Former prime minister Brian Mulroney pauses Wednesday during testimony about how his family was affected by the Airbus scandal. (Adrian Wyld/Canadian Press)

Former prime minister Brian Mulroney defended Wednesday the sworn testimony he gave in 1996 about his relationship with Karlheinz Schreiber, saying he didn’t believe he had an obligation to mention his business dealings with the German-Canadian businessman.

“This was not in any way related to the allegations of my lawsuit and so my own judgment of it is that we have responded to all of the requirements, that I had been more than forthcoming,” Mulroney said.

Mulroney, 70, was testifying in Ottawa for the second day at the Oliphant inquiry looking into the three cash payments he received from Karlheinz Schreiber in 1993 and 1994 in three hotel rooms.

Questions have arisen over a statement made in Mulroney’s successful libel suit against the federal government, which had accused him of taking kickbacks from the 1988 sale of Airbus planes to Air Canada.

During a 1996 appearance in a Montreal courtroom, Mulroney had been asked if he had ever discussed with Schreiber whether Schreiber had been paid substantial sums for Airbus Industries.

Mulroney’s response to the question was: “The fact that Mr. Schreiber may or may not have had any business dealings was not my principal preoccupation. I had never had any dealing with him.”

“What are you referring to when you made that statement, quote, I had never had any dealings with him,” Guy Pratte, Mulroney’s lawyer, asked Wednesday.

“Precisely the context in which I was being interrogated by the government’s lawyers, Airbus, only Airbus,” Mulroney replied.

Pratte asked if Mulroney agreed with the suggestion that while his answer may have been legally accurate, he should have volunteered more information about his commercial relationship with Schreiber.

Mulroney said that when allegations against himself regarding the Airbus affair surfaced in 1996, he and his lawyer volunteered to meet with the Ministry of Justice and the RCMP where he could be interrogated on anything.

“They turned us down cold and proceeded, as you know, we know now, in a very hostile and aggressive and extremely costly manner for the taxpayers of Canada. So we tried to volunteer unsuccessfully.”

Mulroney also pointed out that none of the nine Government of Canada lawyers attending his libel lawsuit thought to ask him “the key question.”

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.

Mulroney has said he was paid $225,000 in three instalments and that the money was payment for an “international mandate” to promote the vehicles on behalf of the German company Thyssen. He has denied he was asked to do any kind of domestic lobbying for the vehicles.

Mulroney said he had put the first two payments in a safe at home. He put the third payment in a safe-deposit box at a New York bank.

Pratte asked Mulroney about why it took so long for him to pay taxes on the three payments he received from Schreiber.

Mulroney said that he considered those payments a retainer, meaning they were not declarable as income until the monies were used.

He said the money was declared as income in 1999 to the Quebec and federal income tax departments. He said the amount of $37,500 per year was added to the tax owed for that year and paid.

Mulroney said the money he made from Schreiber was disbursed to members of his immediate and extended family in Canada and the U.S.

Earlier in the day, Mulroney struggled to hold back tears at the federal inquiry in Ottawa while discussing the impact of the Airbus allegations on his family.

Mulroney was asked by his lawyer about a 1995 letter of request sent by the Canadian government to the Swiss government alleging he was involved in criminal activities in receiving payoffs for Air Canada's purchase of 34 Airbus planes.

Mulroney, who later received a $2.1-million settlement after he sued the federal government over the allegations, strongly denied any wrongdoing on his part in the sale of the Airbus planes.

"I had lived my whole life without any accusations of any sort. I am an honest man, and my family is honest," Mulroney said.

"And now, all of a sudden the world is being told — without any proof, without even consulting myself, without giving me any chance to explain myself or to even comment on the issue, without even being informed of the allegations — all of a sudden out of the blue I'm a criminal."

Pratte, then asked Mulroney about the effect the allegations had on his family.

"Well, you'd think that this kind of thing would be limited to parents, the credible impact on us, Mila and me," an emotional Mulroney said.

Justice Jeffrey Oliphant, who is heading the inquiry, then interjected: "I understand how difficult this is for you, Mr. Mulroney. Let me say I think I have a pretty good understanding of the impact that the letter of request had not only on you but Mrs. Mulroney and your children. I think I understand."

Mulroney then said: "Commissioner, Nicholas was 10 years old and he was …," the former PM said, as he began to choke up.

At that point, the inquiry broke for lunch. Later, a Mulroney spokesman said his outburst was caused by the fact that two journalists, including Harvey Cashore of the CBC's program The Fifth Estate, were laughing during his testimony.

"They were carrying on like a pair of school children," Mulroney said on his website. "It just got to me."

Cashore denied the allegation.

Talked of meetings with world leaders

Earlier, Mulroney testified about meetings he'd had with political leaders from China, Russia and France to promote the sales of armoured vehicles for United Nations peacekeeping missions.

Questions have arisen about what services Mulroney provided for the cash payments from Schreiber.

He said he first raised the issue of these vehicles with Zhu Ronji, then the Chinese vice-premier, during a meeting in 1993. The meeting would have taken place months after he received his first cash payment from Schreiber.

Mulroney said the purpose of the meeting was not to try to sell the government the vehicles but to “begin the process of sounding out” whether China, a permanent member of the UN Security Council, would support the idea of standardized equipment for peacekeeping missions.

Mulroney said Chinese officials seemed to be in general favour of the proposal.

Mulroney also said he met the following year with then Russian president Boris Yeltsin and French president François Mitterand, both now deceased, and discussed the idea. He said the leaders, whose countries belong to the Security Council, both expressed interest.

As well, Mulroney said he met with some top American officials about the proposal, including former secretary of state James Baker, and former secretary of defence Caspar Weinberger, now deceased.

With files from The Canadian Press