ETHI Committee Report

During the course of this study, the Committee heard testimony about European and Canadian companies, lobbying endeavours, large commissions and fees, and a number of Canadian politicians. The story that emerged is a complex set of events that spans more than a decade, starting in the late 1980s. Our findings comprise many inconsistencies and contradictions, and in an effort to assist readers of this report in understanding what we heard, we have attempted to review the key areas that were brought to our attention, highlight the discrepancies, and summarize them in a chronological fashion. 

The Airbus Purchase

In the chronology of events considered during this study, one of the earliest was the 1988 purchase of 34 Airbus aircraft by Air Canada. Airbus Industrie, a European aircraft manufacturer, paid International Aircraft Leasing (IAL), a Liechtenstein company controlled by Karlheinz Schreiber, a substantial commission for the deal, believed to be approximately $20 million. Although some members expressed the view that these matters were on the periphery of the terms of reference of the Committee’s study, several witnesses addressed them.

Even before the transaction took place, there had been controversy arising from the replacement of a majority of the Air Canada board of directors by the Conservative government under Brian Mulroney. One of the new board members, Frank Moores, was appointed to the Air Canada board of directors in March 1985, although he later resigned from that position after reports of conflict of interest. According to Mr. Schreiber, the appointment of Mr. Moores, who at the time ran a government relations firm called Government Consultants International Incorporated (GCI), was a clear signal that he had the backing of the Canadian government. Mr. Mulroney, however, addressed the question of Mr. Moores’ appointment as follows:

I do know that Mr. Moores is the former Premier of Newfoundland, a former member of this House, chair of the transport committee, I think. I think that Mr. Moores was appointed because he was the Newfoundland representative on the board. These were recommendations made by the Minister of Transport to cabinet, and we acted on them. Mr. Moores was appointed, I think for a few months, and then withdrew and retired, not because he was representing Airbus but because he had a conflict because he had an economic association with Wardair. So he had to resign. Of his own volition, he announced his conflict and stepped down within months. (13 December 2007)

As early as January 1995, the RCMP began to make inquiries into allegations that illegal payments had been made to officials in Canada with respect to the Airbus purchase. Later that year, the inquiry developed into a full criminal investigation into the Airbus deal. Aside from fraud charges that were laid, and ultimately dismissed, against Eurocopter Canada Limited ("Eurocopter"), a subsidiary of Messerschmitt-Bolkow-Blohm GmbH (MBB), the investigation was eventually closed in April 2003 without any other charges being laid. 

Professor Johnston, in his report, concluded that the integrity concerns raised by the cash payments disclosed more recently from Mr. Schreiber to Mr. Mulroney do not warrant a lengthy inquiry into matters that have been investigated by the RCMP since 1995:

The RCMP, with knowledge of the cash payments and Mr. Schreiber’s assertion that he made an agreement with Mr. Mulroney just before the latter left the prime minister’s office, determined there was insufficient evidence to proceed with any charges. The information set out in Mr. Schreiber’s November 7, 2007 affidavit caused the RCMP to review its file to determine whether there was any new evidence. After careful review, the RCMP concluded that there was nothing new. As there was no significant new information in Mr. Schreiber’s affidavit, its file at this time remains closed. I have not been presented with or discovered any further evidence beyond that known to the RCMP. ¹

Although Mr. Schreiber indicated to the Committee that he was never interviewed by the RCMP on the Airbus matter, this suggestion was refuted by spokespersons for the RCMP in the media, and by information contained in the Johnston report. ²

The Bear Head Project

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In November 1985, Bear Head Industries (BHI), a wholly-owned subsidiary of Thyssen Industrie AG (Thyssen) was formed to work toward the establishment of a light armoured vehicle facility in Cape Breton, Nova Scotia. This project (referred to as the "Bear Head Project") was promoted by Mr. Schreiber, the Chairman of BHI, who was already lobbying in Ottawa for it.

On 27 September 1988, the federal government signed an Understanding in Principle with BHI to support the Bear Head project, but later it was cancelled by the Mulroney government. Although the project had been cancelled before Mr. Mulroney left office, Mr. Schreiber believed it was still alive. In a May 1992 letter, Mr. Schreiber urged Mr. Mulroney to move the project to Quebec, but this never occurred. As Norman Spector, the columnist who served as Chief of Staff to then Prime Minister Mulroney in the early 1990s, testified, it refused to die “even after Mr. Mulroney killed it.” (5 February 2008).

