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Karlheinz Schreiber says he never talked to Brian Mulroney about money while the former prime minister was still in office, although the pair agreed to work together on future business, he told a parliamentary committee.

Mr. Schreiber said the $300,000 he eventually paid Mr. Mulroney had nothing to do with Air Canada's agreement to purchase $1.8-billion worth of Airbus airplanes. Rather, the money was for Mr. Mulroney's help to promote a light armoured vehicle plant, known as the Bear Head project, for Mr. Schreiber's client, Thyssen AG, he said.

Mr. Schreiber said he struck the deal with Mr. Mulroney on June 23, 1993, when he met privately with him at the official prime minister's residence at Harrington Lake. They talked about Mr. Mulroney's post-electoral future in the private sector, he said.

The meeting was arranged by Mulroney confidante Fred Doucet, Mr. Schreiber said, who had previously informed him that the outgoing prime minister was in financial difficulty.

“And then I said [to Mr. Mulroney], ‘I will let you know what is available. I have funds available for the Bear Head project which is still there and I will let you know.' So it was a principle agreement that we work together, but at that day ... we did not speak about money,” Mr. Schreiber recalled.

“After the meeting, I checked what is left for the Bear Head project ... and there was $500,000 left,” he said, referring to the Swiss bank account he checked before meeting with Mr. Mulroney a second time in August near the Mirabel airport.

At that second meeting, while Mr. Mulroney was still a sitting MP, Mr. Schreiber gave the former prime minister $100,000 in cash – the first of three such payments.

“I'm pretty sure I had no discussion with him before I met with him at the airport. But then, for sure I told him clearly there [is] $500,000 in the account which is available for your service when it [Bear Head] comes to a success.

Mr. Schreiber testified last Thursday that he gave Mr. Mulroney only $300,000 because the plant never materialized.

In what came as a surprise to some committee members, Mr. Schreiber said he also gave $30,000 in cash to the brother of Quebec premier Jean Charest when the latter was running for the leadership of the Progressive Conservative party in 1993.

Mr. Schreiber said he was approached for a donation by Mr. Charest's brother while they were in the secretary's office of former solicitor-general Elmer MacKay.

“I gave it in cash to the brother of Mr. Charest, Jean Charest, for his leadership convention,” he said.

In 1993, leadership campaign contributions did not have to be publicly disclosed to Elections Canada, so it is not unusual that there would be no record of the donation.

Mr. Schreiber said the donation was a “spontaneous” thing, but that he liked the idea of Mr. Charest as leader because he was “something young, something fresh, something quite good for Canada.”

After Mr. Mulroney left office in 1993, Mr. Charest ran against Kim Campbell for leadership of the party and placed a strong second.

Mr. Charest told reporters that the amount he received from Mr. Schreiber was a $10,000 contribution in cash, which he insisted was within the rules.

The Quebec Premier said he doesn't remember meeting Mr. Schreiber and has never spoken to him since the leadership race. “I have no recollection of ever meeting Mr. Schreiber. I don't know him and never did I ever act on any of the files that he was interested in,” Mr. Charest said.

Mr. Charest , who had close ties with Mr. Mulroney at the time, was visibly stunned by Tuesday's revelations.

“I was surprised as everyone else that Mr. Schreiber had alleged to having made a contribution to my leadership campaign of 1993,” Mr. Charest explained.

“My brother Robert, during the 1993 leadership race, was a volunteer. He was not responsible for fundraising. He had worked previously for Elmer Mackay as a legislative assistant for two years and Elmer Mackay asked him to receive a contribution on behalf of Mr. Schreiber that he did receive,” the Premier said.

“My brother's recollection was that the amount was for $10,000 and I was not aware of that and nothing happened after that.”

The Action démocratique du Québec immediately pounced on Mr. Charest's comments and demanded a more clear explanation as to why his 1993 leadership campaign accepted a cash donation even though it may have been legal to do so at the time.

“My understanding is that there were two politicians in Canada who received money from that man (Mr. Schreiber) and that's Mr. Mulroney and Mr. Charest. And as long all the light hasn't been shed on this situation this will remain an embarrassing situation for Mr. Charest,” said ADQ House leader Sébastien Proulx Tuesday.

Mr. Schreiber handed the committee hundreds of pages of documents on Airbus, Mr. Mulroney and correspondence with Prime Minister Stephen Harper's office.

There were high expectations as Mr. Schreiber returned to Parliament Hill on Tuesday, promising “fireworks” during his second day of testimony before the House of Commons ethics committee.

Meanwhile, the Ontario Court of Appeal has agreed to release Mr. Schreiber on $1.31-million bail. Former Liberal cabinet minister Marc Lalonde is among those posting bail, as is Mr. Schreiber and his wife, Barbel.

In a brief interview Monday from an Ottawa-area jail, Mr. Schreiber said he felt “horrible” for not answering many of the committee's questions last week, especially after its members went to great lengths, employing an archaic, almost never-used Speaker's warrant to spring him from jail to hear his testimony.

While the Liberals have tried repeatedly to implicate the current Conservative government in the scandal, they will have to answer questions of their own after The Globe and Mail reported Tuesday that the Bear Head project was still alive after the Tories were banished to the back benches. Liberal cabinet heavyweight André Ouellet waged an intense backroom fight in the mid-1990s to rescue the project, according to federal documents obtained by The Globe.

The ministerial correspondence shows that Mr. Ouellet, the foreign affairs minister and Quebec lieutenant at the time, was a major booster of the plan.

MPs are grilling Mr. Schreiber about the cash he said he gave to Mr. Mulroney at a series of meetings in 1993 and 1994, given that Mr. Mulroney in 1996 said he only had coffee “once or twice” with Mr. Schreiber after leaving office in 1993.

Mr. Schreiber alleges that he struck a financial deal with the former prime minister while Mr. Mulroney was still in office.

Mr. Schreiber's testimony is compelled by a rare Speaker's warrant, which the committee sought after the Conservative government hedged on opposition demands to halt his extradition to Germany.

On Friday, the Ontario Court of Appeal agreed to allow Mr. Schreiber to stay in Canada until after the Supreme Court of Canada decides whether it will hear his appeal of the deportation order, which will likely take several months. He is wanted in Germany on fraud and bribery allegations.

The warrant issued by House Speaker Peter Milliken and sent to the RCMP and the federal ministers of justice, public safety and immigration, among others, was a “command” to keep Mr. Schreiber in Ottawa “until his attendance before that committee is no longer required.”

Mr. Schreiber spent the weekend at the Ottawa Regional Detention Centre, where he reviewed documents retrieved from his Ottawa house. It is not known, however, whether Mr. Schreiber's files, which the committee has considered subpoenaing, will contain his voluminous Swiss bank records.

Mr. Schreiber was escorted this morning by officers into the Parliament building.

Mr. Schreiber brandished his handcuffs at jostling journalists and flirted briefly with a female police officer as security escorted him into the Centre Block through a freight entrance.

“You're the best looking police constable I've ever seen,” he told the officer with a grin. He ignored questions from reporters.

The committee's current plan is to hear from Mr. Schreiber today, then again Thursday. Mr. Mulroney has been invited to appear next week, although his status remains unclear.

Prime Minister Stephen Harper has called a public inquiry into the Mulroney-Schreiber relationship for next year, saying he had to protect the office of the Prime Minister.

With reports from Canadian Press, Daniel Leblanc and Greg McArthur