Former prime minister Brian Mulroney testifies at the Oliphant inquiry in Ottawa on Tuesday. (Fred Chartrand/Canadian Press)

Former prime minister Brian Mulroney told a federal inquiry Tuesday that sales brochures for UN peacekeeping vehicles support his claim that his business dealings with Karlheinz Schreiber were for international work, adding he would never violate domestic lobby rules that he himself brought in.

“It’s quite a stretch to think that I would agree, having served nine years as prime minister of Canada, that I would agree 48 hours before I left office to violate the code of conduct that I brought in myself,” Mulroney said.

Mulroney, appearing for the first time at the inquiry looking into the three cash payments he received from Schreiber in 1993 and 1994 in three hotel rooms, also flatly denied he accepted the first envelope of cash for past services related to Airbus, Eurocopter, Bear Head or for any domestic work.

Schreiber has said he paid Mulroney $300,000 to lobby domestically on behalf of the Bear Head project – a plan to establish a light armoured vehicle plant in Nova Scotia, and then Quebec.

But 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.

“It’s very clear from this that the entire object of the exercise is, of course, the sale of those vehicles around the world,” Mulroney said.

Mulroney, who repeated much of the same testimony he gave at the federal ethics committee in 2007, contradicted Schreiber about their meeting at his official Harrington Lake retreat in June 23, 1993, two days before Mulroney left office.

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 said a meeting was later set up in August 1993 by his former aide Fred Doucet, who said Schreiber wanted to meet Mulroney to discuss an international mandate on behalf of his companies.

Mulroney 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.

“I said 'Yes, I think this is something that I can usefully do,' ” Mulroney recounted.

“I’m not surprised he gives [the brochures] to me. He’s asking me if I would represent the company internationally, and he’s showing me and he gave me documents with the United Nations markings. What does he think I’m going to do? You know, go back to Baie Comeau and ask them if they’re interested?”

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.

The former prime minister recalled that Schreiber said he was an international businessman and only dealt in cash, a business arrangement Mulroney said he now regrets.

“Now, it was at that moment that I should have said, 'Look, this is something that I think I could usefully do for you, but I’m going to require a cheque, just give me a cheque.' I wish I had done that, because had I done it, we wouldn’t be here today.”

$1,000 bills

Mulroney said he returned to his cottage in Quebec and counted the money, which he said was 75 one-thousand-dollar bills. He said he put the money in a safe at his Quebec cottage, later moving it to a safe at his Montreal home. Mulroney said he never put the money in the bank, consulted his accountant about it or recorded it in his books — issues his lawyer Guy Pratte said he would later address.

Mulroney also rejected suggestions made by Schreiber that Mulroney entered into the business arrangement because he was strapped for cash.

He said that after stepping down as prime minister, he was invited to be on a number of corporate boards, had returned to his former law firm and was making $45,000 US for each speech he gave.

Earlier, Mulroney said he hid his business dealings with Schreiber to avoid the rumours and speculation that fuelled allegations against him in the Airbus affair.

"The enormity of those events scarred me and my family for life," Mulroney told the inquiry at Ottawa's Old City Hall. "And it explains my conduct in trying to keep private the private commercial transaction I entered into with Mr. Schreiber after I left office, so as to avoid the same kinds of deceitful and false purveying of information that had led to the original Airbus matter in the first place."

Mulroney received a $2.1-million settlement after he sued for defamation when his name was publicly mentioned in connection with a 1995 investigation into the sale of the Airbus jets to Air Canada.

The inquiry, headed by Judge Jeffrey Oliphant of Manitoba's Court of Queen's Bench, has focused largely on a proposed armoured vehicle plant that German firm Thyssen AG wished to build. Thyssen had enlisted Schreiber's lobbying firm to push for the government contract.

Questioned by his lawyer Pratte, Mulroney told the inquiry that the Schreiber he knew in 1993 “was not the man we know here today.”

Mulroney said that back then, Schreiber was associated with a respected international corporation and came highly recommended by a number of people in Ottawa.

He said Schreiber was a forceful, determined advocate of what became known as the Bear Head project. Mulroney said he saw it as a good opportunity to create hundreds of jobs.

But in 1999, Schreiber was arrested in Toronto on charges of bribery, fraud and income tax evasion in Germany — charges Mulroney said he knew nothing about.

“So we’re dealing with two different people in my judgment. The Mr. Schreiber I had known and the one who is with us today.”

Documentation 'inappropriate,' Mulroney admits

Mila Mulroney, her daughter Caroline and son Mark listen as Brian Mulroney testifies at the Oliphant commission on Tuesday. (Fred Chartrand/Canadian Press)

Mulroney said that context does not fully justify or explain the manner in which he dealt with Schreiber, but he stressed the businessman's relationship with him “was legal and involved no wrongdoing of any kind at all, anytime on my part.”

“I genuinely regret, however, that the circumstances surrounding these transactions for which I am largely responsible give rise to suspicions as to their propriety,” Mulroney said.

“And I certainly accept that inadequately documented arrangements are inappropriate for former public office holders and obviously should be avoided at all times.”

Mulroney was asked about a letter from Schreiber dated March 3, 2008, which was addressed to then chair of the House ethics committee, Paul Szabo. Mulroney appeared at the committee in December 2007 to address his dealings with Schreiber.

In the letter, Schreiber refers to a $2-million payment triggered in 1988 as a result of an understanding in principle signed between the federal government and Thyssen regarding the Bear Head project.

“This $2 million was divided amongst Mr. Mulroney and his friends as follows: On November 2nd, 1988, GCI" — lobbying firm Government Consultants International — "deposited $500,000 to a Swiss bank account code named Frankfurt concerning the Thyssen Bear Head project and the Right Honourable Mulroney,” Schreiber wrote. "Mr. Mulroney would know this money was marked for him, corroborating bank document attached."

Asked whether he knew what Schreiber meant by this, Mulroney said: “I haven't a clue what Mr. Schreiber refers to.”

"What do you say to that statement, Mr. Mulroney, that you would know about this money or that it was set aside for you?" Pratte asked.

“It's preposterous, as are most of Mr. Schreiber's statements and allegations," Mulroney said. "Although I'm not surprised to see it in this correspondence with the distinguished chairman [Paul] Szabo of the ethics committee, which [author William] Kaplan described as a national disgrace and which the prime minister of Canada described as a kangaroo court, and I commend both of them for their gift of understatement.”

The chief counsel of the inquiry, Richard Wolson, will question Mulroney in the next couple of days, as will Schreiber's lawyer, Richard Auger.

With files from The Canadian Press