Two good columns on Mulroney-Schreiber

I haven't posted anything on this blog for a while; instead, I have been standing back reading what others are saying.

Here are a couple of terrific pieces on the upcoming inquiries by Geoff Stevens, who was the Globe and Mail's Ottawa columnist for many years before moving to Toronto as the paper's managing editor.

In Toronto he developed and encouraged two fine investigative reporting teams; one at the Globe in the 1980s and another, years later in the late 1990s, at Maclean's. (Both foundered or were shut down after Geoff left these places.)

Geoff is now writing for the Record in Kitchener-Waterloo and the Guelph Mercury and teaching political science at Guelph and Wilfrid Laurier University.

For The Record, Kitchener-Waterloo and Guelph Mercury
Nov 26/07

BY GEOFFREY STEVENS

The best laid schemes o' Mice an' Men, Gang aft agley, An' lea'e us nought but grief an' pain, For promis'd joy!
—“To a Mouse” by Robert Burns.

Stephen Harper knows what Robbie Burns was thinking when he wrote those lines back in 1785.

Harper had his plans perfectly laid, or so he thought. Parliament would come back, and the opposition parties, eager to avoid an election, would do his bidding. First, he would bully them into supporting (or at least not defeating) his throne speech and any legislation that he decreed must be passed. Next, he would embarrass them by presenting a mini-budget off Parliament Hill, rather than in the Commons where they would have the right of reply. Finally, when the polls were ripe, he would bait them into defeating his minority government, thereby forcing an election and – promised joy – the election of a majority Conservative government.

It seemed, briefly, as though Harper’s strategy would work. A poll taken after the mini-budget, with its tax cuts, lifted to Tories to 42 per cent. That’s majority-government range.

In politics, however, the universe seldom unfolds the way the fellow controlling the levers anticipates. All it took was a fugitive awaiting extradition at the Metro West Detention Centre in Toronto to knock Harper’s plans awry. The polls came back down.

Now, the Commons ethics committee has decided to investigate the Mulroney/Schreiber/Airbus affair. It is calling the man in the cell, Karlheinz Schreiber, the Airbus lobbyist and greaser, to testify, probably this week. At this stage, Schreiber has nothing to lose. The committee also intends to call Brian Mulroney, but whether the former prime minister – who has everything to lose – will answer the call himself, or send his faithful mouthpiece, Luc Lavoie, to retell his tale of post-prime ministerial penury, or blow the committee off is not yet known.

There is no realistic prospect that the committee would seek a Speaker’s warrant, a rarely used power, to compel the former PM’s attendance if he declines to appear. But with or without him, there’s a real risk, as Liberal MP Robert Thibault acknowledged, that the committee could become “a little bit of a circus, a little bit of a gong show.”
One thing it definitely won’t be is a Canadian version of the U.S. Senate Select Committee to Investigate Campaign Practices, better known as the Senate Watergate committee, that transfixed American households – 85 per cent of which followed the hearings on live TV – between May 1973 and June 1974. That committee, which forced the resignation of Richard Nixon, was the biggest show of its kind (a real “reality” show) until O.J. Simpson came along.
The committee chair, Sam Ervin, a Shakespeare-quoting southern senator, became a folk hero with observations like these about Nixon loyalists John Mitchell and John Ehrlichman, two of the principal villains in Watergate: “I don't think either one of them would have recognized the Bill of Rights if they met it on the street in broad daylight under a cloudless sky.”
Not only does the ethics committee chair, Liberal MP Paul Szabo, an accountant from Mississauga, not have Sam Ervin’s turn of phrase, in Canada parliamentary committees simply don’t have the clout of congressional committees in Washington. There, the separation of the executive and legislative powers gives committees a significant degree of independence, which from time to time they exercise.
In Canada, lacking that separation, committees operate under the thumb of the administration. It is only in times like this, with a minority government, that the administration loses control. The opposition parties now have a majority on committees, giving them the ability to pursue inquiries that may (and often are intended to) embarrass the government.
There’s scant chance that the ethics committee will lay a glove on Harper or his government; there are too many degrees of separation between today’s Conservatives and Mulroney’s 1984-1993 Progressive Conservative governments. But the hearings will keep the issues of corruption, integrity and truthfulness alive in the public mind. These issues played in the Tories’ favour in the 2006 election. Not now. The high ground has shifted.
The government has ordered a public inquiry into the Mulroney/Schreiber/Airbus affairs. University of Waterloo president David Johnston has until Jan. 11 to draft terms of reference. There would then be a period of months, perhaps until fall, before hearings begin and witnesses are called.
The Conservatives thought that period might afford a window of opportunity in which to call an election. If nothing else, however, the ethics committee could slam that window shut.
Cambridge resident Geoffrey Stevens, an author and former Ottawa columnist and managing editor of the Globe and Mail, teaches political science at Wilfrid Laurier University and the University of Guelph. He welcomes comments at geoffstevens@sympatico.ca

