Brian Mulroney, envelopes stuffed with cash

Former prime minister Brian Mulroney, who died on February 29, 2024 is being widely feted and he has received a state funeral.

In the Saturday, March 3 edition of the Globe and Mail, I read twelve articles lionizing Mr. Mulroney, in addition to an editorial, and a two-page fold-out containing photos and brief accolades from various individuals, including Joe Biden, George W. Bush, Stephen Harper, Jean Chretien, and Doug Ford.

The articles lauded Mulroney for being “an unabashed champion of free enterprise” and “[proving] the merits of privatization.” In the congratulatory glow, none of the authors bothered to mention Mulroney’s taking delivery in 1993 and 1994 of envelopes stuffed with thousand-dollar bills from Karlheinz Schreiber, who later became a convicted felon in Germany. It was left to the Globe’s editorial to make passing reference to the cash payments, before going to describe Mulroney as “the last great prime minister.”  

Karlheinz Schreiber

The cash-in-envelopes story is a multi-layered tale. Schreiber, who was close to the Christian Democrats and German industrialists, moved to Alberta in the 1970s. There he undertook various business ventures on behalf of German and local investors. He soon became involved in Canadian politics, specifically in the Conservative leadership campaign in 1983, where Brian Mulroney succeeded in dumping Joe Clark. Schreiber, by his own proud admission, provided money for the plane fares and accommodation expenses of Mulroney supporters who were flown in for the Winnipeg convention.

Schreiber developed a relationship with various people close to Mulroney, including Frank Moores, a former premier of Newfoundland and Labrador who was a key player in Mulroney’s leadership campaign. In the September 1984 federal election, Mulroney led the Conservatives to a landslide victory over the tired Liberals. Moores set up an Ottawa-based lobbying firm called Government Consultants International.

Airbus purchase

When Mulroney was elected in 1984, Air Canada was negotiating for the purchase of passenger planes. The American company Boeing and European-based Airbus Industrie were in competition for the contract. Air Canada was then a Crown-owned corporation. Mulroney fired its board of  directors and replaced it with his own people, including Frank Moores until Moores was forced to resign due to a conflict of interest.  

In 1985, Airbus hired Karlheinz Schreiber as its agent in Canada. He also represented two other companies, one of which was eventually to sell helicopters to the Canadian Coast Guard. In his deal with Airbus, Schreiber was to be paid a commission for each plane that Airbus sold to Canada.

Following the money

Early in 1988, Air Canada’s board of directors approved the purchase of thirty-four Airbus 320 planes for $1.8 billion. There were rumours that people close to Mulroney, including Moores, had benefitted from the Air Canada purchase. Questions were raised in parliament and several journalists, including those at CBC TV’s Fifth Estate, began to dig into the story. The RCMP opened an investigation, but it ran out of steam.

Then in 1994, the German newspaper Der Spiegel, interviewed Giorgio Pelossi, a Swiss national who had worked with Schreiber. The Fifth Estate talked to Pelossi soon after. He described how Schreiber, acting on behalf of Airbus, received secret commissions of at least $500,000 for each of the planes purchased by Air Canada. A German government indictment later estimated that Schreiber received at least $22 million US in the Airbus sale. According to Pelossi, Schreiber kept half of it for himself and distributed the rest to “Canadian friends.”

At the time, the German government allowed payment of such “grease money,” provided that it was paid to individuals in other countries. Such payments were illegal within Germany, as they were in Canada.

Pelossi’s job with Schreiber was to set up and maintain a web of companies through which the commissions could flow in a way which would be impossible to track. But he had a falling out with Schreiber, who he believed was not paying him adequately, and he began to skim off some of the money for himself. The two men became bitter enemies.

The RCMP resumed its investigation. In September 1995, the department of justice wrote a letter of request to the Swiss government seeking records about secret bank accounts. The letter alleged that Mulroney, Schreiber, and Frank Moores, had received money from the secret commissions flowing from Airbus. The police also suspected kickbacks in the Coast Guard’s purchase of helicopters from another German company.  

Mulroney sues

Schreiber learned of the letter and tipped off Mulroney. Then someone leaked the letter to the National Post. The story which appeared allowed Mulroney to launch a preemptive strike, a $50 million defamation lawsuit against the Canadian government. Schreiber said that he had never opened a Swiss bank account for Mulroney, and Moores denied having one as well.

In April 1996, Mulroney testified in an examination for discovery to establish the facts in his defamation case. The government’s lawyers, astonishingly, did not ask him if he had ever taken any money from Schreiber, and if so, for what. They did ask if he had contact with Schreiber after Mulroney ceased being prime minister. He responded as follows: “Well, from time to time, not very often. When he was going through Montreal he would give me a call. We would have a cup of coffee, I think, once or twice.” In response to another question about Schreiber, Mulroney said, “I never had any dealings with him.”

The government soon conceded, paying Mulroney three million dollars for his legal costs, and offering an abject apology. Mulroney, out of office for several years, went on to become a respected elder in Canadian politics and to sit on a variety of corporate boards. In 1998, author and lawyer William Kaplan published a book called Presumed Guilty. It was sympathetic to Mulroney and critical of the government, the RCMP, and the media for how they had treated the former prime minister. Mulroney was happy to talk to Kaplan and offered his full co-operation. Kaplan asked him about his relationship with Schreiber. Mulroney said: “I knew Schreiber in a peripheral way.”   

 While life was fine for Mulroney, things did not go as well for Schreiber. In May 1997, German authorities issued arrest warrants for him, accusing him of bribing German politicians and evading taxes. Schreiber was arrested by police in Toronto in August 1997. The German government launched extradition proceedings which Schreiber fought at every turn.  

