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Mulroney struck deal to conceal Schreiber's name from tax filing

Inquiry chief calls early lunch to allow former PM to regain his composure and continue testimony into cash received from Schreiber

From Thursday's Globe and Mail

OTTAWA — A lawyer for Brian Mulroney negotiated an agreement with Canada Revenue Agency that allowed the former prime minister to conceal Karlheinz Schreiber as the source of income when he declared $225,000 six years after receiving it.

Tax documents tabled at the Oliphant inquiry, which Wednesday featured an emotional Mr. Mulroney decrying the media-led “vendetta” against him, and at one point choking back tears, shed light on the long-standing intrigue surrounding what Mr. Mulroney told tax collectors about the cash he received from Mr. Schreiber.

A series of letters written by Mr. Mulroney's tax lawyer, Montreal's Wilfrid Lefebvre, show that he entered into discussions with a CRA auditor in early 2000, which was at least six years after Mr. Mulroney accepted envelopes of cash in hotel rooms from Mr. Schreiber.

As is common with voluntary tax disclosures – an amnesty program that allows taxpayers to make up for past omissions on their annual returns – Mr. Mulroney's name was withheld from the auditors until they signed the agreement.

However, Mr. Lefebvre's last letter on Feb. 2, 2000, also included a provision that “the name of the person who paid the amounts will not need to be disclosed as a result of this disclosure.”

The final agreement had Mr. Mulroney paying a total of $112,500 to the federal and Quebec tax officials.

Despite his voluntary disclosure – which is, in itself, an admission that the money should have been declared at some point earlier – the former prime minister insisted he wasn't late declaring the money.

The cash he received from Mr. Schreiber was “a retainer,” he said, and he described how it sat – $75,000 in a safety deposit box in New York, and $150,000 in a safe in his Westmount, Que., home – for at least six years before he “dispersed it to members of my immediate and extended family in Canada and the United States.”

A few months before Mr. Mulroney made his disclosure, the CBC's the fifth estate revealed that Mr. Schreiber had made $300,000 worth of cash withdrawals in 1993 and 1994 from a Swiss bank account with the codename “Britan.” However, Mr. Mulroney testified that he didn't watch the show.

Under questioning from his lawyer, Guy Pratte, he said at that time he wasn't speaking to Mr. Schreiber, but kept tabs on him through mutual friend and former revenue minister Elmer MacKay. “I heard from Elmer MacKay, that he, Elmer, had picked up that Mr. Schreiber was musing that perhaps I had an income tax problem. I had no income tax problem, but I got the impression that Mr. Schreiber was going to see if he couldn't create one.”

Mr. Mulroney also detailed for the inquiry chair, Mr. Justice Jeffrey Oliphant, what he said were his efforts to promote armoured vehicles to foreign leaders on behalf of Mr. Schreiber – part of what he called a “watching brief” that he was hired to keep.

When he testified before the House of Commons ethics committee in 2007, he said that, in return for the cash, he was supposed to promote the vehicles to world leaders for their “international” and “domestic” needs. On Wednesday, his more detailed testimony showed that he was most interested in getting the support of the United Nations for the vehicles to be used in peacekeeping missions. He also acknowledged that when he went abroad to feel out presidents and prime ministers such as Russia's Boris Yeltsin, France's François Mitterrand and former United States secretary of defence Caspar Weinberger he was “absent of any specific instructions from Mr. Schreiber.”

At one point, Mr. Pratte pointed out a reoccurring trend among the people whom he had a specific recollection of lobbying.

“I can't help but ask Mr. Mulroney, three of the four people we've talked about, Boris Yeltsin, Mr. Mitterrand and Mr. Weinberger are not with us any more – is that right?” Mr. Pratte asked.

“Yeah, they're dead and four years ago when I was in the hospital I almost died, and if that had happened I wouldn't be here and we wouldn't have any problems. There'd be no inquiry,” he said.

“And I should say I was the youngest head of government in the G7, by far, it just happened that way. If President [Ronald] Reagan were still around he'd be 99 today. And Mitterrand would be in his late 80s. That's just the way it is, so we all get old, some day we die. It happened to them, it's going to happen to all of us as well.”

The former prime minister spent most of the morning detailing how “devastating” it was for his family when, in 1995, the RCMP sent an intergovernmental letter to Switzerland seeking access to Mr. Schreiber's bank records. The letter, which said Mr. Mulroney and Mr. Schreiber had defrauded the federal government in connection with Air Canada's 1988 purchase of 34 Airbus airplanes, was “right out of Kafka,” he said.

At one point, Mr. Pratte asked Mr. Mulroney if he wanted to emphasize for Judge Oliphant how difficult this period was. The judge subtly interjected.

“I understand how difficult this is for you Mr. Mulroney. Let me just say I think I have a pretty good understanding of the impact… not only on you, but Mrs. Mulroney and your children. I think I understand,” Judge Oliphant said.

Mr. Mulroney starting explaining that his son, Nicholas, was only 10 years old, before tearing up.

The former prime minister is back on the witness stand Thursday, and will be cross-examined by inquiry lawyer Richard Wolson.

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