Former prime minister Brian Mulroney appeared before a Commons ethics committee today and admitted that it was a mistake to accept cash payments from Karlheinz Schreiber in exchange for his consulting services. However, he said none of his actions were illegal.

The ethics committee is probing why Mulroney accepted cash -- which Schreiber claims amounted to $300,000 -- shortly after leaving office in 1993.

Mulroney told the committee he was actually paid $225,000 in three payments of $75,000.

"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 said in an opening statement.

"... my biggest mistake in life, by far, was ever agreeing to be introduced to Karlheinz Schreiber in the first place."

Schreiber has alleged that the pair agreed in principle to work together in June 1993 at Harrington Lake -- when Mulroney was still in office.

But Mulroney denied ever making a deal to work for Thyssen Industries or any other client of Schreiber while he was serving as prime minister.

He also denied ever receiving money for services relating to the purchase by Air Canada from Airbus of 34 aircraft in 1998.

Cash payments

Mulroney said the first payment he received from Schreiber was on Aug. 27, 1993 at a hotel in Mirabel, Que. -- after he left the prime minister's office. (However, he was still an MP at this time.)

He said Schreiber initially expressed annoyance at the meeting that the government, which Mulroney had headed, had not approved the Bear Head project. The project involved a plan by Thyssen Industries to construct a factory to build light-armoured vehicles in Canada.

"(He) told me he had planned to pursue legal damages to recover costs and damages, he left me with a copy of the lawsuit," said Mulroney.

"He then said that it would be very helpful to Thyssen to have a former prime minister assist in the international promotion of their peacekeeping vehicles and gave me a copy of merchandising documents regarding the vehicle."

Mulroney then said Schreiber wanted to retain him for international representation.

"When I indicated that this kind of global activity was something I thought I could usefully do -- provided that none of the activity would relate to domestic Canadian representation -- he produced a legal sized envelope and handed it to me," said Mulroney.

"At that point, Mr. Schreiber said this is the first retainer payment -- he told me there would be a total of three payments for three years."

Mulroney said he hesitated when he realized it was cash.

"When I hesitated, he said 'I'm an international businessman and I only deal in cash, this is the way I do business,'" said Mulroney.

"When I look back on it today I realize I made a serious error of judgment in receiving a payment in cash for this assignment even though it was decidedly not illegal to do so."

Mulroney said he only used the retainer for expenses while promoting Schreiber's interests internationally.

"After accepting the international payment on the retainer, and during the time two subsequent payments were made, I made trips to China, Russia, Europe and throughout the United States of America where I met with government and industry leaders and explored with them the prospects for this peacekeeping vehicle," said Mulroney.

Schreiber has testified that the cash was to help with the original plans to build the light-armoured vehicle plant in Canada.

Schreiber, facing extradition to Germany on fraud charges, is suing Mulroney to recover the money.

Mulroney says he paid tax on the money only after Schreiber was arrested in 1999 on corruption charges.

He told the MPs that was because the arrest "put in serious doubt my relationship with him.'' Asked if he would have paid the taxes had Schreiber not been arrested, Mulroney said: "Well I don't know the answer to that sir."

Airbus affair

Two years after the agreement, Mulroney said his "world almost ended with the publication of the false and defamatory letter to Switzerland by the government of Canada in the Airbus matter."

"Mr. Schreiber was also accused in the same letter to the Swiss -- obviously, all of my retainer work came to an abrupt and immediate halt."

In 1988, Air Canada -- then a Crown corporation -- bought 34 Airbus jets worth $1.8 billion.

Mulroney sued for defamation after the letter -- linking him to kickbacks in the deal -- was leaked in 1995.

In 1997, Jean Chretien's Liberal government paid Mulroney a $2.1-million settlement.

The Liberals apologized to Mulroney for the "letter of request" but not for the actual RCMP investigation, which ended six years later without charges.

Mulroney said after the letter was leaked he instructed his advisors to contact the income tax authorities to ensure that the full amount received from Schreiber for the Thyssen consulting work was reported by him as income. He said all applicable taxes were paid on the cash payments.

Mulroney also addressed an apparent contradiction to sworn testimony he made in his $2.1 million Airbus settlement -- in which he claimed to have had no prior dealings with Schreiber.

"Any reasonable reading of my testimony indicates that, when I used the language... 'I had never had any dealings with Mr. Schreiber,'... I was clearly referring to the sale of Airbus aircraft at the time that I was in government," said Mulroney.

Mulroney made several points "clearly and unequivocally" to the committee.

He said:

• He never received "a cent" from anyone for services rendered to anyone in connection with purchase by Air Canada from Airbus of 34 aircraft in 1988.
• He didn't receive any money from Thyssen Industries or any other client of Mr. Schreiber while he was in office.
• He "never had a lawyer in Geneva or elsewhere in Switzerland except to defend myself against the false charges laid against me in in 1995."
• He never had a bank account in Switzerland.
• Neither he, nor anyone on his behalf, ever asked Mr. Schreiber or his lawyer to perjure themselves or otherwise lie about the payments received from him.