Brian Mulroney has been ordered to pay more than $470,000 to his former associate Karlheinz Schreiber over the mysterious $300,000 in cash payments Mr. Mulroney received from him after he left office in 1993.
In a default judgment the Ontario Superior Court released yesterday against the former prime minister, the court ruled Mr. Mulroney had not met certain deadlines. It's the latest chapter in a continuing feud between Mr. Schreiber and Mr. Mulroney, former political allies dating back to when Mr. Mulroney was still a young Quebec business executive trying to lead the Progressive Conservative Party back to glory.
Reached last night at his Rockcliffe Park condominium in Ottawa, Mr. Schreiber said the decision came as a surprise. It also means that the questions surrounding the $300,000 cash payments that Mr. Mulroney took from Mr. Schreiber shortly after he left office will endure, Mr. Schreiber said.
However, Mr. Mulroney and his legal team have cried foul and issued a statement alleging that Mr. Schreiber and his lawyers have contravened a written agreement to refrain from seeking such a default judgment.
Mr. Schreiber said he was disappointed that he never got to ask Mr. Mulroney under oath about what he did for the cash payments.
"Well, this is the question we wanted him to answer," said Mr. Schreiber, whose lawyer had recently sought to examine Mr. Mulroney. "I haven't the smallest clue why he and his law firm didn't follow properly up in the courts - but this is the consequence."
Luc Lavoie, Mr. Mulroney's spokesman, said last night that Mr. Mulroney hadn't filed a statement of defence because both legal teams had agreed to hold off while they tried to resolve the issue of whether the case should be tried in Quebec or Ontario.
Instead, Mr. Schreiber and his team "proceeded to surreptitiously obtain a judgment," Mr. Lavoie said.
"Mr. Mulroney will move immediately to set this judgment aside," Mr. Lavoie said.
In March, Mr. Schreiber took Mr. Mulroney to court, alleging that Mr. Mulroney had accepted a total of $300,000 in cash at three separate hotel meetings in New York and Montreal after he left office in 1993. In return for the payments, Mr. Mulroney was supposed to help Mr. Schreiber establish a light-armoured vehicle factory for one of Mr. Schreiber's European clients, Thyssen AG, the lawsuit alleged. Also, the former prime minister didn't deliver on a promise to promote Mr. Schreiber's burgeoning pasta business, Reto Restaurant Systems International, the lawsuit alleged. Mr. Schreiber wanted the money back plus interest.
The tattered relationship between the former prime minister and the international deal maker is a far cry from the alliance that was forged in the early 1980s. At that time, Mr. Mulroney's associates were plotting the overthrow of former prime minister and Tory leader Joe Clark, and Mr. Schreiber, new to the country and federal politics, was looking for influential friends and lucrative contracts for his European clients.
Mr. Schreiber donated money to Mr. Mulroney's campaign efforts and helped organize the anti-Clark movement. Shortly after Mr. Schreiber became a citizen in 1982, Mr. Mulroney sent a telegram to the German national's hotel room in Ottawa: "It is a pleasure to welcome you to Canada."
However, the two found themselves at the centre of a storm in 1995, when the RCMP set its gaze on their relationship. That year, the Mounties sent a letter to the Swiss government, seeking access to Mr. Schreiber's bank accounts and alleging that Mr. Mulroney, Mr. Schreiber and lobbyist Frank Moores had defrauded Canadians, accepting kickbacks and illegal commissions on Air Canada's $1.8-billion purchase of 34 Airbus jetliners.
Mr. Mulroney sued the RCMP and the federal government, alleging that he had been defamed. He eventually settled for $2.1-million.
However, it was only a few years later that a deep fissure divided the two forever, after the CBC's fifth estate obtained Mr. Schreiber's bank records and discovered a coded account labelled Britan.
When the CBC confronted Mr. Mulroney's spokesman about the account - which sounded a lot like "Brian" - Mr. Lavoie called Mr. Schreiber the "biggest fucking liar the world has ever seen."
That comment, Mr. Schreiber says, shocked him and his family, and it was only a few years later that he revealed in The Globe and Mail that, between 1993 and 1994, he had met Mr. Mulroney at New York's Pierre Hotel, Montreal's Queen Elizabeth Hotel and a Montreal airport hotel and handed him $100,000 in cash each time.
Mr. Mulroney has repeatedly declined to explain what he did for the $300,000 and why he didn't disclose it during his testimony in his lawsuit against the government. He has said that he paid tax on the income, but has never disclosed what year it was paid.
Just this week he was asked by a Canadian Press reporter about whether his memoirs, which go on sale on Sept. 10, will elaborate about the payments. Mr. Mulroney responded: "Buy a copy. Buy a copy. Buy a copy."
Mr. Schreiber is still fighting an extradition order to Germany where he is wanted on charges of tax evasion and bribery. In his most recent and final legal stand, he has appealed to the Supreme Court, arguing that the German justice system has already decided that he is guilty.
Airbus chronology
Sept. 4, 1984: Brian Mulroney is elected prime minister.
March 30, 1988: Air Canada board of directors agrees to purchase 34 Airbus airplanes at a price of $1.8-billion. A mysterious shell company receives a commission of $500,000 per plane, and an embittered accountant later identifies the shell company as belonging to Mr. Mulroney's associate, Karlheinz Schreiber.
June 23, 1993: Mr. Mulroney sends a limousine for Mr. Schreiber to visit him at the prime minister's official residence at Harrington Lake, Que. Over the next two years, they meet three times in hotel rooms and Mr. Schreiber gives Mr. Mulroney a total of $300,000 cash.
March, 1995: The RCMP sends a letter of request to Switzerland, seeking access to Mr. Schreiber's bank accounts and alleging that Mr. Mulroney defrauded Canadians.
Nov. 18, 1995: The Financial Post publishes a story about the letter of request to Switzerland. The same day Mr. Mulroney announces that he will sue the federal government.
April 17, 1996: Mr. Mulroney testifies as part of his lawsuit. Since leaving office he met Mr. Schreiber once or twice for coffee, he testifies.
Jan. 9, 1997: The federal government apologizes to Mr. Mulroney, who is later awarded a $2.1-million settlement.
Aug. 31, 1999: Mr. Schreiber is arrested by RCMP on a warrant from Germany. He is currently still appealing his extradition.
October, 1999: Luc Lavoie calls Mr. Schreiber "the biggest fucking liar the world has ever seen" on the CBC's fifth estate.
Nov. 10, 2003: Mr. Schreiber reveals in The Globe and Mail that he paid Mr. Mulroney $300,000. Mr. Mulroney says, through a spokesman, that the payments were made to help Mr. Schreiber promote his pasta business.
March 22, 2007: Mr. Schreiber sues Mr. Mulroney for the $300,000 plus interest, alleging he did no work for the money.
Greg McArthur
Greg McArthur