For The Record, K-W and Mercury, Guelph
Nov 19/07

BY GEOFFREY STEVENS

If the Prime Minister asks you to accept the second worst job in the country, there is only one way to respond. At least, there’s only one way if you are as committed to public service as David Johnston, the president of the University of Waterloo, is. You gulp, then say, “Yes, Prime Minister. I would be honoured. Thank you, Sir.”

That, approximately, is how it went when Stephen Harper “invited” Johnston to accept the second worst job last week – the job of drafting terms reference for the inquiry into the financial dealings between former prime minister Brian Mulroney and Airbus fixer/lobbyist Karlheinz Schreiber. (We’ll come to the worst job in a moment.)

Between now and his deadline of Jan. 11, Johnston will have to pick his way through political landmines as he prepares the mandate for an inquiry will not end up being either a witch-hunt (as the government fears) or a whitewash (as the opposition fears).

He will have to determine how far back the inquiry should reach. Will it reach back to 1976 when Schreiber contributed $25,000 or more to Mulroney’s first run for the Conservative leadership (won by Joe Clark)? Will it reach back to January, 1983 when Schreiber paid to fly anti-Clark delegates to the party’s general meeting in Winnipeg to depose the leader and clear the way for Mulroney’s election as leader in June that year?

Will the inquiry encompass the decision by Air Canada to purchase 34 aircraft from Airbus Industrie for a total of $1.8 billion? The year was 1988, Mulroney was prime minister and Air Canada was still owned by the government.

Will the inquiry probe the secret bank accounts that Schreiber opened in Switzerland, into which he deposited what he has called “grease money” – commissions he received from Airbus to facilitate the sale of aircraft?

Or will Johnston seek to confine the inquiry to more recent history – to whatever financial deal Mulroney struck with Schreiber as the former was leaving office in 1993; to the three envelopes of cash that Schreiber handed Mulroney in hotels in Montreal and New York in 1993 and 1994; and to the $2.1 libel settlement that Mulroney won from the federal government 1997 after he testified in a sworn statement that he barely knew Schreiber and had had no dealings with the man. Neither Mulroney assertion was in accordance with the facts as we now know them.

The damage-control specialists in the PMO want the inquiry restricted to this more recent history. They are desperately afraid that the Mulroney/Schreiber affair will morph into the Tories’ version of the Liberals’ Sponsorship Scandal. They need to build a wall between the Mulroney era and the Harper era – that was then and this is now, and whatever happened then has nothing to do with today’s Conservatives.

A far-reaching inquiry – one that goes back 30 years or so – would be costly and time-consuming and would keep the issues in the public arena for months if not years. For a minority government that aspires to be a majority government, the negative publicity and inevitable perception of guilt by association could be devastating.

But a “small” inquiry – one with a limited scope or timeframe – would outrage the opposition parties, perhaps enough to bring down the Harper government. The reaction on Parliament Hill may not be Johnston’s concern, but he does have to try to draft a mandate that will pass the “smell test” among the public. To do that, the inquiry must address the public’s legitimate questions.

What exactly was the nature of the relationship between Mulroney and Schreiber? What was the $300,000 in cash really for? Was there any more “grease money” paid to anyone that we are not aware of? How did a sleazy operator like Schreiber manage to worm his way into the favour of the former PM (and why did he let him)? What can be done to prevent lobbyists armed with envelopes of cash from buying access to political leaders in the future?

Answering these questions will fall to the person Harper chooses to head the actual inquiry. This will be the worst job in Canada. The commissioner will almost certainly be a current or retired judge, although appointment to such a politically charged inquiry could result in major career damage for a sitting judge. Judges hate political inquiries and for good reason. Still, if the Prime Minister calls one of them, he or she would have little choice but to gulp and to accept.

Cambridge resident Geoffrey Stevens, an author and former Ottawa columnist and managing editor of the Globe and Mail, teaches political science at Wilfrid Laurier University and the University of Guelph. He welcomes comments at geoffstevens@sympatico.ca

Turns out, it was all my fault

I've just had a chance to read some of the letters Karlheinz Schreiber wrote to Brian Mulroney over the last year; letters that were attached to the affidavit he filed in court. As the months wore on with no response from his old friend, Schreiber's tone grew angrier and more frantic.