Greg Alford, former President of Government Consultants International Incorporated (GCI), testified that Bear Head Industries was his client when he was with GCI:

My line of report in Bear Head Industries was from my area of responsibilities, which were domestic projects, Canadian projects. The chairman of Bear Head Industries, as appointed by our German parent company, was Mr. Schreiber and Mr. Schreiber had a greater involvement in international projects. (12 February 2008)

Mr. Mulroney’s evidence was that his dealings with Mr. Schreiber had really begun with the Bear Head project, and that he regretted its eventual failure:

I really had no significant dealings with him until he became a strong promoter of a project in Nova Scotia that came to be known as the Bear Head project. It involved the establishment of a plant to build Thyssen light armoured vehicles. I was supportive of the project, as I believed that it was sound and would contribute to the economic development of eastern Nova Scotia, which, in light of the closures in Glace Bay and Cape Breton, desperately required jobs. But ultimately, after a detailed study by government officials, it was concluded that the direct cost to the government of $100 million was simply more than the government at that time could afford, so the cabinet later made the decision not to approve it. I was genuinely disappointed that we were unable to complete this important job-creating project in the region. (13 December 2007)

The Commissions

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The evidence received by the Committee focussed on two major commission payments that were in dispute, one flowing from each of the transactions discussed above: the Airbus deal, and the Bear Head Understanding in Principle.

Part of the reason for Canadians’ continuing interest in the Airbus deal is the sizeable commissions that are known to have been paid to IAL in relation to the sale of Airbus aircraft to Air Canada. As trustee of IAL, according to his own evidence and that of Giorgio Pelossi, who was his accountant/financial adviser from 1969 to 1991, Mr. Schreiber benefited personally from the commissions, and was involved in the disposition of the Airbus commission. Mr. Schreiber described the commissions as a normal part of doing business, as payments based on success:

It is not money you spend or do; it is money based on success. It was a commission. Do you understand? No business, no commission. In other words, the official agreement was made with Airbus through a company, IAL, which is the trust company in Liechtenstein. By the way, it doesn't belong to me. This is another one, and it is not even necessary, because you could have been there and could have been the trustee for Airbus, or GCI.

Now, when the success is there and you get your commission on the business, if GCI wants to be paid in Switzerland — and this was stated, by the way, by the RCMP at the beginning as well — it's not illegal. (4 December 2007)

As Stevie Cameron, a journalist, author and blogger who has published on the Mulroney Airbus libel settlement and related issues, told the Committee:

I’ve tracked the money trail. I think it was perhaps a bit more than $10 million on each side, but it was the entire truck of money for those payments, those secret commissions. … The money was divided between Europeans and Canadians. The Canadians who received it were Gerry Doucet, Fred Doucet, Gary Ouellet, and Frank Moores, and a few other people also to my memory received it. ... I think Mr. Pelossi told you this morning, if I’m not mistaken, that Mr. Schreiber told him — this is what somebody said to somebody, so take that for what it’s worth — that a quarter was for Mr. Strauss, a quarter was for Mr. Mulroney, a quarter was for the Canadian lobbyists and a quarter was for the Europeans involved in the case. (14 February 2008)

Allegations about where the money went after it was paid to IAL surfaced over the course of the Committee’s hearings. The two streams of commission moneys, Airbus and Bear Head, were also confusingly overlapping, at least according to some witnesses. Mr. Schreiber had this to say in his last appearance before the Committee:

All the documents are bank documents and they are all in the possession of the RCMP and of the German authorities. So there is no secret where the money went. The point is what you don’t understand, it’s very simple. There was all the money that was GCI money. That’s number one. Then it was split with the Europeans and the Canadians because the Europeans wanted something from the cake, and this involved some politicians in France and Germany. (25 February 2008)

Mr. Schreiber also testified that he had been asked to forward “GCI money” to Mr. Mulroney’s lawyer in Switzerland, as a payment related to the Airbus deal.

