Brian Mulroney acted inappropriately in accepting cash, inquiry finds
In a harshly worded report, Justice Jeffrey Oliphant says the former prime minister “failed to live up to the standard of conduct that he himself adopted” in accepting cash payments from German-Canadian businessman..
Former prime minister Brian Mulroney attempted to cover up cash payments of $300,000 he received from a secret account, Karl heinz Schreiber told CBC’s The Fifth Estate.
Karl heinz Schreiber claims former prime minister Brian Mulroney attempted to cover up $300,000 in payments he received. ((Aaron Harris/Canadian Press))
Mulroney wanted Schreiber, a German businessman, to provide a statement that the former prime minister at no time solicited or received compensation of any kind from the German businessman, Schreiber said. But Schreiber did not provide Mulroney with it.
Schreiber is currently in a Toronto jail, awaiting extradition to face possible imprisonment in Germany where he is accused of bribery fraud and tax evasion— charges he denies.
But for the first time, Schreiber has revealed details of what he says was an attempted cover up to save Mulroney’s reputation after he made $300,000 in cash payments to the former prime minister.
Schreiber, who is currently suing Mulroney over the money, has said the payments, handed out in hotel rooms between 1993 and 1994, were intended to enlist his help in establishing an arms factory in Quebec and, later, a pasta business in Ontario.
But in 1999, a scandal emerged in Germany over payments Schreiber had made from bank accounts from Switzerland to prominent people there.
Now Schreiber says his lawyers received a flurry of calls from Mulroney’s team as details about the secret accounts, and Mulroney’s connection to one of them, were about to be made public.
Schreiber said that Mulroney, himself a lawyer, was requesting a written statement from Schreiber that “at no time did he ever solicit or receive” money from Schreiber.
The request ended up on the desk of high-profile Toronto lawyer Edward Greenspan, who was representing Schreiber.
“[Greenspan] only said to me if you ever sign any affidavits or any documents or whatever without my permission, as long as I’m your lawyer, I cut your hands off or you look for a new lawyer,” Schreiber said. “He’s a very humorous guy.”
“When I asked [Greenspan] that there was a request that I should give such a declaration, he said under no circumstances. End of story.”
Schreiber got the message.
“I was not prepared to do that because it was a clear request for, towards me to commit perjury. And why would I do that?” said Schreiber.
When Schreiber refused to provide the statement, Mulroney reversed course and made a “voluntary disclosure” of the income to Revenue Canada, Schreiber said.
According to a letter from an unnamed intermediary of Mulroney’s, which was received Tuesday night by the Globe and Mail, the former prime minister delayed paying taxes because of the “cataclysmic event” that disrupted his lifeon Nov. 2, 1995 — when he learned the RCMP was investigating allegations that he accepted kickbacks from Schreiber for the purchase of a large order of Airbus jets when he was still in office.
“As such, it is understandable that until all these matters were resolved — as they eventually were with his total vindication — he could not resume normal functioning and attend to normal day-to-day affairs,” the letter said, according to the Globe.
However, the Globe said that if Schreiber gave $200,000 to Mulroney in 1993, the taxes owed on that payment would have been due May 2, 1994 — 18 months before November 1995.
Taxes on theadditional $100,000 Schreiber says he gave Mulroneyin 1994 would have been due May 1,1995, six months before Mulroney says he learned about the RCMP investigation.
The letter, which does not specify when Mulroney made his voluntary disclosure, states that it is “understandable” that Mulroney waited until he was vindicated in his legal battle with the federal government and the RCMP to finalize his tax matters.
Mulroney sued for libel over the so-called “Airbus affair,” and under oath, denied any dealings with Schreiber. Mulroney received a government apology and a $2.1-million settlement in 1997.
The letter also raises other questions about timing, according to the Globe.
One key stipulation for making a voluntary disclosure is that the income has to be declared without any hint of an investigation by the Canada Revenue Agency, the agency told the Globe. In addition,a person who is the subject to a criminal investigation, and is aware of it, must be completely upfront about everything in order to file a voluntary disclosure.
‘Imagine you are my lawyer’
The Globe notes that if Mulroney made his disclosure anytime after Nov. 2, 1995, he would have been aware he was the subject of an RCMP investigation, one that focused on his relationship with Schreiber, the very person who provided him with the income.
Schreiber said after Mulroney changed course, from wanting a denial of payments to choosing to make a voluntary disclosure, Mulroney’s team requested that he say the payments were for vaguely described legal services.
“Imagine you are my lawyer and I tell you we need an affidavit from Schreiber that he never received, that he never gave any money to me,” Schreiber said.
