Former Canadian Premier Brian Mulroney Is Exposed in Airbus Scandal Summary

  • Last updated on November 11, 2022

In 1995, Canadian police began investigating former prime minister Brian Mulroney and his adviser, Frank Moores, for taking kickbacks in the sale of Airbus Industrie planes to government-owned Air Canada in 1988. The news media had been reporting on the Airbus investigation for more than one year until finally connecting Mulroney to the scandal in November, 1995. Mulroney eventually was exonerated, but not without controversy.

Summary of Event

Air Canada, owned by the Canadian government, signed a $1.8 billion contract in 1988 to purchase thirty-four A-320 medium-range passenger airliners from the European business consortium Airbus Industrie, comprising four companies: Aèrospatiale of France; British Aerospace; Messerschmitt-Bölkow-Blohm of West Germany; and CASA of Spain. American aerospace giant Boeing lost out in the bidding. Speculation circulated that there were improprieties in awarding the contract to Airbus, but early investigations by the Royal Canadian Mounted Police (RCMP) and the Federal Bureau of Investigation (FBI) did not find any wrongdoing. [kw]Mulroney Is Exposed in Airbus Scandal, Former Canadian Premier Brian (Nov. 18, 1995) [kw]Airbus Scandal, Former Canadian Premier Brian Mulroney Is Exposed in (Nov. 18, 1995) Air Canada scandal Airbus affair Schreiber, Karlheinz Mulroney, Brian Mathias, Philip Mulroney, Brian Moores, Frank Air Canada scandal Airbus affair Schreiber, Karlheinz Mulroney, Brian Mathias, Philip Mulroney, Brian Moores, Frank [g]Canada;Nov. 18, 1995: Former Canadian Premier Brian Mulroney Is Exposed in Airbus Scandal[02730] [c]Publishing and journalism;Nov. 18, 1995: Former Canadian Premier Brian Mulroney Is Exposed in Airbus Scandal[02730] [c]Corruption;Nov. 18, 1995: Former Canadian Premier Brian Mulroney Is Exposed in Airbus Scandal[02730] [c]Government;Nov. 18, 1995: Former Canadian Premier Brian Mulroney Is Exposed in Airbus Scandal[02730] [c]Trade and commerce;Nov. 18, 1995: Former Canadian Premier Brian Mulroney Is Exposed in Airbus Scandal[02730] [c]Business;Nov. 18, 1995: Former Canadian Premier Brian Mulroney Is Exposed in Airbus Scandal[02730] [c]Space and aviation;Nov. 18, 1995: Former Canadian Premier Brian Mulroney Is Exposed in Airbus Scandal[02730] Pelossi, Giorgio

Brian Mulroney.

(Hulton Archive/Getty Images)

Years later, on September 29, 1995, the senior counsel of the Canadian Department of Justice (DOJ), on behalf of the RCMP, sent Swiss government officials a letter of request asking for help in obtaining access to banking records that might implicate former Canadian prime minister Brian Mulroney and Ottawa lobbyist and former Newfoundland premier Frank Moores in accepting kickbacks from German-Canadian businessman Karlheinz Schreiber. Schreiber had been a fund-raiser for Mulroney, was an associate of Moores, and was a Canadian representative for Airbus. Moores was chairman of the lobbying firm Government Consultants International (GCI) and a board member of Air Canada.

The DOJ was investigating Mulroney, Moores, and Schreiber on charges of defrauding the Canadian government. One of the bad deals involved Messerschmitt-Bölkow-Blohm’s sale of helicopters to the Canadian coast guard and the other deal involved a failed attempt to launch a German armored-vehicle factory in Canada. All of the deals involved Schreiber. The letter to the Swiss authorities also requested that the alleged bank accounts of Moores and Mulroney be frozen and that the RCMP be given the right to access account information.

Later that fall, someone leaked the letter’s existence to the media; many claim it was Schreiber. On November 18, Financial Post reporter Philip Mathias broke the story that Mulroney, Moores, and Schreiber were being investigated. Even though the media had been reporting on the Airbus contract controversy for some time, the article by Mathias was the first to connect Mulroney’s name with the scandal. Mathias’s article included portions of the letter of request as well. The media indicated that the letter acknowledged possible schemes to receive illegal payments involving the sale of the thirty-four A-320 aircraft to Air Canada. The reports claimed that money was likely transferred from Airbus to Schreiber’s company, International Aircraft Leasing (IAL), and then transferred into two Swiss bank accounts set up for Moores and Mulroney.

Mulroney responded to the investigations and news reports by filing a $50 million libel Libel cases;and Brian Mulroney[Mulroney] suit—$25 million in damages and an additional $25 million in punitive damages—against the DOJ and the RCMP. The DOJ insisted that it had followed normal investigative procedures in writing the letter and that details of the investigation had to be included to ensure Swiss authorization of the request. Mulroney denied claims of misconduct, rejected ownership of bank accounts outside Canada, and refuted claims of having close ties with Moores during the time in question. Moores also denied claims that he lobbied Airbus for the contract and that he had any direct contact with GCI or any of the partners of the consortium. Mulroney and his lawyers argued that the disclosure and publication of excerpts from the letter from the DOJ was defamatory, based on false allegations, and that the excerpts led to worldwide criticism of Mulroney.