[Fred] Doucet asked me to make sure that from the GCI money, money goes to the lawyer in Geneva for Mr. Mulroney. You don’t have the feeling from me that I can easily be shocked, but I was. I said, “What are you talking about? Why the hell would one send money to a lawyer in Geneva for Mr. Mulroney? What for?” And now came this unbelievable answer. He said, “For Airbus.” I hear myself even today asking, “What the hell has Mulroney to do with Airbus?” His answer was, “Are you naive?” So I said, okay, I’ll leave it this way, and I went to Frank Moores and said, “Frank, I want to know from you … You know this is a deal between the European partners from Airbus and governments. What the hell is he talking about?” Frank Moores said to me, “Leave it with us. Don’t talk about it. You have nothing to do with all this.” (6 December 2007)

Both Mr. Doucet and Mr. Mulroney vehemently deny this allegation. In Mr. Mulroney’s words:

I never received a cent from anyone for services rendered to anyone in connection with the purchase by Air Canada from Airbus of 34 aircraft in 1988. I have never had a lawyer in Geneva, or elsewhere in Switzerland, except to defend myself against the false charges laid against me in 1995. (13 December 2007)

Greg Alford also testified that Mr. Schreiber’s allegations were untrue, as Airbus was not a client of GCI or of Frank Moores. This denial is contradicted by media accounts that Mr. Moores did lobby on behalf of Airbus Industrie, and did receive moneys connected with the Airbus deal from Mr. Schreiber. Mr. Schreiber read into the Committee’s record a 1988 letter from GCI, in the name of Frank Moores, to Dr. Franz Josef Strauss, who was Chairman of Airbus Industrie in the late 1980s. In the letter, Mr. Moores asked Dr. Strauss for his help with a problem that had arisen involving a deficiency guarantee, that threatened the potential sale of 33 aircraft to Air Canada (4 December 2007).

Mr. Alford did, however, state that Thyssen was a client of GCI, and Bear Head was a wholly-owned Canadian subsidiary of Thyssen. According to the evidence received by the Committee, Thyssen paid a $4 million commission as a result of the signing of the 27 September 1988 Understanding in Principle by the Government of Canada to support the Bear Head project. This money was distributed by Mr. Schreiber, and his evidence was that part of it became the source of the funds he used to make his cash payments to Mr. Mulroney.

The cash, as I said earlier, was from the accounts where money went to GCI. Since the project collapsed, from the $4 million, from Thyssen, for my share I kept $500,000 as a reserve in case I could do something with the project in the future. Britan stands for Brian Mulroney and the Cape Breton Bear Head project. I think it must have been a couple of weeks after my meeting with Mr. Mulroney at Harrington Lake, when I had identified with the banker in Zurich what money was available in Frankfurt, and I said “Okay, open a Britan account and transfer it there.” (6 December 2007)

Ms. Cameron’s investigation allowed her to confirm the existence of the Britan account and withdrawals from it that roughly match the sequence of events described by Mr. Schreiber.

[B]y the time that Harvey [Cashore] and I finished this book and it was published in 2001, all we knew was what this committee knows now. We knew that the diaries of Mr. Schreiber and the bank accounts we had showed money put into the Britan account of $500,000, and then it showed the meetings that were set up between the men — that you all know about — and it showed the withdrawals of the $300,000 in four parts: $100,000; $100,000; $50,000; $50,000, and then the $200,000 remained in the account. (14 February 2008)

The Mulroney/Schreiber Cash Transaction

The Agreement

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The agreement between Mr. Schreiber and Mr. Mulroney in 1993/1994 was one of the most contentious issues before the Committee. Mr. Schreiber, in his testimony, insisted that an agreement between the two men was reached at Harrington Lake, the official summer residence of the Prime Minister, on June 23, 1993 while Mr. Mulroney was still Prime Minister. The agreement, according to Mr. Schreiber, was that Kim Campbell would form the next majority government and that when Mr. Mulroney was back in his law firm in Montreal, he would be in a good position to help get the Bear Head project completed in Canada on behalf of Thyssen Industries. However, even when Ms. Campbell did not form a government in 1993, Mr. Schreiber stated that he thought he still could use the assistance of Mr. Mulroney in the future. When it became apparent that this would not be the case, Mr. Schreiber sued Mr. Mulroney for a return of the money.

