December 13, 2007 / 4:12 PM / 10 years ago

Brian Mulroney says sorry for accepting cash

OTTAWA (Reuters) - Former Canadian Prime Minister Brian Mulroney apologized publicly on Thursday for accepting hundreds of thousands of dollars in cash from a German arms dealer, but he bluntly rejected suggestions he had taken kickbacks.

Mulroney, a mentor to current Conservative Prime Minister Stephen Harper, had for years declined to answer why exactly he took the money from Karlheinz Schreiber after leaving office in 1993. Schreiber says he handed over a total of C$300,000 ($295,000), while Mulroney said he received C$225,000.

The affair is one of the great mysteries of Canadian politics and efforts to uncover what happened have revealed allegations of skullduggery and influence-peddling that involve senior officials and politicians.

Schreiber, awaiting extradition to Germany to face charges of fraud, bribery and tax evasion, says he paid Mulroney to help German firm Thyssen AG build a plant in Canada to assemble light-armored vehicles.

Mulroney told legislators on Thursday that the money was in fact a retainer to promote use of the vehicles abroad in peacekeeping operations.

He said that while the deal had been legal, and while he had accepted no money while in office, he recognized he had made a serious error in judgment by agreeing to take cash.

“I apologize and I accept full responsibility for it,” he told a parliamentary committee, saying he should instead have insisted on a check.

The committee is looking into the so-called Airbus affair -- a 1990s investigation into suspected kickbacks connected to Air Canada’s purchase of Airbus airliners in 1988, while Mulroney was prime minister.

At the time, Airbus was a client of Schreiber, who made millions of dollars in commissions on the deal. In 1995, Canadian officials sent a formal letter to Swiss authorities, implicating Mulroney in a scheme to accept kickbacks.

Mulroney successfully sued for libel and won a C$2.1 million settlement, saying the allegations had been a “near-death experience” for his family.

“I never received a cent from anyone for services rendered to anyone in connection with the purchase by Air Canada from Airbus of 34 aircraft in 1988,” he said. Schreiber also says the money he paid to Mulroney was not linked to Airbus.

Last month Harper ordered a formal probe into allegations of improper dealings between Mulroney and Schreiber -- who also has Canadian nationality -- and told his cabinet to cut contacts with the former prime minister.

At the time of the Airbus deal, Mulroney and Harper were in different right-wing political parties. The two have since become friends, with Mulroney acting as an advisor to Harper.

Mulroney -- who left office after nine years with his popularity at record lows -- has been dogged for years by questions as to why he did not at first declare the money to Canada’s tax authorities.

He told the committee he considered the cash was to cover expenses and was not income. Later on, when questions were asked about the money, he declared it all as income to tackle what he said could be suggestions he had acted improperly.

Schreiber says he got little in return for the C$300,000 he says he gave Mulroney and is suing Mulroney to get it back.

“My second biggest mistake in life, for which I have no one to blame but myself, is having accepted payments in cash from Karlheinz Schreiber for a mandate he gave me after I left office,” Mulroney told the committee.

“My biggest mistake in life -- by far -- was ever agreeing to be introduced to Karlheinz Schreiber in the first place.”

Schreiber has been fighting extradition to Germany for eight years. Mulroney said his former friend would “say anything, sign anything, do anything to avoid extradition.”

($1=$1.02 Canadian)

Reporting by David Ljunggren; Editing by Peter Galloway

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