Michael Howard agreed the men's release when he was Home Secretary
A career criminal has denied concocting a conspiracy to plant guns before tipping off the authorities in a bid to secure his early release from jail.
John Haase, 59, from Liverpool, was jailed for 18 years in August 1995 for smuggling heroin.
He and Paul Bennett were freed less than a year later after giving alleged false details about a large arms cache.
Mr Haase was speaking at Southwark Crown Court where he denies conspiracy to pervert the course of justice.
His nephew Paul Bennett, 44, of no fixed address, his wife Deborah, of Teynham Avenue, Knowsley Village, and Sharon Knowles, of Wadeson Road, Walton, all deny the same charge.
Haase and Bennett were released in 1996 after then-Home Secretary Michael Howard signed a Royal Prerogative of Mercy.
The court heard how Mr Haase provided "leads" about guns which had in fact been planted at the request of him and Mr Bennett.
The prosecution claims that in 1993, while on remand awaiting sentencing in connection with a large consignment of heroin, Mr Haase and Mr Bennett came up with the plan.
But Mr Haase told the court he had paid friends on the outside for information they gleaned from the underworld grapevine about guns, drugs, and other criminality.
Answering questions from his barrister, Trevor Burke, QC, Mr Haase, who admitted having a criminal record including armed robbery, stretching back to 1964, insisted that all the information he gave to his customs handler Paul Cook was "genuine."
Mr Burke asked him: "Did you at one point say you had a contact in London who could supply a Stinger ground-to-air missile and this missile was offered to you?"
Mr Haase said yes and added that his contact could supply it for £3,000.
Later he was asked about one of the seizures - two sub-machine guns which were handed into his solicitor's office in Birkenhead.
Mr Haase said: "These were coming down from London and I was told they were from soldiers guarding nuclear power stations."
But he said when they were examined by customs and police they were crude home-made weapons of a quality which could not have come from the army.
He was also asked about a gun which had been smuggled into Strangeways Prison.
He admitted telling his handler the gun had been brought in for a man in the prison who was on trial for the murder of two MOT inspectors, and it was to be used in an escape attempt.
But he denied he had arranged for the gun to be brought in himself and said he had simply heard about it from another inmate.
Later Mr Haase was asked about Labour MP Peter Kilfoyle who came to see him in Whitemoor Prison in 2004, and obtained a signed affidavit.
Mr Haase said: "He wanted to use my affidavit against Michael Howard," and added that he did not pay a bribe to Mr Howard or to Mr Cook, his customs handler.
He also told the court he had developed a cover story to minimise the risk of being identified as a "grass" in the prison system.
However when Mr Burke asked him if he had intended to dishonestly mislead the authorities in order to get a shorter sentence, Mr Haase confirmed that he had not and would have been "happy to have been sentenced in open court".
The trial continues.