In his November 2007 affidavit, Mr. Schreiber stated that the terms of the agreement reached at Harrington Lake were that Mr. Mulroney would support Mr. Schreiber’s efforts in obtaining approval of the establishment of a production facility for light armoured vehicles by BHI. It was also discussed that if matters got difficult in the province of Nova Scotia, then Mr. Mulroney would assist in moving parts of the project to the province of Quebec.

Mr. Schreiber also informed the Committee that Mr. Fred Doucet, a former senior advisor to Prime Minister Mulroney and government lobbyist thereafter, had told him that Mr. Mulroney was in desperate financial shape and needed money badly and that Mr. Schreiber should help him:

Because Fred Doucet told me that he is in desperate shape and needed money so badly that I should help him. There was a great mess because he and his wife had sold some furniture from 24 Sussex, which everybody knows, and the furniture belonged to the government and they had to undo the deal, though it was very obvious somebody was spurning there. And, yes, there was more than one reason. One was a bad project, and the other one was that he was helpful in the unification of Germany. Those were the two reasons, when I went to Harrington Lake. (29 November 2007)

However, in his testimony before the Committee, Mr. Doucet denied having made any such suggestion to Mr. Schreiber. Mr. Doucet did, however, provide the Committee with a document dated February 4, 2000 that purported to outline the mandate accepted by Mr. Mulroney pursuant to his agreement with Mr. Schreiber:

I met again with Mr. Schreiber in my office in Ottawa in early February 2000 where I presented him with a written statement on the mandate consistent with what he had represented it to be and on which Mr. Mulroney concurred. In this draft mandate statement I left open, by way of a blank, the identification of the companies responsible for the mandate and the fees to cover services and expenses. In his own handwriting Mr. Schreiber wrote the following: Bayerische Bitumen-Chemie, Koutering, and Bitucan Calgary. I circled the two company names identified by Mr. Schreiber as the mandating companies. The balance of the handwriting on the mandate document is mine, recording the rest of the information given to me by Mr. Schreiber. I asked him what the fee was. He told me that the fee to cover services and expenses had been set at $250,000. (12 February 2008)

Mr. Schreiber, for his part, denies everything that was written on this document, with the exception of the date. He stated that the document was completely filled out by Mr. Doucet and that he was simply asked to sign it, something he refused to do.

Mr. Mulroney, in his testimony, stated that the agreement with Mr. Schreiber took place on 27 August 1993, when he was no longer Prime Minister and had resumed the practice of law in Montreal. According to Mr. Mulroney, Mr. Schreiber asked him to serve as an international consultant promoting Thyssen military vehicles. Mr. Mulroney agreed that this kind of global activity was something that he could do, provided it did not relate to Canadian representation. The meeting at Harrington Lake was simply a farewell courtesy call on the part of Mr. Schreiber, and no future business arrangements had been discussed with Mr. Schreiber at that time.

With respect to the amount of money that changed hands between Mr. Schreiber and Mr. Mulroney, while the February 2000 document provided by Mr. Doucet indicates that the amount was $250,000, Mr. Schreiber claims that he paid Mr. Mulroney $300,000 in three cash installments of $100,000 each. Mr. Mulroney, however, contends that he was paid $75,000 a year for three years’ work; a total of $225,000. Neither gentleman provided documentary evidence (e.g. receipts, invoices, expense records) in support of his claim. Mr. Mulroney told the Committee that he placed the money he received in a safety deposit box in New York and the safe in his home in Montreal.

Mr. Mulroney stated that in 1999 he voluntarily declared the full amount of cash received as income to Quebec and federal tax authorities, choosing not to deduct the $40,000 he says he incurred in expenses:

In August 1999, Mr. Schreiber was arrested in Toronto under an international warrant and charged in Germany with corruption, fraud, bribery, and income tax evasion. Although, Mr. Chairman, I had learned four years earlier to be highly skeptical of some charges made by governments against private citizens, this stunning new development put in serious doubt my relationship with him. I thought the best way to deal with this situation was to declare the entire amount as income, although I had only used it for
expenses — absorbing the expenses myself and compensating myself for the fees to which I was entitled. (13 December 2007)