He could not believe that Mulroney, the man he gave cash to in 1993 and 1994 in time of need, could let him down like this. Now that he himself needed Mulroney to lobby Prime Minister Stephen Harper for help in preventing the authorities from shipping him back to Germany to face charges of fraud, tax evasion and bribery, there was only silence.

Still, as I waded through Schreiber's arguments, I was startled to see my name appear here and there.

"All my personal problems," he wrote Mulroney on January 29, 2007, "began with Stevie Cameron's book, 'On the Take,' and Allan Rock's political witch-hunt with the RCMP against you."

Who knew.

On the Take was published in the fall of 1994. I'd been interested in Schreiber since 1987 when I was a national columnist for the Globe and Mail and learned about his influence in the Mulroney circles.

People told me that he was working hard to get government money to build a tank plant in Nova Scotia for Thyssen, the German industrial giant, a major manufacturer of military vehicles. His fiercest opponent was another Conservative, Sidney Spivak, the former party leader in Manitoba who had become the head of the Canada Israel Committe.

As far as I am concerned, this was where the whole Schreiber-Mulroney story began for me - and here is what I published at the time. It was eighteen years ago. As I read it again now, I realize that unwittingly I had pulled together in this one story the central characters in a drama that would engage me for many years.

And it is the contract here in this story - the Bearhead deal - that Schreiber wanted so much that six years later, in 1993, he hired Brian Mulroney to try to get it for him. Or so Schreiber tells us now.

GLOBE AND MAIL - Document 1 of 27 - Page 1 of 7
MON SEP.25,1989 PAGE: A1
BYLINE: STEVIE CAMERON
Controversial plant gets green light in Cape Breton
BY STEVIE CAMERON

After four years of tense on-again, off-again negotiations, a West German company is going ahead with a controversial assembly plant in Cape Breton, thanks to government support and well-connected lobbyists.

But the project has once again alarmed Canada's Jewish community, just as it did three years ago when their opposition forced Prime Minister Brian Mulroney's government to defer a decision to support it.

Bear Head Industries Ltd. , a subsidiary of the German industrial giant Thyssen AG , is going ahead with plans to build a $58-million plant that will include military vehicles and tanks among its products, equipment the Jewish community believes will end up in the Middle East.

Ottawa lobbyists Frank Moores, Gerald Doucet and Gary Ouellet have beenconnected to the project and Greg Alford, the former president of Government Consultants International - the Ottawa lobbying firm which was set up by Mr. Moores, Mr. Doucet and Mr. Ouellet in 1985 - is now in charge of the Bear Head project in Canada.

Three years ago, Bear Head planned to sell the armored personnel carriers and tanks assembled in the Cape Breton plant to Saudi Arabia and other Middle Eastern countries, but the plan was fiercely opposed by theJewish community.

"The sale of Canadian-made arms to Saudi Arabia would escalate the Middle East arms race and be detrimental to Israel's security," the Canada-Israel Committee said in February of 1986.

Today, the committee is once again concerned that the company itthought it had stopped in 1986 is planning to go into production.
"The Jewish community of Canada will be extremely upset if the Thyssen war plant is brought into Canada," said Robert Ritter, the executive director of the CIC in Ottawa.

"There's been, in the past, other facades around the initiative, but italways seems to come back down to the arms element.

It was the Jewish community's belief that the earlier initiatives were terminated once and for all, but their revival represents an effort to do in Canada what theycan't do in Germany.

"West German law forbids German companies to sell directly to some countries in the Middle East, but nothing prevents companies from assembling military equipment in other countries and then shipping it tothe Middle East.

According to federal Department of External Affairs policy, Canada does place controls on arms sales to countries "involved in hostilities or where there is an imminent threat of hostilities."

Mr. Alford said in an interview that the company plans to concentrate on "environmental products" such as flue scrubbers for industrial chimneys and waste water treatment equipment, but he confirmed that the plant would also be assembling military vehicles.

"Defence is an important side to our project," Mr. Alford said.

The environmental products and military products both use metal fabrication that can be done by the one plant, he said.

Although Mr. Alford said defence work accounts for only 2 per cent of Thyssen's worldwide production, the plans announced by the company make it clear they still intend to try to sell their military vehicles and tanks through the United States.