“Two days later I tell you, ‘You know what, call Revenue Canada, the two of us have to go there. I have to make a voluntary disclosure.’ I mean how in the name of God can you do this?”
Schreiber said a document he received from Mulroney’s team, which has been seen by The Fifth Estate, lists services to be rendered by Mulroney described as:
“To provide a watching brief.”
To “develop economic opportunities.”
For “travelling abroad.”
For “new markets.”
For “Canadian-made peace keeping.”
Schreiber also told The Fifth Estate that a year earlier, in 1998, he had met with Mulroney at the Savoy Hotel in Zurich Switzerland, where Mulroney expressed concerns about their dealings.
“And then I found a very nervous, very nervous Brian Mulroney and the reason for his, for his visit was more or less to find out whether there would be any evidence that he received any money,” Schreiber said.
‘I thought he was somehow in good shape’
Schreiber said he told him not to worry because the cash was untraceable.
“If [Mulroney] would have said ‘I never received from him $300,000, I would have had no way to prove that he got $300,000 from me,” Schreiber said.
“So when he left, I thought he was somehow in good shape.”
The cash arrangement between Mulroney and Schreiber began in June 1993, after Schreiber said he had been approached by former Mulroney chief of staff Fred Doucet. According to Schreiber, Doucet told him Mulroney was not financially well off and needed some help.
Schreiber agreed to assist Mulroney.
From 1993 to 1994, Schreiber said he met with Mulroney three times in hotel rooms in Montreal and New York and handed over envelopes stuffed with cash. The money, according to Schreiber, had come from a secret account he had created in Zurich, under the codename BRITAN.
There is no evidence Mulroney knew where the money was coming from.
RCMP shut down investigation
Documents obtained by CBC News show that the Justice Department looked into whether or not it could attempt to recover the $2.1 million-settlement Mulroney received after revelations Mulroney had accepted cash payments from Schreiber.
But the RCMP shut down the investigation into Mulroney, even saying he’d never be charged again, without confirming whether or not Mulroney even got the money or what it might have been used for.
Mulroney himself declined to be interviewed by the RCMP about the $300,000.
Mulroney refused repeated requests by the CBC for an interview. As for Schreiber’s lawsuit, none of the allegations have been proven in court and Mulroney’s legal team has said their client doesn’t owe Schreiber anything
The Airbus affair refers to allegations of secret commissions paid to members of the Government of Canada during the term of Prime Minister Brian Mulroney (1984–93), in exchange for then-crown corporation Air Canada’s purchase of a large number of Airbus jets. The Chairman of Airbus (a European consortium) at the time of the contract competition was Franz Josef Strauss (1915–1988), a high-profile German politician in Bavaria.
The order in question had long been pending, and both Boeing and Airbus had been competing heavily for the contract. Both offered shared production in Canada, and Boeing went so far as to buy de Havilland Canada to further strengthen their bargaining position, as well as gain access to the feederliner market where they, at that time, had no presence. The contract was eventually won by Airbus in 1988, with an order for 34 Airbus A320s, as well as the sale of some of Air Canada’s existing Boeing 747 fleet. Boeing immediately put de Havilland up for sale, thereby putting that company in jeopardy, but the blame for this was generally placed on the government.
In 1995, the Royal Canadian Mounted Police (RCMP) accused Mulroney and Frank Moores of accepting kickbacks from Karlheinz Schreiber on the sale of Airbus planes to the government-owned airline during Mulroney’s term as Prime Minister of Canada. The allegations were made in a letter sent by the RCMP to the government of Switzerland seeking access to banking records. Schreiber had earlier raised money for Mulroney’s successful 1983 bid to win the leadership of the Progressive Conservative Party.
Mulroney denied the allegations, and launched a $50 million defamation suit against the Canadian government, alleging that the newly elected Liberal government of Jean Chrétien was engaging in a smear campaign against its predecessor. The government settled out of court in early 1997, and agreed to publicly apologize to Mulroney, as well as paying the former prime minister’s $2.1 million legal fees.
Although there is no evidence that Mulroney accepted kickbacks while prime minister, he acknowledged in 2003 that shortly after stepping down in 1993 that he accepted $225,000 over 18 months from Schreiber, in three cash payments of $75,000 each. Mulroney was still a member of the Canadian House of Commons when one of the payments was made. Mulroney claims that this money was paid to him for consulting services he rendered to help promote a fresh pasta business, and to develop international contacts for Schreiber. Mulroney had previously not admitted accepting any commissions from Schreiber during his lawsuit against the Canadian government, and later under oath specifically denied any business dealings with him. Mulroney has not yet provided evidence of any work he performed for that money, and declared it as income to Revenue Canada only years later, when Schreiber had come under criminal investigation in Germany. Schreiber ridiculed their dealings in pasta-macaroni as nothing more than being sent a single flyer, and has stated that the three separate payments were actually $100,000 each in $1000 bills, a total of $300,000.