In terms of the amount at issue, Mr. Lavoie, communications director for Brian Mulroney until November 2007, stated that after finding out from media reports that $300,000 had changed hands between Mr. Schreiber and Mr. Mulroney, he proceeded to address media questions on the basis of this amount because he never discussed specific amounts with Mr. Mulroney, at any time:

I was informed in the spring of 2000 by Mr. Mulroney’s lawyer that Mr. Mulroney had received what was described to me as a retainer. I was told that that payment had been made to him in cash by Mr. Schreiber and that it had been made in three instalments. I didn’t ask exactly how much money was involved, but I asked what order of magnitude we were talking about. I was told three times that the matter involved tens of thousands of dollars. (7 February 2008)

Media reaction to Mr. Mulroney’s testimony to the Committee has included questions as to the plausibility of Mr. Mulroney doing international consulting work to promote Thyssen’s LAV technology in places such as China and Russia. It has been widely reported in the media that, in interviews with The Globe and Mail and CBC, a former Thyssen executive and a spokeswoman for the company have said they are not aware of the lobbying that Mr. Mulroney claims to have done for Thyssen in China, Russia and France between 1993 and 1994. In his evidence before the Committee, Mr. Mulroney indicated that he did not see himself as an employee of Thyssen, but as “an international consultant”. (13 December 2007)

The Meetings

Mr. Schreiber and Mr. Mulroney agree that they met at Harrington Lake on June 23, 1993, in a hotel in Mirabel, Quebec on August 27, 1993, at the Queen Elizabeth Hotel in Montreal in December 1993, and then at the Pierre Hotel in New York in December 1994. They also agree that at the latter three meetings, Mr. Mulroney accepted cash payments from Mr. Schreiber.

It was Mr. Schreiber’s testimony that all of the meetings were arranged by Mr. Fred Doucet and that he even attended the meeting in New York. According to Mr. Doucet, however, he only arranged the Mirabel and New York meetings, in both cases at the request of Mr. Schreiber. Mr. Doucet felt that he was asked to arrange the meetings because he was a link between Mr. Schreiber, who was a previous client, and Mr. Mulroney, who had been a previous employer.

Both Mr. Mulroney and Mr. Doucet told the Committee that at the New York meeting, Mr. Mulroney reported in great detail for at least an hour about his ongoing consultancy work with respect to the promotion of Thyssen military vehicles in the international arena. Specifically, Mr. Mulroney indicated that he had made visits to China, Russia, Europe and throughout the United States exploring the prospects of selling Thyssen peacekeeping vehicles either for national needs or for use in international peacekeeping initiatives.

Mr. Schreiber, however, informed the Committee that no oral briefing was received at this meeting. He also explained that it would not be possible to travel internationally to sell armoured vehicles given that there was no plan to build the vehicles, and as such, there were no vehicles to sell.

Further to his testimony about the meeting in New York, Mr. Mulroney informed the Committee that Mr. Schreiber was there to attend a dinner with the Honourable Allan MacEachen and that he planned to attend, as did Mr. Mulroney, a lunch or dinner party for Elmer MacKay who had just gotten married. Both Mr. MacEachen and Mr. MacKay disputed this recollection. In a letter to Mr. Mulroney dated 30 January 2008, Mr. McEachen states that the facts pertaining to him in this regard are false. He has never been in New York City at the same time as Mr. Schreiber, he did not have dinner with Mr. Schreiber in New York, and he has never stayed at or been in the Pierre Hotel.

Mr. MacKay told the Committee that there was no wedding-related lunch or dinner set up in New York:

In the fall of 1994 Karlheinz Schreiber and his wife Barbel kindly invited Sharon and I to meet them in New York. We hadn't seen them since our wedding. While having lunch in the restaurant in The Pierre Hotel Mr. Mulroney and Fred Doucet arrived. We had no idea they were even in New York. They stayed briefly and departed I believe for the airport. That was the last we saw of them and that is another huge exaggeration, a wedding reception indeed. (25 February 2008)

The Airbus Settlement Agreement

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In the fall of 1995, the Government of Canada sought the assistance of authorities in Switzerland by means of a Letter of Request in relation to the criminal investigation (related to the Airbus deal) being conducted by the RCMP. The Letter stated that the RCMP had commenced a criminal investigation pursuant to section 121(1) of the Criminal Code, “Frauds on the Government” or bribing government officials.

