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Mulroney's six-year tax gap

In a four-hour session before MPs, the former prime minister acknowledges receiving cash from Schreiber, offers explanation for delay in reporting it, attacks the deal-maker's credibility and changes his tune on a public inquiry

From Friday's Globe and Mail

OTTAWA — Brian Mulroney paid taxes on $225,000 in cash he received from Karlheinz Schreiber only after the international businessman was charged with bribery in Germany in 1999, six years after the former prime minister accepted the first envelope of money.

Breaking years of silence in a politically charged appearance before the House of Commons ethics committee Thursday, Mr. Mulroney launched one attack after another against Mr. Schreiber's credibility and motives, while publicly acknowledging for the first time that he received the cash.

Mr. Mulroney suggested the matter is now closed and that he no longer needs a full public inquiry to prove his innocence. But the committee said it might ask him to come back in February after hearing again from Mr. Schreiber.

Mr. Schreiber has said he gave Mr. Mulroney a total of $300,000 in 1993 and 1994, but Mr. Mulroney insisted Thursday the payments amounted to $225,000, all in $1,000 bills that he stored in a safe at his home in Montreal and a safety deposit box in New York.

Mr. Mulroney testified he used the cash to cover expenses for international travel on behalf of Mr. Schreiber and German manufacturer Thyssen AG, which he said hired him to pitch its light-armoured tanks to major heads of state.

Mr. Mulroney said he was under no legal obligation to reveal the cash payments during sworn testimony in a 1996 defamation suit against Ottawa, and that he paid taxes on the funds after Mr. Schreiber was charged in 1999 to “clean” his files.

“This stunning new development put in serious doubt my relationship with him,” Mr. Mulroney said of Mr. Schreiber. “I thought the best way to deal with this situation was to declare the entire amount as income, although I had only used it for expenses.”

When asked when he would have paid the tax had Mr. Schreiber not been charged with fraud, tax evasion and bribery in relation to military deals and political contributions in Germany, Mr. Mulroney replied, “I don't know the answer to that.”

Throughout Thursday's four-hour hearing, Mr. Mulroney settled accounts with his former political supporter, accusing Mr. Schreiber of issuing false affidavits and “blackmail letters” as part of a lengthy legal battle to stay in Canada.

“Karlheinz Schreiber … will say anything, sign anything and do anything to avoid extradition” to Germany, he said.

Mr. Mulroney apologized for the first time for his “embarrassing” decision to enter into a deal with Mr. Schreiber in 1993. With his wife and four children seated a few rows behind him in a crowded Parliament Hill hearing room, Mr. Mulroney said the biggest mistake in his life was agreeing to meet Mr. Schreiber. The second, he said, was taking money from him.

“I should have insisted that payment be in a more transparent or accountable manner. By not doing so, I inadvertently created an impression of impropriety that I hope will not reflect adversely on the high office I was privileged to hold,” Mr. Mulroney said.

“I realize I made a serious error of judgment in receiving a payment in cash for this assignment even though it was decidedly not illegal to do so. That mistake in judgment was mine alone. I apologize and I accept full responsibility for it.”

Opposition MPs brushed aside Mr. Mulroney's apology. Bloc Québécois MP Serge Ménard said the Bank of Canada eliminated the $1,000 bill “because they're generally used for illegal ends.”

NDP MP Pat Martin said it did not “look very good” for a former prime minister to conduct cash business. “People use cash in business deals of that size when they're either trying to hide any record of something that they know to be wrong or if they're trying to avoid taxes,” he said.

Mr. Mulroney met with Mr. Schreiber at his official residence at Harrington Lake on June 23, 1993, two days before he resigned as prime minister after nine years in office. Mr. Mulroney said Mr. Schreiber raised the Bear Head project – the military plant Thyssen wanted to build in Cape Breton – but that they did not discuss working together.

Mr. Mulroney said it was only two months later, in August, 1993, that he entered into discussions with Mr. Schreiber to promote Thyssen. Though he was no longer prime minister at that time, he was still a member of Parliament.

Mr. Mulroney said the first discussion occurred in a hotel room in Mirabel, Que., when Mr. Schreiber offered the first of three envelopes of cash.

“When I hesitated, he said, ‘I'm a international businessman and I only deal in cash. This is the way I do business,'” Mr. Mulroney said.

Mr. Mulroney said he also received envelopes containing $75,000 in Montreal in December, 1993, and in New York a year later. He said he promoted Thyssen vehicles to officials in China, the United States, France and Russia. He identified only two of those officials – both now dead – presidents François Mitterrand of France and Boris Yeltsin of Russia.

Mr. Mulroney contradicted his former spokesman Luc Lavoie who said Mr. Mulroney agreed to work with Mr. Schreiber because he was facing financial difficulties after leaving office. “That's not accurate. I think it's more solicitude on their part than accuracy,” he said.

Throughout his appearance, Mr. Mulroney repeatedly attacked contradictions in Mr. Schreiber's past statements, affidavits and testimonies.

“Which one is perjury?” Mr. Mulroney asked of two allegedly conflicting affidavits filed this year by Mr. Schreiber.

Still, Mr. Mulroney often used the statements from Mr. Schreiber to bolster his own case, such as Mr. Schreiber's assertion the cash payments were for future business, and not as a reward for past government decisions. Mr. Mulroney insisted he never received anything in relation to Air Canada's 1988 purchase of Airbus planes. He added he never had a lawyer or bank account in Switzerland, contrary to Mr. Schreiber's assertion that he was asked to send funds to Mr. Mulroney's lawyer in Geneva.

Mr. Mulroney said he was traumatized when he learned in late 1995 that Ottawa had sent a letter to Swiss authorities stating that he received money in relation to the Airbus sale.

“It was like a near-death experience,” Mr. Mulroney said.

He sued the government for defamation and was awarded $2.1-million for his costs, but did not disclose his cash dealings with Mr. Schreiber in his testimony. Mr. Mulroney said that under Quebec law, he did not have to talk about this issue because the lawsuit was focused only on alleged bribes in the Airbus deal.

Still, MPs did not use the opportunity Thursday to ask Mr. Mulroney to clarify his 1996 testimony that he only had “coffee” once or twice with Mr. Schreiber after leaving office.

In addition, MPs did not ask Mr. Mulroney about a meeting with Mr. Schreiber in a hotel in Zurich in 1998, after the lawsuit with Ottawa was settled but before Mr. Mulroney paid his taxes.

Prime Minister Stephen Harper has appointed a special adviser to recommend the terms of reference for a public inquiry by Jan. 11. Liberal MP Robert Thibault said there are still a number of “open questions” to answer, while Bloc Québécois Leader Gilles Duceppe said “grey areas” remain.

Mr. Mulroney was more intent on blaming The Globe and Mail and the CBC's fifth estate for helping Mr. Schreiber avoid extradition by making unfounded allegations.

“He created a frenzy with his two media allies, and here we all are today,” he said.

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