It was Lowell Murray's first day on the job and his boss – Prime Minister Brian Mulroney – had one task in particular he asked the senator to tackle.
The two men were flying somewhere over Eastern Canada in the government's Challenger jet, bound for an afternoon news conference in St. John's.
It was June 6, 1987, the day Mr. Mulroney announced the creation of the Atlantic Canada Opportunities Agency and Mr. Murray's appointment as its inaugural minister. At some point during the three-hour flight, Mr. Mulroney reached over and handed a single file folder to Mr. Murray.
“Here's something you want to have a look at,” Mr. Murray recalled Mr. Mulroney saying.
Inside there was a single letter – a proposal for a light-armoured vehicle factory that Thyssen Industrie AG, a German arms manufacturer, wanted to build in Cape Breton.
It's been more than 20 years since that flight, and until now it has not been understood how this factory became such a priority for the Mulroney government. Speaking for the first time publicly about the proposed factory, Mr. Murray, a Progressive Conservative senator, played down the significance of that handoff. “I didn't attach any greater importance to it,” he said.
However, when Mr. Mulroney gave Mr. Murray that file, it set in motion a chain of events that resulted in some of the former prime minister's friends and political allies getting paid hundreds of thousands of dollars by German-Canadian lobbyist Karlheinz Schreiber.
There's no evidence to suggest Mr. Mulroney knew his associates stood to profit from the Thyssen file he handed Mr. Murray in 1987. What is clear is that after receiving that assignment, Mr. Murray spent the next 15 months trying to make the factory, known as Bear Head Industries, a reality, and he helped persuade three ministers to sign an “understanding in principle” to support the project.
Those signatures prompted $2-million to take a circuitous route from Thyssen's headquarters in Germany to shell companies in Liechtenstein, on to Mr. Schreiber's Swiss bank accounts, until a portion of that money made its way into Canadian pockets. The factory was never built.
Mr. Murray, who still serves as one of three Progressive Conservatives in the Senate, says he was shocked to discover through recent news reports who was paid as a result of that document being signed 21 years ago. He also expressed bewilderment that Thyssen would pay so much for a document that, he says, didn't force the government to do much of anything.
“Incredulous. That's all I can say. Absolutely incredulous. But of course I don't know what [the money] was for,” Mr. Murray said, later adding, “I'd like to know.”
In his interviews with The Globe, Mr. Murray said the recipients of those commissions – only two are still alive – should publicly explain what work they performed for the money.
“It's important at a minimum because it's become a public issue. It's out there.”
Mr. Murray insists that his intentions were pure; he wanted to make the agency a success and bring a potential 500 manufacturing jobs to an economically depressed area of Cape Breton, he said.
Others who were close to Mr. Mulroney also saw an opportunity. And documents originally obtained by CBC's the fifth estate – including Mr. Schreiber's Swiss banking records show just how much money there was to spread around.
Pushing the proposal
Ten days after receiving the Thyssen file from the Prime Minister, Mr. Murray's phone rang.
On the other end of the line was Fred Doucet, Mr. Mulroney's former chief of staff and long-time friend, Mr. Murray said. The senator says he made a note of the conversation in his agenda book. Mr. Doucet, who had recently left the Prime Minister's Office to become Canada's ambassador of international summits, congratulated Mr. Murray on his new post and encouraged the senator to get moving on his first assignment, Mr. Murray said.
“[He] also told me that the Thyssen thing was important,” Mr. Murray said. “The idea was that it would be of great political advantage, that it was extremely important, that the Prime Minister thought it was important.”
“I didn't consider that untoward. [Mr. Doucet] had been a political assistant in the PMO and he came from Cape Breton and he was interested in the political fortunes of the party.”
The very same day, Mr. Murray says he received a call from Mr. Doucet's brother, the lobbyist, Gerry Doucet. Gerry Doucet was one of the partners of Government Consultants International, the firm made up of prominent Tories such as Frank Moores, the late former Newfoundland premier, and Conservative organizer Gary Ouellet, who has also died. The firm represented Mr. Schreiber and Bear Head Industries and Gerry Doucet called to make sure the senator was “moving the project forward,” Mr. Murray said.