In his testimony before the Committee, former Justice Minister the Honourable Allan Rock explained that a letter of request is an investigative tool used to obtain information from another country that may be helpful in a police investigation. It explains to the foreign state what is being investigated, the allegations, the information available to date and the assistance being sought. It is the practice of the International Assistance Group (IAG), of the Department of Justice, to transmit requests to foreign authorities by Canadian police services for assistance in investigations. The Canadian police service in question prepares the letter of request for the cooperation of the foreign police, brings it to the IAG, and the lawyers there ensure that it is in the appropriate form for the foreign government. The Request for Assistance in this case was initiated and drafted by the RCMP and signed and sent by the International Assistance Group of the Department of Justice on 29 September 1995

 According to testimony provided by the Right Honourable Brian Mulroney, the 1995 Letter of Request was completely flawed and based solely on media speculation. Specifically, Mr. Mulroney alleged that two RCMP officers were instructed by RCMP Commissioner Murray to seek information from Stevie Cameron, an investigative journalist, because they had nothing on Airbus but that Ms. Cameron seemed to have information that might be of assistance. According to Mr. Mulroney, it was largely on the basis of Ms. Cameron’s files that the RCMP initiated their investigation. However, in her testimony before the Committee, Ms. Cameron stated that while she was interviewed a number of times by two RCMP officers, starting in January 1995, the only thing she volunteered was newspaper stories and clippings, information that was already publicly available. She stated that she was pretty careful about this as she was taking direction from her editors and her lawyer.

On 20 November 1995, Mr. Mulroney launched a $50 million libel action against the Attorney General of Canada and the RCMP for false allegations made against him in the Government’s Letter of Request to Switzerland in relation to the RCMP Airbus investigation. The lawsuit was eventually settled in an agreement reached between the Government of Canada and the RCMP and Mr. Mulroney in January 1997.

The issue of Mr. Mulroney’s dealings with Mr. Schreiber was raised during Mr. Mulroney’s examination under oath as part of the libel lawsuit proceedings. The matter was of interest to the Committee because of the cash exchange that took place between the two men between August 1993 and December 1994 and the fact that Mr. Mulroney in his examination on discovery stated that he had never had any dealings with Mr. Schreiber. According to Mr. Mulroney, this testimony was accurate as it was clearly referring to the sale of Airbus aircraft and his time in government. Mr. Mulroney noted that according to the law of Quebec at the time, where a statement of defence has not yet been filed, questions asked of the plaintiff can only pertain to the allegations in the statement of claim, which in this case were that Mr. Mulroney had received bribes during his time as Prime Minister in relation to Airbus.

Mr. Rock, who was the Minister of Justice and Attorney General of Canada at the time the case was settled, did, however, inform the Committee that it was his view that had there been disclosure of the cash payments by Mr. Schreiber to Mr. Mulroney this would have had a dramatic effect on the libel lawsuit litigation. Mr. Rock stated that follow up questions would have been asked, and documents would have been requested, including bank accounts, safety deposit box records and perhaps tax returns. Mr. Rock also speculated that the settlement agreement might have been reached on a different basis had the cash payment transaction been known at the time:

Had we known about the cash and the circumstances in which it was paid, it would have had a very significant effect on the litigation. I’ll point out that this case was all about reputation. Mr. Mulroney complained that the language used affected his reputation. But the disclosure of the cash payments also had that effect, and had that disclosure been in 1996 or 1997, before this case was settled, we would have been dealing with a very different set of facts. Either we would have pursued questions, as this committee is doing, about documents, about records, about witnesses — to find out where the trail led — or we might have settled the case because the language was inappropriate. But as I said, perhaps that settlement would have been on very different terms. (5 February 2008)

In response to questions about Department of Justice memoranda that seemed to suggest that the Department had considered trying to get the settlement money back after learning about the cash transaction, Mr. Rock stated that he did not know what happened in that regard; however, he did know of a procedure that one can invoke to ask a court to set aside a settlement agreement, such as the one reached in 1997, where it is argued that it was reached on the basis of something less than full disclosure.

