OTTAWA (Reuters) - Former Canadian Prime Minister Brian Mulroney, seeking to restore a tarnished reputation, testified on Tuesday that when he received large secret payments in 1993 he had no idea that the man he got them from would one day be a fugitive from justice.
It was his first day of testimony at an inquiry the government has set up to examine cash payments Mulroney received from German-Canadian arms dealer Karlheinz Schreiber after Mulroney stepped down as prime minister in 1993.
Schreiber says he handed over C$300,000 ($256,000) in cash to Mulroney in separate hotel meetings so that Mulroney could help promote establishment of a factory to build light armored vehicles.
Mulroney says that the amount was only C$225,000 and said on Tuesday that he accepted that such "inadequately documented arrangements are inappropriate" for former office holders.
Mulroney said nothing he did was illegal and that the Schreiber he dealt with was a well-respected businessman.
"The Karlheinz Schreiber that I knew in 1993 was not the man that we know here today," said a husky-voiced Mulroney, now 70.
He said Schreiber was closely associated with German firm Thyssen AG, which employed 160,000 people, and that Schreiber led Thyssen's efforts to set up the light-armored vehicle plant in Canada, and came recommended by friends Mulroney respected.
"So that's the Schreiber I knew, but then in 1999 Mr. Schreiber was arrested in Toronto under an international Interpol warrant and jailed pending his extradition," Mulroney said.
"He was a fugitive of German justice and so I had known nothing of these troubles that led to those charges. I knew him as an accomplished entrepreneur."
He said understanding this does not "fully justify or explain" the manner in which he dealt with Schreiber.
"I genuinely regret...that the circumstances surrounding these transactions for which I am largely responsible give rise to suspicions as to their propriety, and I certainly accept that inadequately documented arrangements are inappropriate for former public office holders...," he said.
Mulroney led the Progressive Conservative Party to the biggest parliamentary majority in Canadian history in 1984, but he was unpopular toward the end of his nine years in office and his party was reduced to just two of 295 seats in the House of Commons in an election held in 1993 shortly after he retired.
His image had been somewhat rehabilitated in recent years, and he had given informal political advice to Conservative Prime Minister Stephen Harper that some think helped Harper win the 2006 election.
But Mulroney's reputation suffered when news emerged of the large cash payments he received from Schreiber. When Harper set up the inquiry in 2007, he cut off contacts with Mulroney, and relations between the two men have since soured.
Editing by Peter Galloway