Journalist Stevie Cameron wrote about the scandal, and Schreiber’s links to the Mulroney government, in her 1994 best-selling book On the Take: Crime, Corruption and Greed in the Mulroney Years. The CBC’s The Fifth Estate produced a documentary in March 1995 which revealed a secret side agreement between Airbus and a Liechtenstein shell company, International Aircraft Leasing (IAL), which received millions of dollars in secret commissions after the sale of Airbus aircraft to Air Canada. William Kaplan responded to Cameron and the CBC in his 1998 book Presumed Guilty, criticizing journalists for lacking evidence.
In October 1999, The Fifth Estate obtained Swiss Bank Corporation records which revealed that Schreiber had set up a secret bank account in Zurich with the code-name “BRITAN,” from which three cash withdrawals totaling $300,000 were made in 1993 and 1994. Two years later, Cameron and Fifth Estate producer Harvey Cashore, wrote a book about Schreiber called The Last Amigo. In 2004, Kaplan clarified his position in a further book, A Secret Trial, by criticizing Cameron for her role as a confidential RCMP informant on the Airbus matter, and Mulroney for not disclosing the fact that he had received the $300,000 from Schreiber.
On February 8, 2006, Schreiber stated in a Fifth Estate interview that the money from the “BRITAN” account came at the request of a Mulroney aide, who told him the former prime minister was short of funds. Schreiber mocked Mulroney’s claim that the money was a consulting fee for help given in a pasta business Schreiber had invested in. The programme also reported there was no evidence that Mulroney knew of the source of the funds. The following year, The Globe and Mail and The Fifth Estate revealed that Brian Mulroney filed a voluntary disclosure with Revenue Canada several years after accepting the cash envelopes from Schreiber.
The Globe and Mail reported on November 1, 2007 that Mulroney, who had by his own admission received $75,000 of Schreiber’s stated $300,000 in cash in New York City in December 1994, should have declared those funds when he crossed the border into Canada several days later, if he had not already spent the money. The story quoted retired RCMP inspector Bruce Bowie, who played a role in preparing the original Canadian legislation requiring large cash transactions to be reported, which was passed during Mulroney’s term. Internal United States rules also require that large cash transactions be recorded, and whether Mulroney did so for this transaction was an open question, according to the Globe and Mail article.
On November 8, 2007, an affidavit, including further allegations by Schreiber, was filed in court. Prime Minister Stephen Harper announced that a third-party independent inquiry would be launched to review the dealings between Schreiber and Mulroney, to be headed by David Lloyd Johnston, president of the University of Waterloo. The RCMP announced on November 14 that they would also open a review process into those matters. In June 2008, the government established the “Commission of Inquiry into Certain Allegations Respecting Business and Financial Dealings Between Karlheinz Schreiber and the Right Honourable Brian Mulroney”
Schreiber lost his appeal of extradition to Germany on November 15, and he remained confined in the Toronto area. Extradition proceedings against Schreiber, launched by German authorities, began in 1999; Schreiber is wanted in Germany to answer for several criminal charges, including fraud and bribery, which had a role in bringing down a government there, and which damaged the legacy of former German Chancellor Helmut Kohl. Schreiber stated that if extradited, he would not cooperate with the inquiry. Minister of Public Safety Stockwell Day said that the inquiry would be structured to allow witnesses to testify regardless of their location, and that Schreiber would have to testify. Opposition parties in the Canadian House of Commons called for Schreiber’s extradition to be delayed, to allow him to take part in the inquiry. Minister of Justice Rob Nicholson promised to delay the extradition until at least December 1, 2007, to allow potential appeals to be filed by Schreiber’s lawyer Edward Greenspan.