"While Bear Head will have full access to U.S. defence markets underthe Canada U.S. Defence Production Sharing Agreement," a news release says, "all exports by Bear Head Industries, including those outside of North America, will of course be in full accordance with the government's policy of export controls."

U.S. policy has been to supply arms to both the Israelis and the Arabs, but Canada's policy has been not to supply these countries.

The controversy first became public in 1986 when news reports revealed that Thyssen had asked the Canadian government in 1985 for a five-year export permit to ship products manufactured in Cape Breton to Saudi Arabia, Kuwait, Pakistan, Bahrein, Algeria and the United Arab Emirates.

As the Canada-Israel Committee pointed out at the time, licences forthe export of military equipment are normally granted for a one-year period.

"This exception to the rule would hamper the government's ability to effectively monitor Thyssen's exports to the Middle East," Sidney Spivak, chairman of the committee, said at the time.

The federal cabinet debated the secret proposal twice in 1986.

AlthoughExternal Affairs Minister Joe Clark and a few other ministers were strongly opposed to it, Sinclair Stevens, then industry minister, and ministers from Nova Scotia supported it enthusiastically.

The issue was especially difficult because of concern about job creation in Cape Breton, where unemployment rates are among the highest in the country. Thyssen promised to create 500 jobs and predicted 800 spin-off jobs in related industries, but there was hope in Nova Scotia that the plant would eventually have 2,000 employees and create up to 4,000 spin-off jobs.

To shore up more support, Thyssen hired Government Consultants International to lobby for it in the highest levels of government; the senior partners at GCI at that time - Mr. Moores, Mr. Doucet and Mr.Ouellet - are close friends of Mr. Mulroney and Donald Mazankowski, the deputy prime minister.

Mr. Doucet's law partner in Halifax, Edmond Chiasson, was hired as BearHead's lawyer.

Another supporter was Calgary businessman Karlheinz Schreiber, the chairman of the Bear Head board of directors and the only Canadian on theboard.

Mr. Schreiber has extensive business interests in Alberta and Germany, and in 1980 he set up an investment company in Alberta for thelate premier of Bavaria, Franz Josef Strauss.

Sources say Mr. Schreiber has also been a business colleague of Mr.Moores.

Lastly, the powerful Canadian engineering giant Lavalin, which had been promised subcontracts for its plant in Pictou, N.S., supported the BearHead plan.

With generous subsidies promised from the Atlantic Canada Opportunities Agency, the plant looked like a certainty; only the angry and sustained campaign by the Jewish community persuaded the cabinet at the last minute to withhold its support.

Then, in 1987, Mr. Mulroney appointed Donald McPhail,who had been Canada's ambassador in West Germany, as the new president of ACOA; Mr.McPhail was also seen as a strong supporter of the Thyssen project. (Mr. McPhail is now a senior adviser in the Privy Council Office.)

Mr. Alford, who works out of Thyssen's Ottawa offices, was hired as executive vice-president for corporate affairs of Bear Head last December. He was once Mr. Moores' executive assistant at GCI and then the president of the company. He is Bear Head's most senior executive in Canada and reports to Juergen Massman, the company's president, in West Germany.

The plans surfaced again publicly on Sept. 28, 1988, when Thyssen announced that Bear Head would be going ahead with the plant in full co-operation with ACOA and the Nova Scotia government.

The announcement revealed that "in 1987 ACOA took on the co-ordination and lead role on the part of the Canadian government."

After the federal election, when the area failed to elect any Progressive Conservatives and after severe cuts to defence spending, the project once again appeared to have been put on hold, but ACOA and BearHead spokesmen now say it is proceeding.

Mr. Alford would not say how much money the government would give in grants and loans, but he did say the incentive package was attractive.Premier John Buchanan's government has promised Bear Head 120 hectares of land for $1 (the site is at the entrance to the Strait of Canso) and has offered to pay for 30 per cent of the cost of the infrastructure.

Winn Potter, head of ACOA in Halifax, said his organization had contributed "under $100,000" toward a market research study and less than $20,000 toward an engineering study.

But because the project would cost more than $20-million and ACOA deals with projects under that amount, he said ACOA's role would be turned over to the federal Department of Industry, Science and Technology and he did not know what the federal contribution would be.

Thyssen employs 128,000 people around the world and 2,000 in Canada.

How they spent the money

Well, they spent it the same way you or I probably would if we had a nice windfall of a few hundred thousand or a million or two: they spent it on a place. A getaway. A holiday home.