In the latter half of 1987, Mr. Murray would go on to have more than a dozen conversations with the Doucet brothers – three with Fred and 10 with Gerry – about the proposed factory, Mr. Murray said. The senator also recalled Fred Doucet urging Mr. Murray to promote the project with Perrin Beatty, who at that time was defence minister.
(When contacted by The Globe, Fred Doucet declined to comment on any of his conversations with Mr. Murray. Gerry Doucet did not return messages.)
Across the Atlantic, Karlheinz Schreiber and his accountant Giorgio Pelossi were plotting to ensure that lots of money would be available if the federal government made its support for the factory more official.
A series of 1987 letters between Mr. Pelossi and Thyssen show that the arms manufacturer gave Mr. Schreiber $1.9-million to support his lobbying efforts, and the company agreed to give him another $2-million if he delivered a “letter of intent” from the Canadian government.
On Christmas Eve, 1987, Mr. Pelossi sent Thyssen the good news – such a letter was just around the corner.
“On the part of the responsible government offices, we have been assured that this letter of intent will be granted to you at the beginning of next year,” Mr. Pelossi wrote.
Back to the drawing board
It took a little longer. On Aug. 30, 1988, Mr. Murray spoke with Fred Doucet again, and again, Mr. Murray says, the former PMO staffer was calling about the proposed factory – but this time in a different capacity.
Mr. Doucet had left the government just weeks earlier and became a lobbyist. Mr. Murray says Mr. Doucet called to let him know he was now representing the Bear Head project. He would go on to speak with Mr. Doucet three more times in September about the project, Mr. Murray said. With hindsight, it was a good time to be associated with the project. A windfall was on the horizon.
A federal election was imminent, and Mr. Murray said he wanted something in writing to make sure the proposal wasn't left behind when all the campaigning was over – especially if there was a change in government. His agency started to pursue a “letter of comfort,” Mr. Murray said.
The only problem was, the defence department was firmly against the idea – and had already rebuffed Mr. Schreiber's proposal on numerous occasions. The only way Mr. Beatty was going to sign anything, the former defence minister told The Globe in an interview, was if “there was no obligation to choose” the Thyssen vehicles.
Mr. Murray went back to the drawing board.
“So we then started drafting and redrafting and drafting and redrafting,” the senator said. “Originally we thought agreement in principle and this thing was lawyered and lawyered and lawyered again. And the Department of Justice, I think it was, probably came up with ‘understanding in principle' to make the commitment even less serious on the part of the government,” Mr. Murray said.
Finally, on Sept. 27, 1988 – just days before Mr. Mulroney called a federal election – the ministers signed the document. Thyssen issued a press release and the Nova Scotia media ran with stories about a potential 500 jobs for Cape Breton.
But back in Ottawa, at least one high-ranking defence official was still in the dark, saying it was the only occasion he could recall not being informed about his minister, Mr. Beatty, signing such an agreement.
“It wasn't processed in normal channels,” said the official. “We were not interested in this deal because we just didn't have the money or the priority... and that position was taken quite consistently.”
“I frankly, to this day, don't know what the [understanding] in principle was supposed to achieve.”
Invoices roll in
After the document was signed, one of the first invoices to arrive for Mr. Schreiber was from Fred Doucet, whose new company was Fred Doucet Consulting International.
It was dated Nov. 2, 1988, which was less than three months after Mr. Doucet left his government job and about a month after the document was signed. His invoice was for $90,000.
Other invoices started rolling in. The law firm of Gerry Doucet, Mr. Doucet's brother, also billed for $90,000. Gary Ouellet's consulting company billed for a further $90,000. Frank Moores sent his $90,000 invoice and his lobby firm, Government Consultants International, issued an invoice for $250,000.
All of the invoices used similar language to describe the work that was performed: “professional services,” “services rendered” and “consulting services.”
And sure enough, over a period of 20 days, money started winding its way from Germany back to the lobbyists. Thyssen sent $2-million to one of Mr. Schreiber's Liechtenstein shell companies. That was transferred to another shell company, which in turn sent $1-million to one of Mr. Schreiber's Swiss bank accounts. Then, $610,000 was transferred out of the Swiss bank account – codenamed “Frankfurt” – the same day Fred Doucet invoiced Mr. Schreiber.
After the money made its way through another Liechtenstein company, Mr. Schreiber paid all of the parties – a total of $610,000 – on Nov. 15, 1988, from one of his Calgary companies, Bitucan.
