January 12, 2008 / 12:27 AM / in 10 years

Government to probe why Mulroney took cash payments

<p>Former Canadian Prime Minister Brian Mulroney testifies before the Commons ethics committee on Parliament Hill in Ottawa, December 13, 2007. Canada confirmed on Friday it would hold a formal inquiry into why former Mulroney accepted hundreds of thousands of dollars in cash from a business lobbyist, but the probe is likely to be more limited than that demanded by opposition parties. REUTERS/Chris Wattie</p>

OTTAWA (Reuters) - Canada confirmed on Friday it would hold a formal inquiry into why former Prime Minister Brian Mulroney accepted hundreds of thousands of dollars in cash from a business lobbyist, but the probe is likely to be more limited than that demanded by opposition parties.

In recent years, Mulroney has been a mentor to current Prime Minister Stephen Harper, who announced the investigation last November and then asked academic David Johnston to examine how best to proceed. Johnston delivered his report this week.

“After reviewing the report and consulting Professor Johnston, the government has decided to convene a public inquiry,” Harper said in a statement.

Last month, Mulroney apologized publicly for taking cash from German-Canadian arms dealer and business lobbyist Karlheinz Schreiber after leaving office in 1993. The cash -- totaling C$225,000 ($221,000) according to Mulroney, C$300,000 according to Schreiber -- was stuffed in envelopes and handed over at hotel-room meetings.

Although Harper had nothing to do with the payments and was not even in the same party as Mulroney at the time, opposition parties hope some of the dirt will stick to him.

Schreiber, who is awaiting extradition to Germany to face charges of fraud, bribery and tax evasion, wrote to Harper last year about the case but the Prime Minister said he never received the letter, prompting accusations of a cover-up.

The probe will start after a parliamentary committee finishes examining the “Airbus affair” -- a 1990s probe into suspected kickbacks tied to Air Canada’s purchase of Airbus airliners in 1988, while Mulroney was prime minister.

The inquiry is likely to take months to set up, meaning there is no chance of any testimony being used in an election campaign some observers expect in the first half of 2008.

Critics say the inquiry should re-examine the Airbus affair and some legislators want an examination of Mulroney’s dealings going back to 1983, the year before he became prime minister.

Johnston said there was nothing to “justify a wide-ranging, unfocused inquiry into all of the matters that Messrs. Schreiber’s and Mulroney’s names have been associated with over these many years.”

Instead, he said the probe should look at the payments, the business and financial relationship between Schreiber and Mulroney and what happened to Schreiber’s letter to Harper.

Opposition politicians were quick to say they suspected Harper would try to limit the probe.

“In our view he (Johnston) is opening up the door for the possibility of the prime minister doing something short of the full public inquiry that was promised in November and we’re quite concerned about that,” said Thomas Mulcair of the left-leaning New Democratic Party.

Schreiber says he paid Mulroney to help German firm Thyssen AG build a plant in Canada to assemble light-armored vehicles. Mulroney said the money was a retainer to promote use of the vehicles abroad in peacekeeping operations.

Johnston, president of the University of Waterloo, will deliver his final recommendations on how to run the probe once the committee’s work is over.

($1=$1.02 Canadian)

Reporting by David Ljunggren; editing by Rob Wilson

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