Ethics Committee testimony
Schreiber was summoned from jail by a Speaker’s Warrant issued by Commons Speaker Peter Milliken, and was transported from Toronto to Ottawa on November 28, 2007. He testified before the House of Commons Ethics Committee on November 29, December 4, and December 6, 2007. Schreiber obtained a stay of his extradition from the Ontario Court of Appeal on November 30, and obtained bail on December 4 by posting $1.3 million. Schreiber explained that the $300,000 he paid to Mulroney in three cash installments of $100,000 each, in 1993 and 1994, did not come directly from Airbus, but was drawn from ‘success fees’, money Schreiber earned in commissions for his lobbying work on behalf of Airbus, MBB, and Thyssen, in the late 1980s and early 1990s. Airbus and MBB had concluded large contracts, for airplanes and helicopters respectively, with the Canadian government while Mulroney was prime minister. Thyssen’s project, a prospective new factory for manufacturing light armoured vehicles, had gained initial government approval, but was never built. Schreiber explained further that the money he paid to Mulroney was not for any work Mulroney did while he was prime minister from 1984–1993, but was a retainer for future work Mulroney would do for Schreiber after he left political office, as well as a reward for Mulroney’s support for German reunification, which was achieved in 1991. This amount was originally set for $500,000, but was reduced because Mulroney did not in fact perform the work, according to Schreiber, who is suing Mulroney to recover that money. Mulroney refused to comment in advance of his scheduled appearance before the Ethics Committee on December 13, 2007. However, six weeks following his appearance, Mulroney’s lawyers submitted a letter to the Ethics Committee chairman, Paul Szabo, indicating that their client would not be willing to appear again before the committee because of the “unfair” treatment he encountered on December 13. On February 26, 2008, CTV News reported that Mr. Mulroney, through his lawyer, had reiterated his refusal to reappear before the Committee, scheduled for February 28. After mulling the possibility of issuing a subpoena, the committee decided the next day that it would wrap up this activity without further testimony.
Wikinews has related news: Brian Mulroney testifies before House of Commons in Canada
On February 14, 2008, Mr. Schreiber’s Swiss accountant told the Ethics Committee that he did in fact set up a Swiss account for Mr Mulroney. He denied knowing about transactions made on that account by or for the former Prime Minister.
Oliphant Commission Report
In April and May 2009, the next episode ensued as the Oliphant Commission inquiry began. Chaired by Mr. Justice Jeffrey Oliphant, Associate Chief Justice of the Court of Queen’s Bench of Manitoba, it was specifically mandated to focus on the dealings between Schreiber and Mulroney. While the inquisitors and their questions were different, the answers by Mr. Schreiber in April and Mr. Mulroney in May were essentially paraphrasings and expansions on those of the Ethics Committee proceedings. Notable new revelations in Mulroney’s testimonies included his explanation for the delay in declaring the cash payments as income (he considered them as advances on future activities, to be declared only when drawn upon), and that his accountant, without his knowledge, had arranged to pay tax on only half the amount. This was in accordance with a Canada Revenue Agency amnesty incentive, now discontinued, that was intended to encourage delinquent taxpayers to submit late declarations, thus garnering funds which would otherwise have been lost or, at minimum, require costly legal action to be collected.
The Commission completed its hearings phase in the last week of July 2009. The following weekend Mr. Schreiber, after a last-ditch effort to find another means of avoiding extradition, was ordered to appear at the Toronto Detention Centre pending his return to Germany. Within three hours, he was escorted onto a Europe-bound aircraft by two RCMP officers, and designated “surrendered to Germany.”
The Commission’s report, released on May 31, 2010, included the following findings:
That Mulroney entered into an agreement with Schreiber while Mulroney was a Member of Parliament, but not while still prime minister
That Schreiber retained Mulroney to promote the sale of military vehicles in the international market (not within Canada), that three cash payments totaling at least CAD $225,000 were made by Schreiber to Mulroney in person, and that no services were ever provided by Mulroney for the monies paid
That these business and financial dealings were inappropriate given Mr. Mulroney’s position and that Mulroney repeatedly acted inappropriately in disclosure and reporting of the dealings and payments
The report intentionally avoids “expressing any conclusions … regarding civil or criminal liability” based on the Commission’s mandate and Oliphant wrote that he was “careful not to use language that would even hint at such a finding”.
A two-year inquiry into Brian Mulroney’s dealings with German-Canadian arms lobbyist Karlheinz Schreiber has concluded that the former prime minister acted in an “inappropriate” way when he accepted large amounts of cash from Schreiber.
The report by Justice Jeffrey Oliphant said Mulroney “failed to live up to the standard of conduct that he himself adopted in the 1985 ethics code.”
The judge said he could not accept Mulroney’s testimony that his acceptance of at least $225,000 in cash was an error in judgment. Rather, it was an attempt to hide the transactions, Oliphant said.
“The reason Mr. Schreiber made the payments in cash and Mr. Mulroney accepted them in cash was that both wanted to conceal the fact that the transactions had occurred between them,” the judge said in a summary read to the media.
“Something was amiss,” Oliphant said. “These dealings do not reflect the highest standards of conduct, nor do they represent conduct that is so scrupulous it will bear the closest public scrutiny.”
If the dealings were appropriate, there would have been a contract, an exchange of letters or some documentation confirming the agreement, the judge said.
