A spokesman for Brian Mulroney defended the former prime minister's $2.1 million out-of-court settlement, suggesting that findings from the Oliphant inquiry do not the erase the fact he was libelled years ago by the RCMP.

"The harm done by their libel of Brian Mulroney, that he was a criminal in office, the basis of the government's offer to settle, is in no way mitigated by anything that has happened since," a source close to Mulroney wrote in an email. "You can't retract a libel."

Opposition MPs have demanded the federal government recoup the money paid to Mulroney from his libel suit against the government 13 years ago.

That suit was based on Mulroney's claims that the RCMP defamed him by writing a letter accusing him of taking kickbacks for Air Canada's purchase of Airbus jets in 1988.

But in a report released Monday that looked into Mulroney's dealings with German-Canadian businessman Karlheinz Schreiber, Justice Jeffrey Oliphant called into question the testimony Mulroney gave to Department of Justice lawyers in 1995 before the settlement was reached.

In his 1995 testimony, Mulroney said he and Schreiber merely had coffee from time to time.

Later, it was revealed that he, in fact, accepted at least $225,000 in cash from Schreiber after he left office.

Mulroney told the Oliphant commission that at the time, he did not reveal his business dealings with Schreiber to the lawyers simply because they didn't ask the right questions. But Oliphant called that claim "patently absurd."

Opposition wants repayment

Opposition members have argued that since the inquiry found that Mulroney did have inappropriate business dealings with Schreiber, he misrepresented the nature of his relationship with the businessman during the testimony on which his libel settlement was based and hence should forfeit that money.

The Mulroney camp has pointed to the February 2008 testimony by former federal justice minister Allan Rock at a parliamentary committee examining the business dealings between Mulroney and Schreiber.

In his testimony, Rock stated that that language in the RCMP letter asserted as a matter of fact that there was criminal activity.

Mulroney's spokesman quoted Rock who said: "It was the language used that was the essential harm here, and it was for that reason we apologized and agreed to pay costs."

But Rock also stated that had they known "about the cash payments from Schreiber "and the circumstances in which it was paid, it would have had a very significant effect on the litigation."

I’ll point out that this case was all about reputation," Rock testified. "Mr. Mulroney complained that the language used affected his reputation. But the disclosure of the cash payments also had that effect, and had that disclosure been in 1996 or 1997, before this case was settled, we would have been dealing with a very different set of facts."