Former prime minister Brian Mulroney's business dealings with German-Canadian businessman Karlheinz Schreiber were "inappropriate," Justice Jeffrey Oliphant says in a report released Monday.

Oliphant also concluded that Mulroney failed to live up to the ethics code he himself introduced in 1985 for holders of public office.

Oliphant was appointed by the Harper government two years ago to look into revelations that Mulroney accepted at least $225,000 in cash-stuffed envelopes from Schreiber in the early 1990s.

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Justice Jeffrey Oliphant releases his report on the business and financial dealings between Karlheinz Schreiber and former prime minister Brian Mulroney during a news conference in Ottawa Monday. ((Sean Kilpatrick/Canadian Press))

Mulroney admitted taking $225,000 in cash from Schreiber but said he broke no laws or ethical guidelines.

The former prime minister argued that he had been hired by Schreiber merely to try to line up support from political leaders in Russia, China and France for a proposed United Nations purchase of armoured vehicles made by the Thyssen firm of Germany. Schreiber was a lobbyist for Thyssen.

Mulroney testified he made an error in judgment in accepting the money.

Schreiber said the payments totalled $300,000, not the $225,000 Mulroney later declared for tax purposes. He also maintained the former prime minister was supposed to lobby Canadian officials, not foreign leaders.

Oliphant said the lack of a paper trail made it impossible to believe either Mulroney or Schreiber on the sum of how much money was paid to the former prime minister.

Questionable conduct on 3 'distinct occasions'

Oliphant also chastised Mulroney over his testimony that taking the money was a mistake.

"In my view, an error in judgment cannot excuse conduct that can reasonably be described as questionable if that conduct, as is the case here, occurred on three distinct occasions," Oliphant said.

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Former prime minister Brian Mulroney testifies at the Oliphant commission in Ottawa on May 12, 2009. ((Fred Chartrand/Canadian Press))

"I therefore conclude that the reason Mr. Schreiber made the payments in cash and Mr. Mulroney accepted them in cash was that they both wanted to conceal the fact that the transactions had occurred between them."

Oliphant said that Mulroney's taking of envelopes full of cash from Schreiber, failing to record them, failing to deposit the cash into a bank and failing to disclose the fact of the cash payments when given the opportunity to do so "goes a long way, in my view, to supporting my position that the financial dealings between Mr. Schreiber and Mr. Mulroney were inappropriate."

"These dealings do not reflect the highest standards of conduct, nor do they represent conduct that is so scrupulous it will bear the closest public scrutiny," he said.

Mulroney glad 'unfortunate chapter is over'

Mulroney, who was prime minister from 1984 to 1993, responded that he was pleased Oliphant found that the deal Mulroney made with Schreiber was done only after he left office.

"I genuinely regret that my conduct after I left office gave rise to suspicions about the propriety of my personal business affairs as a private citizen," Mulroney said in a statement.

"I will leave it to others to assess the full impact of these events. For now, I am merely grateful that this unfortunate chapter is over and that my family and I can move forward with our lives."

Oliphant could not make findings of civil liability or criminal guilt in his report, but he did issue several recommendations, including a call to make it an offence for former public office holders to fail to meet the disclosure obligations under the Conflict of Interest Act.

The federal government issued a brief release acknowledging it has received Oliphant's report.

"On behalf of the government of Canada, I would like to extend my appreciation to Commissioner Jeffrey J. Oliphant and his staff for their dedication and hard work over the past two years to fulfil the mandate of the commission," said Prime Minister Stephen Harper.

Under the terms set out in June 2008, Oliphant was asked to determine if the cash relationship between Schreiber and Mulroney was appropriate, what the money was for and where the money went.

However, the inquiry's terms barred it from looking into allegations that Mulroney and Schreiber were involved in a kickback scheme over the 1988 purchase of Airbus aircraft by Air Canada.

Nor could Oliphant look into the $2.1-million libel settlement Mulroney got from the federal government in 1997 stemming from the RCMP's Airbus probe.

Richard Wolson, the commission's lead lawyer, said the inquiry didn't get into Airbus because it was outside of its mandate. 

"We could only go where our mandate took us," he told reporters.