UPDATE 1-Canadian PM says growing expenses scandal a distraction

Tue May 21, 2013 2:03pm EDT

* Crisis is biggest to hit Conservatives since 2006

* Conservatives fear scandal will damages party's reputation

* Polls show party trailing Justin Trudeau's Liberals

By David Ljunggren

OTTAWA, May 21 (Reuters) - Canadian Prime Minister Stephen Harper on Tuesday dismissed a mushrooming expenses scandal as a distraction, but also said he was "very upset" that members of his Conservative Party had apparently tapped the public purse for personal gain.

Harper, facing the biggest crisis since he won power in early 2006 with promises to clean up government, urged legislators to focus on the economy, which the Conservatives see as their strongest suit.

"We have an active and important agenda on the issues that matter to hard-working Canadian families ... when distractions arise, as they inevitably will, we will deal with them firmly," Harper told his Conservative caucus.

"But we cannot lose sight of our top priority."

In a widening spending scandal that is being investigated by ethics commissioners, three Conservative senators have stepped down to sit as independents after audits indicated they claimed expenses to which they were not entitled.

Harper's chief of staff, Nigel Wright, resigned on Sunday after secretly writing a personal check for C$90,000 ($88,000) to enable one of the three, Senator Mike Duffy, to repay housing allowances that he should not have claimed.

Critics say the large check broke ethics rules that prevent senators from taking gifts. Conservative legislators and their supporters fear that the scandal in the Senate, the upper house of Parliament to which members are appointed by the government, will damage the party's reputation.

The New Democrats, the official opposition, say the Conservatives have violated the trust of voters.

"These aren't distractions. This is about the abuse of public trust," NDP ethics critic Charlie Angus said. "The prime minister's ethical brand is deeply damaged at this point."

Speaking to the caucus before leaving for a visit to Latin America, Harper made no mention of Duffy, Wright or the C$90,000 check. But he tried to ease some of the concerns of his fellow legislators by criticizing those he suggested were to blame.

"I'm not happy. I'm very upset with the conduct of some parliamentarians and our officials in my office," he said.

"Anyone who wants to use public office for their own benefit should make other plans or better yet, leave this room."

Duffy quit the Conservative caucus last Thursday. A fellow Conservative senator Pamela Wallin, whose expenses are also being probed, followed suit on Friday. A third senator, also embroiled in the expenses scandal, quit in February after he was charged with assault.

"This is an unfortunate, unacceptable situation ... (Harper) has expressed leadership and that's exactly what I wanted to hear from him," Treasury Board Secretary Tony Clement told reporters after the prime minister spoke.

Polls taken before the scandal broke last Tuesday showed the Conservatives trailing the opposition Liberals, who are led by Justin Trudeau, the photogenic son of former Liberal Prime Minister Pierre Trudeau.

The next election is not due until October 2015.

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