Once Karlheinz Schreiber started splitting up the millions of dollars in secret commissions paid by Airbus, Thyssen and MBB (Messerschmidt-Bolkow-Blohm) to help obtain huge government contracts in Canada, there was enough money going round for some serious real estate.

Frank Moores' lobbying firm, Government Consultants International, worked on all these contracts and he began by buying, with a friend, a beautiful fishing camp in the Gaspe in 1989 for between $150,000 and $200,000 and renovating it.

We don't know if it was money from Schreiber that paid for this place because Moores had many major companies among his clients, but we do know that he used the first payments from the Airbus sales to Air Canada, payments that rolled into his firm in 1990, to buy a $200,000 condo in an exclusive gated community in Jupiter, Florida.

Giorgio Pelossi, Schreiber's accountant, wired him the money he needed from the accounts Schreiber set up to hold the secret commissions.

In 1989, both the Doucet brothers, Fred and Gerry - now both of them working as lobbyists on Schreiber's projects - bought themselves condos in Ste. Petersburg, Florida.

That same year, Schreiber himself bought himself a condominium in Rockcliffe Park in Ottawa for $375,000.

And Europeans who received a share of the secret commissions on these and other deals involving Schreiber also bought holiday homes. One, for example, was Stuart Iddles, Airbus's senior vice-president from 1986 to 1994; through is wife, he purchased Casa Estacas, a waterfront villa in Puerto Vallarta in 1992. His codename in Schreiber's meticulous arrangement of sub-accounts in the Zurich bank that held the secret commissions, was "Stewardess."

German officials who accepted secret commissions from Schreiber on a Thyssen tank deal unrelated to the Canadian contracts also bought luxurious getaways; one chose a home in Lugano, Switzerland; another a ski chalet, also in Switzerland.

And what did Brian Mulroney buy? And with what?

He bought two places but neither with Schreiber commissions, as far as I could determine. He appears to have used his own money to finance the new house he bought for $1.67 million in Montreal in March 1993 and which he renovated for another $1-million (although his original work permit had showed plans worth about $600,000).

But in January, 1997, after winning his spectacular lawsuit against the RCMP and the Canadian government for including his name in a letter to Swiss authorities saying he was under investigation with regard to the sale of the Airbus planes and other contracts, he received an apology and $2.1-million to cover his legal fees and make amends.

That was the same lawsuit that saw him deny having any sort of business relationship with Schreiber and stating that they only met for coffee a couple of times at a hotel in Montreal.

A few weeks later he and his wife, Mila, were shopping for a holiday home in Palm Beach, Florida and in March, 1997 they bought a house there for $1.45-million.

Stepping down to private life

In January, 1993 Brian and Mila Mulroney were the talk of Palm Beach, Florida.

Mulroney, folks were saying, had offered $40,000 to one local resident to rent his house for the month; he and Mila ended up renting the home of a local millionaire and started to house-hunt themselves, looking at houses on Island Drive in the $2.5-million range.

No one was surprised when he announced in February that he was stepping down as prime minister and leaving politics. The date was set for June when a leadership convention would elect his successor.

But before they could buy a Palm Beach getaway, the Mulroneys needed to find a home in Montreal and in March, 1993 they paid $1.67 million for a two-storey, four bedroom stone house on Forden Crescent in Westmount, the city's most expensive neighbourhood. The house needed work and soon Mila Mulroney was busy with decorators and contractors on plans to fix it up. It was going to be expensive; the building permit noted the work had been estimated at $600,000.

How were they paying for it? Not to mention paying for all the other expenses that had been covered for them for nine years by the party and the federal government. Mulroney decided to join the law firm of Ogilvy Renault where he had worked before becoming president of Iron Ore of Canada. But he wasn't starting until August, 1993 and money was needed now.

Mulroney had just resigned and was now living at Harrington Lake, the prime minister's official summer residence. His last visitor at 24 Sussex Drive, at a private lunch for two, had been Peter Munk; Mulroney was soon to go on Munk's board at Barrick with a generous batch of stock options and directors' fees.

And one of his last visitors at Harrington Lake was Karlheinz Schreiber, in a meeting set up by Fred Doucet.

When Harvey Cashore and I were working on The Last Amigo between 1999 1nd 2001, we searched through Schreiber's diaries and saw notes of the calls he had with Fred Doucet setting up the meetings in 1993 and 1994. This one at Harrington Lake on June 23 - when Schreiber now says Mulroney asked him for money - was just one of them.

Mulroney formally resigned as prime minister two days later.

