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Last Updated: Wednesday, 14 November 2007, 12:23 GMT
Canada announces Mulroney inquiry
Former Canadian leader Brian Mulroney
Mr Mulroney says he is the victim of a smear campaign
Canadian Prime Minister Stephen Harper has announced a public inquiry into corruption allegations involving former leader Brian Mulroney.

Police are also looking into the claims by German-Canadian businessman Karlheinz Schreiber about a C$300,000 (152,000) deal with Mr Mulroney.

Mr Schreiber said the lobbying deal was made before Mr Mulroney left office.

Mr Mulroney said it involved private business dealings after his departure from politics.

Mr Harper promised an investigation into the case last week, but announced the setting up of a formal inquiry on Tuesday.

Mr Mulroney, who served as Canada's Conservative prime minister from 1984 to 1993, has admitted receiving the money in cash in a series of hotel room meetings.

He called for a public inquiry on Monday, saying it was the only way to put the issue to rest.

'Total fabrication'

Previously, Mr Schreiber had said he made the payments after Mr Mulroney had stepped down, but in an affidavit last week, he said they were discussed before the prime minister left office.

Mr Schreiber, who is fighting extradition to Germany on tax and fraud allegations, is suing Mr Mulroney over the money.

He said Mr Mulroney failed to honour his side of the deal, which was to help him develop a chain of pasta restaurants and secure government approval for an arms factory in Quebec.

In the affidavit, Mr Schreiber also claimed that Mr Mulroney's former aide, Fred Doucet, had asked Mr Schreiber at some unspecified date to transfer funds to Mr Mulroney's lawyer in Geneva "related to the Airbus deal".

Mr Doucet told the Globe and Mail newspaper that he had "never spoken to Karlheinz Schreiber about transferring any funds, anywhere", adding that the allegation was "an absolute, total fabrication".

Mr Mulroney received a C$2.1m settlement after his name was publicly mentioned in connection with a 1995 investigation into the sale of Airbus jets to Air Canada.

SEE ALSO
Canada ex-PM under investigation
10 Nov 07 |  Americas

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