There appeared to be some dispute, as well, between Mr. Mulroney and Mr. Rock concerning the basis for the settlement agreement and the extent to which knowledge of the commercial relationship between Mr. Schreiber and Mr. Mulroney could have factored into the decision to settle. Mr. Mulroney stated that the Government initiated the settlement because there was no case, it was a hoax and a complete fabrication that had nothing to do with whether they knew or not about the cash transaction between Mr. Schreiber and himself. Mr. Rock, however, pointed out that the settlement did not apologize for the investigation, which continued after 1997. It was the language used in the letter that was the essential harm and it was for this reason that the Government apologized and agreed to pay costs. The settlement agreement specifically stipulated that it did not stop the RCMP’s ongoing criminal investigation into Airbus nor did it grant anyone, including Mr. Mulroney, effective immunity from such an investigation.

Mr. Rock agreed with Mr. Mulroney that the government initiated the final settlement discussions, but disagreed about the state of the defence’s case:

Shortly before trial, the Department of Justice learned that a member of the RCMP had disclosed to a third party, sometime in late 1995, the fact that the letter of request included the name of Mr. Mulroney. Counsel advised me that this unauthorized disclosure, if entered into evidence at the trial, would destroy our first defence — namely the defence of privilege — and weaken our second defence, which had to do with the publication. In those circumstances, I instructed counsel to reopen negotiations to see whether the litigation could be settled, and those negotiations resulted in the settlement agreement that Solicitor General Herb Gray and I announced on 7 January 1997. (5 February 2008)

Key Communications Between Mr. Schreiber and Mr. Mulroney

Mr. Schreiber provided the Committee with several volumes of documents, including his correspondence with Mr. Mulroney, of which some items were discussed during his appearances before the Committee. Of particular interest was his 20 July 2006 letter to Mr. Mulroney. That letter refers to a “very painful misunderstanding” between the two men relating to the ‘Bear Head Project’. In it, Mr. Schreiber describes himself and Mr. Mulroney as innocent victims of a vendetta of which Mr. Mulroney is still the “prime target”. Mr. Schreiber tenders his “profuse apologies” for the “misleading, erroneous and unfair characterization” of their business relationship as depicted on the CBC program, the fifth estate. Mr. Schreiber described Mr. Mulroney, in the letter, as having been the “best advocate I could have retained”.

Mr. Schreiber explained to the Committee that the letter had been drafted at the suggestion of his friend, the Honourable Elmer MacKay, who had asked for the letter in order to assist Mr. Mulroney. Mr. Schreiber’s understanding was that the letter was to be presented to Mr. Harper by Mr. Mulroney as evidence of a truce between Messrs. Schreiber and Mulroney. As Mr. Schreiber explained:

[Mr. MacKay] is one of the nicest people I know and a hell of a good friend. He had nothing more in mind than to help me, and he believed what Brian Mulroney told him when he asked him to do that letter. He needed it so badly to prove to Mr. Harper that we were in good standing after this horrible broadcast of the fifth estate called “Money, truth and spin,” and he would never be able to help me if that were not resolved. So I was very reluctant to give this letter, to be quite frank with you. But in my situation, and since I still wasn’t sure how far Mr. Mulroney goes in all these lies, I agreed. And it was a shock for me when Prime Minister Harper said publicly on television that Mr. Mulroney never spoke with him about me or my letter. (29 November 2007)

Mr. Mulroney denied having solicited a letter for this or any other purpose. Mr. MacKay, on the other hand, agreed that he had prepared a draft for Mr. Schreiber’s use, but disagreed with Mr. Schreiber about the purpose of the letter. The text of the letter only partly reflects Mr. MacKay’s suggested language. In Mr. MacKay’s view, he had reluctantly attempted to act as a mediator, ultimately unsuccessful, attempting to assist two friends to resolve their differences, and it was in that context that he had offered the draft letter to Mr. Schreiber. Mr. MacKay told the Committee:

For a long time I had almost incessant telephone calls from both these men, both my friends, not wanting to talk about sports or business or public affairs, but only to complain about each other. Each one would ask “What's the other doing? What's he thinking? What's he saying”? Finally, I got to the point where I wanted to see this thing come to an end one way or the other, legal affairs, personal affairs, I thought the least I could do as a friend for both of them was to suggest the obvious thing, how about an apology?... That letter that Mr. Schreiber sent to Mr. Mulroney as far as I know had no quid pro quo. I didn't know exactly when he sent it. I didn't compose it. I think he wrote it after he received my suggested memo. I don't know what was in their minds.

