Canada's Mulroney, Back in a Bad Light

Former Prime Minister Faces Multiple Probes Into Old Financial Scandal

VANCOUVER, B.C. -- Ask Canadians under 30 about the name Mulroney, and chances are they will think not of the former prime minister, Brian Mulroney, but of his son, Ben, the Ryan Seacrest of the North, host of "Canadian Idol." But that was before the elder Mulroney came storming back into the national spotlight in a scandal befitting prime-time television.

Details including cash-stuffed envelopes, a foreign lobbyist and deep political intrigue are still emerging from testimony before parliamentary panels in Ottawa. At the center of it all is the prime minister of nine years who left office in 1993 as one of the most unpopular leaders in Canadian history.

Mulroney's reputation had been on the rebound in recent years. His record on issues from free trade to support of the 1991 Persian Gulf War appeared to be earning him a place as a conservative elder statesman along the lines of Ronald Reagan. His son's emergence on the Canadian pop culture scene didn't hurt the budding rehabilitation.

But now outrage over the financial scandal is so intense that the current prime minister and Mulroney's fellow conservative, Stephen Harper, head of Canada's shaky minority government, last month announced a public investigation by an independent adviser. The probe is to follow ethics hearings already underway in Canada's House of Commons.

At issue are Mulroney's dealings with Karlheinz Schreiber, a German Canadian businessman and arms lobbyist. Schreiber is fighting extradition back to Germany to face bribery, fraud and tax evasion charges.

In the early 1990s, allegations swirled that Schreiber had paid kickbacks to Mulroney while he was in office in connection with Air Canada's purchase in the 1980s of jets from the European consortium Airbus. The deal was worth $1.8 billion (Canadian).

Mulroney steadfastly denied the allegations. After Canadian investigators made official inquiries into the matter in the 1990s, Mulroney sued the government for libel -- and won a settlement that offered him not only an apology but an award of $2.1 million (Canadian), worth about the same amount in U.S. dollars at current exchange rates.

Last year, a new Schreiber affair began. In papers filed in Canadian courts, the businessman asserted that in a meeting two days before the end of Mulroney's term, the two men reached a deal in which Mulroney would work as a private citizen to smooth the way for construction of a light armored tank factory in Quebec. It was a project of one of Schreiber's clients, German manufacturer Thyssen AG.

After Mulroney left office, Schreiber said, he paid Mulroney $300,000 (Canadian) in cash.

In November, Toronto's Globe and Mail newspaper and the Canadian Broadcasting Corp. reported that Mulroney had tried to cover up payments from Schreiber and had paid taxes on them only after Schreiber was indicted in Germany on bribery charges several years later.

In December, Mulroney appeared before a parliamentary committee, admitting after years of broad denials that he had, in fact, taken cash from Schreiber. Mulroney said that the amount had been $225,000 (Canadian) -- not $300,000 -- and that it had been paid out in $1,000 bills in envelopes on two occasions in Quebec and once in New York City, in 1993 and 1994.

"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 told the panel in December. "That mistake in judgment was mine alone. I apologize, and I accept full responsibility for it."

Mulroney testified that the meeting before he left office was merely a courtesy and that no business was discussed. Only after leaving office did he reach a deal with Schreiber, for what he described as lobbying of world leaders on Thyssen's behalf. He described the money he received as "legitimate and legal" payment for those services. It was paid in cash, he said, because that was how Schreiber did business.

"My biggest mistake in life, by far," Mulroney testified, "was ever agreeing to be introduced to Karlheinz Schreiber in the first place." Schreiber's allegations were a ploy to delay his extradition to Germany, Mulroney contended.

"This is a witch hunt" organized by opponents in the opposition Liberal Party, said a close adviser to Mulroney who spoke on condition of anonymity, citing the sensitivity of the case. "It's an unfair attempt to stain the legacy of a conservative leader."

Mulroney and his attorneys are struggling to limit the scope of the investigation to his dealings with Schreiber. But some opposition leaders are pushing to include other allegations -- from accusers who reportedly include one of Mulroney's former chiefs of staff -- involving mysterious cash transactions while Mulroney was in office.

The Schreiber scandal is a major headache for Harper at a time when his Conservative Party faces the prospect of elections in the coming months. Analysts say public pressure may yet force Canada's conservative leaders to broaden the investigation.

"Mulroney took millions in taxpayer money because he said he was libeled in the 1990s by the mere suggestion from investigators that he might have had murky financial dealings with Schreiber," said Nelson Wiseman, professor of political science at the University of Toronto. "Now he's telling us that, 'Oh, wait a minute, I did take money from Schreiber, but for different reasons.' Why should Canadians believe him now?"