“Why, then, was there a need for such secrecy? The answer is that Mr. Mulroney wanted to conceal the fact that he had received money from Mr. Schreiber.”
However, Oliphant rejected Schreiber’s testimony that the lobbying agreement between the two men was made while Mulroney was still prime minister in 1993.
He said he was unable to determine whether Mulroney’s statement that he received $225,000 from Schreiber was true or whether, as Schreiber testified, the amount was $300,000.
During the hearings, Mulroney said he took the money to lobby international leaders for the sale of light-armoured vehicles on behalf of Schreiber. But Oliphant expressed skepticism about Mulroney’s explanation, saying “for different reasons, none of the people to whom Mr. Mulroney says he spoke were available” to Oliphant commission of inquiry.
“I am not able to find that any services were ever provided by Mr. Mulroney for the monies paid to him by Mr. Schreiber.”
Oliphant noted that Mulroney accepted “cash-stuffed envelopes from Mr. Schreiber on three separate occasions,” did not make a record of the payments, did not deposit the money in a bank or disclose the payments when given an opportunity to do so later. The judge said that this “goes a long way” to “supporting my position that the financial dealings between Mr. Schreiber and Mr. Mulroney were inappropriate.”
Oliphant also criticized Mulroney’s statements in 1996 during proceedings in his $50-million lawsuit against the federal government, in which he claimed damages arising from Ottawa’s inquiry about Mulroney’s financial holdings to the Swiss government. Speaking under oath in that case, Mulroney did not explain his dealings with Schreiber because, the former prime minister later explained, he was not asked specifically about those dealings. Instead, Mulroney said that he had seen Schreiber a couple of times for a “cup of coffee.”
Saying that the former prime minister did not “disclose the true state of affairs,” Oliphant said, “I find that Mr. Mulroney acted inappropriately in failing to disclose his dealings with Mr. Schreiber and the payments he received when he gave evidences” in the Airbus lawsuit.
Mulroney received a $2.1-million settlement from the federal government in that lawsuit, but former Liberal cabinet ministers have said they would not have made the settlement had they known at the time of Mulroney’s financial link to Schreiber.
In Question Period Monday, Liberal MP Siobhan Coady (St. John’s South – Mount Pearl) asked whether Ottawa would press for the return of the $2.1 million, given Oliphant’s findings. Justice Minister Rob Nicholson said only that the government would review the inquiry’s recommendations.
The inquiry arose from a 2007 allegation by Schreiber that he paid a large sum of money to Mulroney as part of a lobbying deal the two men reached shortly before the Progressive Conservative politician left 24 Sussex in 1993.
Schreiber said it was $300,000 but Mulroney later said he took $225,000 in cash. Mulroney also disputed the timing, saying the two men met shortly before he stepped down as prime minister but no agreement was reached until later.
Schreiber’s allegations sparked national attention, prompting Mulroney to call for hearings to clear the air. Harper agreed and announced on November 14, 2007, that University of Waterloo President David Johnston would develop a mandate for a public inquiry.
Based on Johnston’s recommendations, Harper established the Oliphant commission, which held public hearings in 2009. Oliphant’s report was due Dec. 31, but, citing the 150,000 pages of documents received at the inquiry, Oliphant asked for an extension until today.
Oliphant was asked to delve into the circumstances surrounding Schreiber’s payments to Mulroney, including when they were made, what was the source of the cash, what services—if any—were rendered in return for the money and what happened to the cash after Mulroney received it. The judge was also ordered to examine whether ethical rules or guidelines for MPs or former cabinet ministers were broken by Mulroney.
Estimates of the cost of the inquiry have reached $16 million—including $1.8 million for Mulroney’s lawyers.
Mulroney and Schreiber both testified at the Oliphant inquiry last year; Schreiber was extradited to Germany shortly after the hearings wrapped up. German authorities had been seeking his extradition for 10 years on charges of fraud and bribery in relation to a 1999 corporate bribery scandal that shook the country’s political foundations.
Earlier this month, Schreiber was sentenced by a German court to eight years in prison for tax evasion.
Before Oliphant was appointed, Mulroney gave testimony on his dealings with Schreiber at a House of Commons committee. After the parliamentary hearings, Mulroney changed his mind about having a commission of inquiry, saying it was no longer necessary. But Harper went ahead anyway with the Oliphant commission.
A source close to the former prime minister said last week that he just wants to put the entire Schreiber affair behind him as soon as possible.
“The absolute need from Mr. Mulroney’s and his family’s point of view at this stage is that this closes the door, that it is the end of the story and life continues in a different frame the day after,” the source said.