Swiss bank accounts

The Fifth Estate kept following the story. In October 1999, they broadcast another documentary. They obtained bank documents to show that in 1993 and 1994 Schreiber had transferred money from International Aircraft Leasing (IAL), the company in Lichenstein where he received commission payments from Airbus, to several bank accounts in Switzerland. One of those Swiss bank accounts was code-named Britan. Schreiber had deposited $500,000 in the account in July 1993, and he withdrew $300,000 in four separate transactions later in 1993 and in 1994.

Speaking to the camera, the Fifth Estate’s Lyndon McIntyre wondered aloud about the similarity of the account named Britan and the first name of the former prime minister. McIntyre added, however, that the CBC had no evidence that Mulroney knew that Schreiber had established a bank account in that name. McIntyre also recalled that Mulroney testified under oath in 1996 at an examination for discovery that he never had a Swiss bank account, nor was there ever one set up on his behalf. The story appeared to end there.  

Bombshell news

Then came the bombshell. In November 2003, William Kaplan, writing in the Globe and Mail reported that in late June, 1993 Mulroney met with Schreiber at Harrington Lake. Mulroney had just resigned as prime minister but was still an MP. Schreiber was transported to and from Harrington Lake in a government limousine. They met again on three subsequent occasions in 1993 and 1994. The first of those meetings was at Mirabel airport in Montreal in August 1993. Mulroney remained an MP until an election call in October 1993.

In each of the three meetings after Harrington Lake, Schreiber handed over to Mulroney an envelope stuffed with cash. Those meetings coincided with the dates and amounts of withdrawals that Schreiber made from the Britan account in Switzerland, as had been reported in the CBC documentary back in October 1999. 

With the news out, Schreiber admitted that he had given Mulroney $300,000. Mulroney later claimed that it was $225,000, but initially both men said the money was for for consulting services. Three hundred thousand dollars in 1993 would be equivalent to $560,000 today. The revelations created a public furor. In November 2007, Prime Minister Stephen Harper reluctantly appointed Manitoba judge Jeffrey Oliphant to lead a public inquiry. The proceedings, which began in the spring of 2009, were televised and there was high drama as Mulroney vigorously defended himself under cross examination.

Much to the chagrin of journalists like the CBC’s Harvey Cashore, who had spent years researching several Airbus documentaries for the Fifth Estate, the commission’s frame of reference was limited issues related to the three cash payments. Any pursuit of testimony from Mulroney under oath about involvement in the Airbus saga was off limits. Harper’s rationale was that Airbus had been dealt with during Mulroney’s lawsuit against the Canadian government and the subsequent apology and cash settlement.

That seemed odd, because early in 2006, after Mulroney had sued the government and won an apology, the Fifth Estate broadcast another documentary in which Schreiber admitted, for the first time, that the $300,000 he gave to Mulroney came out of the Britan account. That assertion had never been tested in a court of law.  

Mulroney claimed before Oliphant that there was no ethical breach involved in his relationship with Schreiber. He was leaving politics and had set up a consulting company. In return for the money he took from Schreiber, he sought support from political leaders in Russia, China and France for a proposed United Nations purchase of armoured vehicles made by the Thyssen firm of Germany. Schreiber was a lobbyist for Thyssen. The vehicles would have been built in Cape Breton. Mulroney also said he promoted a pasta making machine that Schreiber wanted to build and sell.

Oliphant sceptical

Oliphant did not buy it. In his 2010 report, he wrote: “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 as well that Mulroney produced no documentation from his meetings with Schreiber. He did not bill Schreiber through the consulting company Cansult, which Mulroney created upon leaving office, but rather he accepted cash payments. He provided Schreiber with no receipts for the money, nor did he deposit it into a bank account. He chose to keep some of the cash in secure safes in his homes, and some in a safety deposit box in a New York bank.

Mulroney took the cash in 1993 and 1994 but did not declare it as income or pay tax on it until 2000, when he made a voluntary disclosure. Mulroney, coincidentally or not, began to negotiate to pay these taxes shortly after the Fifth Estate documentary in 1999 documenting that Schreiber had taken $300,000 out of the Britan account in 1993-94.

Oliphant wrote: “The conduct exhibited by Mr. Mulroney in accepting cash-stuffed envelopes from Mr. Schreiber on three separate occasions, failing to record the fact of the cash payments, failing to deposit the cash into a bank or other financial institution, and failing to disclose the fact of the cash payments when given opportunities to do so goes a long way, in my view, to supporting the position that the financial dealings between Mr. Schreiber and Mr. Mulroney were inappropriate.”    

You had a choice, sir

In his concluding remarks Oliphant wrote: “The Commission provided the opportunity for Mr. Mulroney to clear the air and put forward cogent, credible evidence to support his assertions that there was nothing untoward about his dealings with Mr. Schreiber. I regret that he has not done so. I express this regret on behalf of all Canadians, who are entitled to expect their politicians to conserve and enhance public confidence and trust in the integrity, objectivity, and impartiality of government.”   

Oliphant oversaw commission of inquiry, not a court of law. He chastised Mulroney but the former prime minister was neither charged nor found guilty of anything. He got to keep the money from Schreiber and his lawyers negotiated a deal for him to pay tax on only half of it.

Three hundred thousand dollars was equivalent to about five times the average annual income of a Canadian family at the time that Mulroney received it. That is small change compared to the estimated US $20 million that Airbus paid in commissions to Karlheinz Schreiber. We do not know for certain who Schreiber shared that money with, but we do know that it cost each one of us because Air Canada was then a government-owned corporation and secret commissions added to the cost of the planes.       

 The Canadian establishment is celebrating Brian Mulroney as the last great prime minister.

Hardly.

Photo credits

Toronto Star, Winnipeg Free Press, Wikipedia Commons