility of that arbitrator — I certainly don't and I don't think anybody who knows the background of the gentleman would either," Housakos added, referring to Binnie.

But one source told CBC News it is troubling that three of the Senate's over-spenders will be presenting the findings to the public, saying it should have been left to the previous members of the subcommittee, Larry Smith, Beth Marshall and George Furey.

The spending of those three has been found to be beyond reproach.

What is 'parliamentary business?'

There is another perspective, offered by some senators, that may explain the Senate's urgency in appointing an independent arbiter: That Auditor General Michael Ferguson and his team don't fully understand the work senators do.

Specifically, they say there could be disagreement between the Senate and the auditors over what constitutes "parliamentary business." The late Senate speaker Pierre Claude Nolin was among those who pointed to the definition as a potential sore spot.

The term is significant because senators are allowed to bill travel costs and other expenses when undertaking parliamentary business. If the Senate and the auditor general disagree on that definition, hundreds of thousands of dollars in otherwise properly claimed expenses would suddenly be up for debate.

The auditor general was called in nearly two years ago to review spending by senators, including travel and living expenses. Auditors looked at spending by 116 current and former senators over several years.

Senators have been preparing themselves for the results of the audit since RCMP launched investigations into the spending habits of suspended Senator Mike Duffy and three of his Senate colleagues: suspended senators Patrick Brazeau and Pamela Wallin and retired senator Mac Harb.

Duffy's trial on 31 charges of fraud, breach of trust and bribery resumed on Monday. He has pleaded not guilty to the charges. Trials for Brazeau and Harb have not begun, while Wallin has never been charged.

with files from James Cudmore, Hannah Thibedeau and Madeleine Blais-Morin

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