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Former prime minister Brian Mulroney, left, leaves with wife Mila and lawyer Guy Pratte after six days of testimony at the Oliphant Commission in Ottawa on Wednesday May 20, 2009. The commission is investigating the business dealings between German-Canadian businessman Karlheinz Schreiber and Mulroney. (Sean Kilpatrick)
Former prime minister Brian Mulroney, left, leaves with wife Mila and lawyer Guy Pratte after six days of testimony at the Oliphant Commission in Ottawa on Wednesday May 20, 2009. The commission is investigating the business dealings between German-Canadian businessman Karlheinz Schreiber and Mulroney. (Sean Kilpatrick)

Mulroney's legal bill to cost taxpayers $2-million Add to ...

Brian Mulroney, whose estimated $2-million in legal fees at the Oliphant inquiry will be paid by the federal government, testified yesterday that he never sought money for personal damages when he settled his lawsuit with Ottawa more than a decade ago because it would have come from taxpayers.

In his last day of cross-examination and his sixth day of testimony, Mr. Mulroney told the Oliphant inquiry that when his lawyers came to him in 1997 and told him the government was ready to settle his defamation suit against the RCMP, he had an important stipulation. "I had no interest in asking for any, or accepting, any money that came from the taxpayers," Mr. Mulroney told Mr. Justice Jeffrey Oliphant.

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Mr. Mulroney's description of his gesture to taxpayers came only one day after the inquiry revealed that the Canada Revenue Agency didn't require him to pay tax on half of the $225,000 in cash that he accepted from German-born lobbyist Karlheinz Schreiber in hotels between 1993 and 1994.

Those payments were never disclosed during the mid-1990s lawsuit, which Mr. Mulroney launched after the RCMP accused him and Mr. Schreiber of defrauding the federal government in connection with more than $20-million in secret commissions European manufacturers paid to the lobbyist. As part of the 1997 settlement agreement, the federal government paid the former prime minister's legal and public relations costs - about $2.1-million.

Yesterday, it emerged that taxpayers are again on the hook for the latest incarnation of Mr. Mulroney's legal team, which has numbered as many as five during some hearings before the Oliphant inquiry.

A spokesperson for the Privy Council Office said last night that the office has set aside more than $2-million to cover Mr. Mulroney's legal expenses and is awaiting invoices from the former prime minister. A Treasury Board policy can be used to cover legal expenses of former prime ministers with PCO approval. Mr. Mulroney has also employed public relations firm Navigator Ltd. during the inquiry, but nothing in the Treasury Board policy offers compensation for such work. Robin Sears, Mr. Mulroney's chief spokesperson, said last night in an e-mail that the government will not pay his firm.

During his last day of testimony, the former prime minister squared off for the first time against Mr. Schreiber's lawyer, Richard Auger.

Several of Mr. Auger's questions focused on the last cash instalment that Mr. Mulroney received from Mr. Schreiber, which Mr. Mulroney says was held in a Manhattan safety deposit box.

Mr. Mulroney said he could not recall when he cleared out the box - which held the 75 Canadian $1,000 bills - but the former prime minister acknowledged that he used most of the money to pay for his children's education in the United States.

Mr. Mulroney said he did not use the money from the safety deposit box until after he declared it as income in 2000. But in response to repeated questions from Mr. Auger, he said he recalls few details about when the money was removed.

"When was the last increment removed from the safety deposit box in New York?" Mr. Auger asked.

"I have no idea," Mr. Mulroney replied.

"Could it have been in 2001 or 2002?"

"I have no idea, sir," Mr. Mulroney repeated.

"Could it have been in 2008?"

"Two thousand and eight? No, sir," Mr. Mulroney said.

"Could it have been in 2005?"

"Well, I think I've indicated to you that it was most likely beginning in late 2000," Mr. Mulroney said.

"Well, you said in increments. So the first increment was removed in late 2000?" Mr. Auger asked.

"I believe so, yes."

"How much?"

"I can't remember, sir."

An intervention by Judge Oliphant ultimately drew a more detailed account of where the money went.

"Mr. Mulroney, at that time did you have children or a child attending school in the United States perhaps?" Judge Oliphant asked. "I happen to be a father who has a child that has been educated out of the country, and I'm wondering if some of the money went to that?"

Mr. Mulroney confirmed that that was the case.

"I think there were in that time frame at least two, if not three, in New York and Connecticut at the time, in that general time frame, and you're quite right, that's what it was used for principally," he said.

According to news reports from 2001 to 2004, three of Mr. Mulroney's children were studying in the United States.

Mr. Mulroney's daughter, Caroline, was taking law at New York University when she married Andrew Lapham in September, 2000, in a high-profile wedding in Montreal. The New York Times published a story on the wedding, given that it involved the daughter of a former Canadian prime minister and the son of Lewis Lapham, the editor of Harper's, the current affairs magazine based in New York.

Before Mr. Mulroney finished his testimony, Judge Oliphant sought assurance that he felt he was treated fairly. "I think precisely that, Mr. Commissioner," Mr. Mulroney replied. Before he left the hearing room, Mr. Mulroney and his wife, Mila, shook hands with at least three of the inquiry lawyers.

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