Karlheinz Schreiber makes his way down a hallway as he arrives at the Oliphant commission in Ottawa for his first day of testimony. (Adrian Wyld/Canadian Press)

German-Canadian businessman Karlheinz Schreiber told an Ottawa inquiry on Tuesday that he doesn't know why he failed to mention during a 2004 fraud case that he had met with former prime minister Brian Mulroney at his official Harrington Lake retreat in 1993.

In what were at times testy exchanges, lead commission counsel Richard Wolson challenged Schreiber’s credibility on previous testimony he had given regarding his dealings with Mulroney.

Wolson asked Schreiber why, when he was asked questions during the Eurocopter trial about all his meetings with Mulroney, he failed to mention this important meeting. The court case involved Eurocopter and two German businessmen who had been charged in Canada with fraud.

Former prime minister Brian Mulroney has said he received cash payments from Schreiber after he left office in June 1993. (Fred Chartrand/Canadian Press)

It was at Harrington Lake that Schreiber said he and Mulroney — who was then the Conservative prime minister — came to an agreement in principle under which Mulroney would lobby on behalf of a light-armoured vehicle plant known as the Bear Head project once Mulroney left office.

"Why didn’t you tell the prosecutor that you met at Harrington Lake to have an agreement with Mr. Mulroney to do business with him in the future? Why didn’t you do that, sir?" Wolson said.

"I don’t know," Schreiber said.

"I don’t recall why I would not have told him. Everybody knew," Schreiber said later.

"I'm going to suggest to you that you didn’t want to tell the prosecutor that you had a relationship with Brian Mulroney," Wolson said. "You didn't want to tell him that, and that is why you limited your evidence the way you did."

"That is not true," Schreiber said.

Cash payments, secret accounts

The probe, headed by Judge Jeffrey Oliphant, aims to get to the bottom of the hundreds of thousands of dollars in cash that Schreiber gave to Mulroney between 1993 and 1994, shortly after Mulroney left office.

Schreiber previously testified before a Commons committee that he gave Mulroney $300,000 to lobby on behalf of the Bear Head project.

But Schreiber, 75, who faces extradition to Germany on a number of tax, bribery and fraud charges, has said he would save his most controversial testimony for his appearance before the inquiry.

In testimony to the federal ethics committee in 2007, Mulroney said he received cash payments from Schreiber after he left office in June 1993.

Mulroney said he was paid $225,000 in three instalments, and that the money was payment for his efforts as an international lobbyist on behalf of the German company Thyssen.

Wolson also challenged Schreiber over a letter he wrote to the parliamentary ethics commission last year in regard to $500,000 placed in a secret Zurich bank account — known as the Britan account — which was controlled by Schreiber and was used to pay Mulroney.

Schreiber said money was deposited to that account in 1988 and lay dormant until July 1993.

In the 2008 letter to the ethics commission, Schreiber wrote that Mulroney, in 1993, had "concocted a way to have the money dispersed to him."

“How can [Mulroney] concoct a way to get $500,000 and you’re the one who made the deal with him?” Wolson asked Schreiber

"What means, concoct?” Schreiber asked.

“It's your word, it's your letter,” Wolson replied. "It was your deal with him. He didn’t ask you for a deal, you made a deal with him. You don’t understand?"

"No," Schreiber said.

"I have a problem with that special word,” Schreiber later said.

Diary investigated

Wolson also asked Schreiber about entries he made in his diary that indicated party donations to Liberals, including ones to former prime ministers Jean Chrétien and Paul Martin, from his company Bear Head.

Schreiber had made note of the donations in his diary in 1993. But under questioning from Wolson, Schreiber said he only heard about the donations two years ago.

"Why would you make an entry showing monies paid to well-known Liberal politicians in October of 1993 if you didn't find out anything about it until a couple of years ago?" Wolson asked.

Schreiber said he couldn't recall the circumstances surrounding his diary notations. He added that even though he was the chairman of Bear Head, he was not involved in the daily spending and did not have to approve such donations.

With files from The Canadian Press