Karlheinz Schreiber told a federal committee Tuesday he didn't discuss money with former prime minister Brian Mulroney during a private 1993 meeting when he was still in office, but that the two made an oral agreement to work together when Mulroney returned to private life.

"We made an agreement in principle to work together. We did not speak about money," said Schreiber, who testified before the House of Commons ethics committee Tuesday, his second appearance.

Karlheinz Schreiber says the binder with a picture of Brian Mulroney contains all his correspondence with the former prime minister.
(Tom Hanson/Canadian Press)

Schreiber said $300,000 in cash he paid Mulroney wasn't a kickback from Air Canada's $1.8-billion purchase of jets from Airbus, but involved a light-armoured vehicle plant known as the Bear Head project.

"I received great laughs when this story came up that Brian Mulroney was involved with Airbus," he said. "Somebody told me that Air Canada is Liberal property. If Mulroney had shown up five miles away from Air Canada, they would have done the opposite from everything he wanted."

Schreiber said Mulroney believed his successor, Kim Campbell, would be re-elected with a majority government, putting him in a "comfy position" to work with Schreiber when he returned to his legal practice in Montreal.

"And then I said, 'I will let you know what is available. I have funds available for the Bear Head project which is still there and I will let you know.' So it was a principle agreement that we work together, but at that day, we did not speak about money,” said Schreiber.

Schreiber later checked the Swiss bank account and found $500,000 left over. Last week, Schreiber said Mulroney received only $300,000 of that money because he didn't fulfill his end of the agreement.

When asked by Conservative MP David Tilson if any of the monies he was planning to give Mulroney were compensation for anything Mulroney did for Schreiber while he was prime minister, Schreiber said "No."

One of the key questions of the whole affair that has never been answered is what services Mulroney provided in exchange for the money. 

Meeting date dispute

Schreiber insisted the meeting took place at the Harrington Lake prime ministerial residence on June 23, 1993, while Mulroney was still in office. Schreiber said Mulroney adviser Fred Doucet arranged the meeting because the former prime minister was in financial trouble.

However, Tilson said that in earlier court documents and a book on the Airbus affair, Schreiber said any deals made with Mulroney occurred after Mulroney left office.

Opposition MPs questioned whether it was ethical for Mulroney to accept a cash payment from Schreiber — who lobbied the government on behalf of German business interests — while he was still an MP. That first $100,000 payment was made in August 1993 at a Montreal hotel.

Schreiber later heatedly called Mulroney a "liar" for failing to move ahead with the armoured tank project.

Conservative MPs said Schreiber's testimony shows nothing more than a failed business relationship between two private individuals.

"If that is the case, it is clearly not an issue for this committee," said MP Russ Hiebert.

Charest donation alleged

Schreiber, who is facing extradition to Germany to face fraud and other charges, handed over a thick binder that he said contains all his correspondence with Mulroney.

"This is my entire correspondence with Mr. Mulroney," Schreiber said. "I wanted this to come out, and this is why someone wanted to kidnap me and kick me out.

"Don't tell me I'm not co-operative with the Canadian government."

Schreiber pulled another prominent politician into the mix during his testimony, alleging he paid $30,000 cash to Jean Charest's brother for Charest's bid for the Tory leadership in 1993. He said he liked the idea of a fresh, new face leading the party.

Charest, now Quebec's premier, said that he didn't have any dealings with Schreiber, that he wasn't aware of the donation and that he wasn't pleased to be dragged into the events of the day. Charest also said his brother's recollection was that the amount was for $10,000.

Specific donations did not have to be reported to Elections Canada at the time, and Charest said no rules were broken.

Holds up Harper binder

Schreiber also held up a second binder he said was his correspondence with Prime Minister Stephen Harper, and a thick, bound document, saying it contained his responses to all of the questions posed by MPs during his appearance at the committee last week.

He said he wrote to the Prime Minister's Office at least twice recommending he call an inquiry into the Airbus affair, saying in one letter that Harper's "political enemies" were undermining his efforts to clean up government. Schreiber said he received a letter from the PMO in early 2007 saying the office had forwarded the documents to the Justice Department.

Opposition politicians have been trying to link the current Conservative government to Schreiber. Last month, Harper called a full public inquiry into the Airbus allegations.

Schreiber's highly anticipated appearance came a day after he told CBC News his testimony will be "like Christmas" for its members.

Schreiber is led away after commenting as he arrived under police custody on Parliament Hill in Ottawa Tuesday.
(Fred Chartrand/Canadian Press)

"I'm not sure if this is a Christmas gift or a burden. For sure, it will help you for the right and special questions," he said during his opening statement. "This is a basis. If you are not satisfied, just let me know and I'm going to dig for it and hopefully I can find it."

Committee members adjourned the meeting to review the binders of documents and called on Schreiber to return for a third appearance, on Thursday.

Schreiber was allowed to return to his Ottawa home Tuesday after the Ontario Court of Appeal agreed to release him on bail of $1.3 million.

Committee probes deal

The ethics committee is also reviewing Mulroney's $2.1-million settlement from the federal government in 1997 over his libel suit regarding the so-called Airbus affair — in which millions of dollars in secret commissions were allegedly paid in the sale of jets to Air Canada.

Schreiber, a key player in the Airbus saga, surprised some MPs when he said he was never questioned by the RCMP on the Airbus affair.

But the Mounties said on Tuesday that they spoke to the former arms dealer and his lawyer several times between 2000 and 2006 as part of "a thorough investigation" into the Airbus file.

Last week, during his first appearance before the committee, Schreiber offered some details about his relationship with Mulroney. He said Mulroney was only paid $300,000 of a $500,000 business deal because the former prime minister did not hold up his end of the bargain.

Schreiber is also suing Mulroney to recoup the $300,000 in cash payments. Before last week's hearing, it was reported the money was allegedly paid for Mulroney to help establish a pasta business and a light-armoured vehicle factory for Schreiber's client Thyssen, and that the services weren't provided. But Schreiber told the committee the cash arrangement had nothing to do with a pasta business.

Schreiber also refused to answer some questions, saying he didn't have enough time to go through his files before his appearance.

Schreiber alleged in an affidavit that the deal was struck two days before Mulroney left office as prime minister in 1993.

Schreiber also alleged in the affidavit that a Mulroney adviser asked Schreiber to transfer money in connection with Air Canada's 1988 purchase of Airbus planes to a Mulroney lawyer based in Switzerland.

None of the allegations against Mulroney has been proven in court.

With files from the Canadian Press