We also saw in the banking records that on July 27, little more than a month later, Schreiber withdrew $100,000 out of the "Britan" account he has set up in a numbered Swiss account in Zurich, money from the secret Airbus commissions. And a month after that, on August 27, Mulroney and Schreiber met at the Montreal airport and Schreiber gave him the money.

But the Mulroneys had other plans for raising money. Earlier that same summer, someone came up with the bright idea of selling the furniture and fittings at 24 Sussex Drive that they weren't taking with them to Montreal. Such things as curtains, a few tables and chairs and so on. The buyer? The government itself, through the good offices of the National Capital Commission's boss, a man called Marcel Beaudry. (The NCC was responsible for maintaining the official residences.) He made a deal with Mila Mulroney to buy her leftovers for about $160,000.

The NCC called in three furniture experts to evaluate the goods being offered and the evaluations were, to be kind, uneven. Especially when they were given only a day or two to look at the stuff. By mid-June, 1993, the deal was struck and the NCC agreed to pay Mila Mulroney $150,000. What was interesting was the thought that some of the goods being sold had been paid for by the Conservative party many years earlier.

Only when one of the dealers, asked to evaluate the furniture and outraged at the scheme, called me, did the story come out. I wrote it for The Globe and Mail in early July, 1993. Public reaction was swift and furious. In mid-July, Mila wrote Marcel Beaudry from a friend's house in France where she and Mulroney were holidaying to to say she was returning the cheque.

Clearly, by the time Schreiber gave Mulroney the $100,000 in August, the money was very welcome.

Annabelle King, then the Montreal Gazette's design editor, told me that the work on the Mulroney house was the talk of the town. One fact stood out, she said: the Mulroneys were paying most of the bills in cash.

"Cash came in like it was falling from the sky"

Brian Mulroney has always liked cash. Tidy, untraceable, convenient cash. As far as I know, it didn't start with Karlheinz Schreiber; in fact, I don't know when it started. But soon after he was sworn in as Prime Minister of Canada on September and moved to the official residence at 24 Sussex Drive in Ottawa, a trusted confidant in his office began arranging packages of walking-around money for Mulroney's wife, Mila.

Fred Doucet had been a close friend of Mulroney's since their days together at university in Nova Scotia, and joined the new prime minister as chief of staff. He made arrangements for senior members of the household staff - often the chef, Francois Martin, who also acted as household manager - to pick up envelopes of cash for Mrs. Mulroney, usually in amounts of between eight to twelve thousand dollars. This happened every week or two.

Martin told me, in interviews I had with him in 1993 as I worked on my book, On The Take: Crime, Corruption and Greed in the Mulroney Years (published in 1994), that Mila Mulroney often asked him to do banking for her and he would take envelopes of cash, thousands of dollars in cash, and he would deposit it for her at the Bank of Montreal on Wellington Street.

"Cash came in like it was falling from the sky," he told me.

By the end of Mulroney's first term in office, he said, the system changed. Doucet left for a new patronage job and the cash moved to a new refrigerator-sized safe in the basement of 24 Sussex Drive. It sat near Martin's desk in his basement office. The prime minister's executive assistant, Rick Morgan, would deliver and retrieve the cash from the safe, Martin told me.

Twice, when he was working at his desk, he saw Mulroney himself remove cash from the safe.

Now, during all the years that he was the prime minister, Mulroney denied taking money from the Conservative Party to help him finance his lifestyle. When party president Gerry St. Germaine told reporters on July 18, 1991 that Mulroney did receive money from the party - in response to a question from a reporter who had been tipped off that Mulroney had filed income tax returns of $300,000, far more than he made as prime minister - he was forced to recant a few hours later, saying the party didn't supplement the income of the leader.

But when I asked the party's chief fundraiser, David Angus, in his Montreal office in the spring of 1994, where the cash was coming from that Doucet gave Mila Mulroney and where the cash in the basement safe came from, Angus told me it came from the party and it was for personal expenses.

Angus said he sat down with the Mulroneys every year to decide what expenses they might be facing for the next year and then set aside a portion of the funds raised by the party to cover these. "We tried to even out the cash flow," he told me, "so they would have monies available to them...on a regular basis."

When I asked Angus why the money arrived in bundles of cash he said it was more convenient that way.

Bonnie Brownlee, Mila Mulroney's former assistant, admitted to me that she often picked up the cash and that the the couple's "financial things" would often be handled by people like Marjory LeBreton, another Mulroney confidante who is now a Conservative senator.

NEXT: STEPPING DOWN TO PRIVATE LIFE