(Neither of the former ministers interviewed for this story – Mr. Murray and Mr. Beatty – said they had any knowledge of the commissions that were set to flow as a result of that document being signed. Mr. Beatty said he never received “any pressure” to sign the document.)
Mr. Murray said he couldn't recall speaking about the factory with Mr. Ouellet, and he said he has a vague recollection of meeting with Mr. Moores, but said he couldn't remember the exact date.
Fred Doucet's only public comments about his role with the Bear Head project came in February when he testified before the House of Commons ethics committee. In his sworn testimony, the former Mulroney staffer was asked when he started working for Mr. Schreiber. His answer – “I believe I got on the payroll in February of '90” – was 14 months after he issued his $90,000 invoice to Mr. Schreiber. When the contradiction was exposed in the media, Mr. Doucet's lawyer sent a letter to the committee apologizing and explaining that his client was “mistaken” – but neglected to explain how Mr. Doucet came to make that mistake.
Questions about what Mr. Mulroney knew about the commission deal, and why he selected the Thyssen file as the only file to hand Mr. Murray during his first day on the job remain unanswered.
The public relations firm handling inquires for the former prime minister declined to comment.
In December, Mr. Mulroney testified before the House of Commons ethics committee that he was “supportive of the project” but was never asked about the money that was funnelled back to Canada as a result of that document.
TIMELINE
Behind the Bear Head project
Feb. 23, 1982: A 42-year-old Brian Mulroney sends a Telex to German businessman Karlheinz Schreiber, congratulating him on becoming a Canadian citizen.
January, 1983: Progressive Conservative Leader Joe Clark announces a leadership race after receiving only 66.9 per cent support from delegates at a Winnipeg convention. Mr. Schreiber later reveals that he paid to fly anti-Clark delegates to the convention.
Sept. 4, 1984: Brian Mulroney, who replaced Mr. Clark as Progressive Conservative party leader, becomes Canada's 18th prime minister.
June 6, 1987: During a flight to St. John's to announce the creation of the Atlantic Canada Opportunities Agency, Prime Minister Brian Mulroney hands his new minister, Senator Lowell Murray, a single file folder, Mr. Murray says. Inside is a proposal from Thyssen Industrie AG, a German arms manufacturer, to build a light-armoured vehicle factory in Cape Breton known as Bear Head Industries, Mr. Murray says. There's no evidence to suggest that Mr. Mulroney knew his associates stood to profit from the Thyssen file he handed Mr. Murray.
June 15, 1987: Mr. Murray says he receives a phone call from Fred Doucet, the ambassador of summits and Mr. Mulroney's friend. Mr. Doucet tells Mr. Murray the Prime Minister considers the project “important,” Mr. Murray says. The same day, Mr. Murray gets a phone call from Mr. Doucet's brother, Gerry Doucet, a lobbyist with Government Consultants International, the firm representing Bear Head, Mr. Murray says.
Nov. 26, 1987: In a letter, Thyssen informs Karlheinz Schreiber that the German-Canadian middleman is entitled to millions of dollars in success fees if he can deliver a “letter of intent” from the federal government for the proposed factory.
Dec. 24, 1987: Mr. Schreiber's accountant informs Thyssen that a letter is on the way.
July 13, 1988: Mr. Murray says he starts drafting a “letter of comfort” to solidify the government's support for the project.
Aug. 30, 1988: Mr. Murray gets a phone call from Fred Doucet, who informs the senator that he's now working as a lobbyist and representing Mr. Schreiber and the Bear Head project.
Sept. 27, 1988: Three of Mr. Mulroney's ministers sign an “understanding in principle” with Bear Head Industries.
Oct. 25, 1988: Thyssen sends $2-million to the Liechtenstein bank account of Mr. Schreiber's shell company, half of which later flows into Mr. Schreiber's Swiss bank accounts.
Nov. 15, 1988: Mr. Schreiber's Alberta company, Bitucan Holdings, issues $90,000 cheques to Fred Doucet's consulting company, Frank Moores, Gerry Doucet's law firm and Gary Ouellet's consulting company – as well as a $250,000 cheque to Government Consultants International.
1993-1994: Mr. Mulroney accepts at least $225,000 in cash from Mr. Schreiber in hotels in Montreal and New York.
