Prime Minister Stephen Harper said Friday he will appoint an independent third party to review new allegations by German-Canadian businessman Karlheinz Schreiber over his dealings with former prime minister Brian Mulroney.

Brian Mulroney, right, shown arriving with Prime Minister Stephen Harper for a dinner hosted by the Ukrainian Embassy in the former prime minister's honour in Ottawa in April, is being sued by businessman Karlheinz Schreiber.
(Canadian Press)

Speaking to reporters at the National Press Theatre, the prime minister said the action was necessary "to review what courses of action may be appropriate."

"I acknowledge the appointment of an independent and impartial third party to review the allegations. I will co-operate fully with the person appointed," Mulroney said in a statement issued late Friday.

Harper said his government "can't ignore" the allegations because they relate to Mulroney's term in office and they must "always protect the office of the prime minister."

"The person will be asked to give us a recommendation on how to proceed, what the most appropriate venue and most appropriate process is to proceed after reviewing all the documents," the prime minister said, adding he hasn't ruled out calling an inquiry into the allegations.

"I can assure we will move quickly on this matter."

In an affidavit filed Thursday in Ontario's Superior Court of Justice, Schreiber alleges he negotiated a $300,000 lobbying deal with Mulroney at the prime minister's Harrington Lake retreat in Quebec on June 23, 1993 — two days before Mulroney stepped down as prime minister.

The affidavit also alleges a Mulroney adviser asked Schreiber to transfer funds in connection with Air Canada's 1988 purchase of Airbus planes to a Mulroney lawyer based in Switzerland.

Schreiber's allegation about the Airbus funds is similar to the accusations that sparked Mulroney's 1995 lawsuit against the federal government, and resulted in the former prime minister receiving an apology and a settlement of $2.1 million in 1997.

Asked why the government doesn't use its own in-house lawyer for the probe, Harper said one of the things it must consider is that the former government and the justice department were part of the 1997 settlement to Mulroney.

"Therefore it's not up to me or up to them to issue an impartial opinion with respect to this affair," he said in French. "That is why we need an independent opinion."

Harper named in affidavit

The court papers also drew Harper into the bitter lawsuit for the first time by claiming Mulroney was to meet with the prime minister last summer to discuss the matter, a claim Harper vehemently denied.

Karlheinz Schreiber talks to the CBC's The Fifth Estate in February 2006.
(CBC)

"Mr. Mulroney never talked to me about Mr. Schreiber and he never gave me any documents," the prime minister said.

Mulroney's lawyers have filed documents with the court quoting Schreiber himself as telling a preliminary hearing in Ottawa in 2004 that he did not meet with Mulroney in "private anywhere when he was prime minister."

The affidavit filed by Schreiber alleges that former Mulroney adviser Fred Doucet asked him to transfer the Airbus funds to Mulroney's lawyer in Geneva.

That's denied by Doucet, who told the Globe and Mail he has "never spoken to Karlheinz Schreiber about transferring any funds, anywhere," adding Schreiber's allegation is "an absolute, total fabrication."

Opposition previously called for inquiry

The announcement comes as a change in course for the prime minister, who last week in Parliament dismissed opposition parties' calls for a public inquiry into the allegations.

"What we were looking to do was for something to be set in motion," Liberal MP Ken Dryden told CBC News on Friday following Harper's announcement. "There was enough information for this to be examined."

Dryden said his party was curious to see what form the review would take, but added he expects the process to be public.

New Democrat MP Joe Comartin said his party colleague Pat Martin still planned to ask the parliamentary ethics committee next week to launch an inquiry into Schreiber's allegations.

"It's obvious that the person that the prime minister is bringing into the milieu is someone who is not going to have subpoena power or any power to compel witnesses to talk to him," Comartin said.  

Schreiber alleges Mulroney failed to honour his promise to help him develop a chain of pasta restaurants, and to help secure government approval for an armoured vehicle plant in Cape Breton.

None of the allegations has been proven in court. Schreiber is scheduled to be deported to Germany on Wednesday to face bribery and fraud charges.