Former prime minister Brian Mulroney holds up a log of his schedule while he was in office, at the Oliphant Commission in Ottawa Friday. (Sean Kilpatrick /Canadian Press)Former prime minister Brian Mulroney said there was nothing "sinister" about meeting with German-Canadian businessman Karlheinz Schreiber in hotel rooms and accepting large cash payments.

For the second day, lead inquiry counsel Richard Wolson questioned Mulroney, asking him about his meetings with Schreiber, the cash payments and the lack of transparency about the transactions. The Oliphant inquiry is looking into three cash payments Mulroney received from Schreiber at three hotels in Montreal and New York from 1993 to 1994.

"If you wish to place a sinister connotation on meetings in hotel rooms and so on," Mulroney said Friday at the federal inquiry. "The meetings in hotel rooms, in this case, took place because [Schreiber] was going to Europe, and he retained the room. We’ve explored the question of the cash payment. I didn’t ask him for cash. I didn’t even know what he was going to do. He did this. And, as I say, my error was in not having insisted upon a cheque at the time," Mulroney said.

"There was no sinister intention or knowledge or any such thing."

"The problem is, some may say … it does sound a little sinister. Not just meeting in hotel rooms but dealing in cash, in $1,000 bills." — Richard Wolson, lead counsel for the Oliphant inquiry

Later in the day, under further questioning about the transactions, Mulroney again repeated there wasn't anything sinister about them. But Wolson questioned the optics of the relationship.

"The problem is, some may say, some Canadians may say, it does sound a little sinister," Wolson. "Not just meeting in hotel rooms but dealing in cash, in $1,000 bills — for a former prime minister to be meeting a fellow who he's been working with in terms of the fellow trying to sell him something over a many-year period."

Wolson was referring to the Bear Head project, a proposal by German company Thyssen Industries to build a light-armoured vehicle plant in Bear Head, N.S. Schreiber had been lobbying for the project while Mulroney was prime minister on behalf of Thyssen, which wanted to secure a government contract for several hundred of the vehicles.

Schreiber has also said he paid Mulroney after he left office $300,000 to lobby domestically on behalf of the plan.

Mulroney has said he was paid $225,000 in three instalments and that the money was payment for his efforts to promote the vehicles internationally on behalf of the German company Thyssen. He has denied it was for any domestic lobby work, which would have violated domestic lobbying rules.

The inquiry has so far heard from Mulroney that he did nothing legally wrong in accepting the three payments but that he made a significant error in judgment. Mulroney also said he put the money in a safe at his home in Montreal and a safety deposit box at a New York bank.

Didn't think to put cash in the bank

Referring to the second payment, Wolson asked if he ever thought of putting the money in a bank to create "some kind of ongoing transparency."

"[I] simply wasn't thinking that way at the time," Mulroney responded. "I had begun the process like that and maintained it like that."

But Wolson later came back to the point, asking him whether during the 16 months that he received the payments, it resonated with him to put the money in a bank and create a paper trail.

"It didn't resonate to the point where I did it obviously," Mulroney said. "And, as I've indicated to you, if I had to do it all over again, I wouldn't hesitate."

'I hesitated because I certainly felt that this was unnatural.' — Brian Mulroney

Mulroney recounted the time he received the first cash payment, in August 1993. He said he was accompanied by two RCMP officers to Schreiber’s hotel room near Montreal's Mirabel airport. He said that upon his arrival, Schreiber handed him a statement of claim to sue the federal government over its failure to act on the Bear Head project.

Mulroney said he was then given the vehicle brochures and asked whether he could help out internationally.

He said Schreiber then retrieved a legal-sized envelope and gave it to Mulroney, saying it was the first payment as part of his retainer.

Mulroney said he took the envelope but did not open it, saying he knew it was not a cheque.

Mulroney admitted he hesitated upon receiving the envelope because he had never before had the experience of being confronted with a cash payment like that.

"When you hesitated, did you hesitate because it just was contrary to your instincts," Wolson asked.

"I hesitated because I certainly felt that this was unnatural," Mulroney said.

Mulroney said Schreiber said he was an international businessman and only dealt in cash.

Wolson asked Mulroney if he was at all bothered by the scenario of the cash payment in the days or weeks that followed.

"I wasn't traumatized at the moment by it. I thought it was unconventional, but, clearly, it is perfectly legal to deal in Canadian tender," he said.

Wolson pressed Mulroney on his reaction to receiving cash and whether, immediately following the transaction, he thought "something is rotten in the state of Denmark."

"Well, I had the feeling, I told you, that this was unconventional or unusual and I reacted in that way," Mulroney said. "But no, it was a payment I put in the safe and was resolved to do good work for it."

Friendship with Schreiber was 'peripheral'

Earlier, Wolson challenged Mulroney over the way he had, in the past, characterized his relationship with Schreiber. Wolson suggested the German-Canadian businessman seemed to have a lot of access to the former prime minister, even though in 1997 Mulroney told author William Kaplan that he knew Schreiber "in a peripheral way."

"You can have clients, or partners or investors whom you do business with, but you might know them in a less intimate or friendly manner," Mulroney told Wolson, explaining what he meant by the term.

Wolson, as he did on Thursday, went through Mulroney's history with Schreiber, pointing to a number of letters that Schreiber had sent to the then prime minister. But Mulroney repeated that he did not see the letters and that prime ministers do not see correspondence from lobbyists.

Referring to diaries and schedules, Wolson also recounted meetings Mulroney had with Schreiber. For example, Wolson said that on Nov. 23, 1992, Schreiber flew into Ottawa from Germany, met with Mulroney on Nov. 24 and then had breakfast with him on Nov. 25.

But Mulroney rejected the claim that he met with Schreiber on the 24th because he would never have had meetings on two days in a row. He also said that any meeting he had with Schreiber was about the Bear Head project and was arranged by his good friend and then Conservative cabinet minister Elmer MacKay.

Wolson also pointed out that Mulroney met with Schreiber on June 3, 1993, and then, only 20 days later, on June 23, at Harrington Lake, Que., two days before he was to resign as prime minister.

At that meeting, Schreiber has testified that he and Mulroney came to an agreement in principle for Mulroney to lobby domestically for Schreiber regarding the Bear Head project.

Mulroney said the visit was a courtesy call and that nothing was discussed about future business arrangements. He said that Schreiber said he might be in touch in the future and that the only time Bear Head was mentioned was when Mulroney expressed his regret that the project did not come to fruition.

Mulroney went through his schedule in June, which was filled with meetings with high-ranking politicians, including former U.S. president Bill Clinton and members of the media, including an interview with U.S. talk show host Larry King.

Wolson said Mulroney, during that month, was a "very busy guy doing a number of very important things."

"So you would have had time for your peripheral friend Schreiber twice in that month?" Wolson asked.

"Well I think that is a bit of a pejorative — if I may say — because I tried to explain to you the context in which that word was used," Mulroney said.

He added that it wasn't unusual.

"I'm seeing dozens of people, hundreds of people who want to drop by and say goodbye," Mulroney said.

Justice Jeffrey Oliphant asked Mulroney to clarify the word "peripheral."

"As I heard you give your evidence about your family and friends and people with whom you worked and trusted, people like Paul Tellier, were you using that term in a relative sense that relative to other people with whom you dealt on a regular basis and relative to your family, your friendship with Schreiber was peripheral?" Oliphant asked.

"Precisely, my lord," Mulroney said.

With files from The Canadian Press