Another point of controversy relating to communications between Messrs. Schreiber and Mulroney relates to a claim by Mr. Schreiber that he had been asked to provide an affidavit indicating that he had never paid Mr. Mulroney. Mr. Schreiber said:

To be quite frank with you, this is how the trouble started, when I refused to sign such an affidavit that Mr. Mulroney never received any payment or whatever from me. From that time on, I got pretty lousy treatment — for example, through Luc Lavoie. (6 December 2007)

According to Mr. Schreiber’s 7 November 2007 affidavit, his lawyer, Mr. Hladun, received several requests from Mr. Mulroney and his lawyer, Gerald Tremblay, asking for a letter or affidavit confirming that Mr. Mulroney had not solicited or received compensation of any kind from Mr. Schreiber.

Mr. Mulroney denied this.

Neither I nor anyone on my behalf ever asked Mr. Schreiber or his lawyer to perjure themselves or otherwise lie about the payments received from him. (13 December 2007)

Mr. Mulroney, in his appearance before the Committee, quoted Mr. Hladun, Mr. Schreiber’s lawyer ³, as having said that his conversations about payments by Mr. Schreiber to Mr. Mulroney were limited to within the context of the Airbus matter.

I [Robert Hladun] have never had a conversation with Brian Mulroney about compensation. The only conversations I had with anyone were in the context of and limited to the allegations of improper payments made as referenced in the September 1995, Letter of Request delivered by the Canadian government to the Swiss authorities, in what became known as the “Airbus” case. My retainer was directed to the allegations stated in that Letter of Request. (13 December 2007)

In his 8 May 2007 letter to Mr. Mulroney, which includes the line “This is my last warning”, Mr. Schreiber indicated that he was prepared to disclose, among other things, that he had been asked through his lawyers to commit perjury to protect Mr. Mulroney. Although at some points in his evidence Mr. Schreiber told the Committee that he would not have perjured himself as requested, at other times he indicated that he would have signed anything, even a false document, in order to comply with Mr. Mulroney’s wishes: “when Brian Mulroney said he needed it for the Prime Minister to fix the whole thing and go to an inquiry, yes, I would sign anything.” (6 December 2007)

Communications Involving the Privy Council Office and the Prime Minister’s Office

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As part of the motion that formed the basis of this study, the Committee was also interested in the correspondence between Mr. Schreiber and the current prime minister, the Right Honourable Stephen Harper. This topic was also addressed in Professor Johnston’s report, in which it was noted that Mr. Schreiber’s letters to the Prime Minister were among over 1.7 million items of correspondence treated by the Executive Correspondence Services (the “ECS”), which is the correspondence management group within the Privy Council Office (the “PCO”), between 2006 and 2007.

These letters were vetted and categorized in accordance with the ECS’s standard procedure and were tracked using its automated Correspondence Management Information System. Of the 16 letters received, 10 of the letters remained under the ECS’s control and were filed without any response. One was filed without response on the advice of the PCO. Receipt of another was acknowledged, and it was forwarded on to the Department of Justice for information purposes.

Mr. Schreiber testified before the Committee that he had received one reply from the Prime Minister’s office: an acknowledgement of his letter dated 16 January 2007, which was a long letter with a subject line reading “Political Justice Scandal”. In it, he enclosed a letter he had received from then Justice Minister Vic Toews, and complained that the concerns and allegations he raised in that letter had not been taken seriously by the Minister.

Four of Mr. Schreiber’s letters (June 16, 2006, August 23, 2006, May 3, 2007 and September 26, 2007) were sent to the Prime Minister’s Correspondence (the “PMC”), unit within the Prime Minister’s Office, for review and comments. The PMC did not provide the ECS with any direction on how to handle the correspondence.

According to the Johnston report, the PCO, ECS and PMC, following their respective standard procedures, reviewed Mr. Schreiber’s letters in the normal course and all three departments determined that the letters that they reviewed should not be sent to Prime Minister Harper for his review. ⁴