In July, 1996, Schreiber filed his own lawsuit, contending that the letter of request was tantamount to undue search and seizure. A Canadian federal court ruled that prior judicial approval of the letter to Swiss authorities was needed and, therefore, any evidence gathered as a result of the letter’s requests was unusable in court. In May, 1998, Canada’s supreme court overruled the lower court’s finding.

The key informant against Schreiber was Giorgio Pelossi, Schreiber’s former accountant-bookkeeper at IAL. Pelossi worked with both the RCMP and Swiss authorities to provide evidence against Schreiber. Pelossi told investigators that he had attended a meeting in which Schreiber and Moores opened bank accounts in Switzerland. He claimed Schreiber said that one of the accounts was for Mulroney, but Pelossi also acknowledged he had no evidence that Mulroney was aware of the account or that it had been used.

Mulroney’s lawsuit against the Canadian government was scheduled to start in Quebec superior court on January 6, 1997. Shortly before the appointed date, Mulroney agreed to settle the case in exchange for an apology for the letter of request and for payment of his legal fees. Mulroney received his apology, which noted that officials had not found evidence of “wrongdoings.” Moores and Schreiber also received letters of apology, but their letters did not mention a lack of conclusive evidence against them. The settlement, however, did not preclude the RCMP from conducting further investigations.

New information about Schreiber’s and Mulroney’s questionable relationship was revealed after the settlement between Mulroney and the Canadian agencies, furthering the Airbus scandal. In 1993, after resigning as prime minister but while still a member of the House of Commons—as well as on two succeeding dates during the next eighteen months—Mulroney had met with Schreiber and received three separate $100,000 cash payments. Mulroney allegedly received these payments to help Schreiber promote other businesses, but the former prime minister failed to report these funds on his tax forms at that time. Years later, in 1999, he voluntarily filed a tax disclosure of $225,000.

In September, 1997, German investigators issued an arrest warrant for Schreiber, seeking details from him about several allegations, including Tax evasion;Karlheinz Schreiber[Schreiber] tax evasion, fraud, and the Airbus affair. Canadian officers arrested Schreiber in Toronto two years later, on August 27, 1999. He was ordered to be extradited to Germany, but he was released on bail while he appealed the order.

Impact

On April 22, 2003, after nine years of costly investigations and a lack of evidence, the RCMP announced an end to the Airbus inquiry. In May, 2004, the Ontario superior court concurred with a lower court’s decision to extradite Schreiber, and the Ontario court of appeals followed suit in March, 2006. Early in 2007, Schreiber’s bail bond expired, and he was taken back into custody. Two months later, Schreiber sued Mulroney for failure to deliver services after he paid the former prime minister $300,000 in 1993 and 1994.

In June, 2007, the federal court of Canada agreed with the lower courts regarding Schreiber’s extradition. Schreiber once more appealed the extradition order, but he failed in the Ontario court of appeals in November and remained in jail in Toronto. Schreiber still feared extradition to Germany, where he was wanted for several corruption charges, including his connection to a fraud investigation involving Helmut Kohl, the former German chancellor. In March, 2008, he lost his last chance to be tried in Canada when the supreme court ruled that he should be extradited, but only after the completion of a public inquiry into his business dealings with Mulroney.

The Airbus affair ranks as one of the worst political scandals in Canadian history. The time-consuming investigation consumed money as well: Canadian citizens had to pay millions of dollars over the course of the inquiry, creating much cynicism about politics when the investigation became widely known by the public.

The vague and uncorroborated aspects of the Airbus affair and the subsequent scandalous business dealings between Mulroney and Schreiber still mystify many people, and there remains much speculation about whether or not Mulroney deserved exoneration. Some believe he should return the settlement monies he received for the cost of his legal fees. Mulroney has vacillated between publicly welcoming further inquiry in hopes of improving his reputation to arguing that there is no sense in wasting even more taxpayer money on further investigations. Air Canada scandal Airbus affair Schreiber, Karlheinz Mulroney, Brian Mathias, Philip Mulroney, Brian Moores, Frank

Further Reading
  • citation-type="booksimple"

    xlink:type="simple">Cameron, Stevie. On the Take: Crime, Corruption, and Greed in the Mulroney Years. Toronto, Ont.: Macfarlane Walter & Ross, 1994. A scathing examination of the corruption and crime that plagued Mulroney’s term as prime minister of Canada.
  • citation-type="booksimple"

    xlink:type="simple">Cameron, Stevie, and Harvey Cashore. The Last Amigo: Karlheinz Schreiber and the Anatomy of a Scandal. Toronto, Ont.: Macfarlane Walter & Ross, 2001. A detailed analysis of the Airbus scandal, mostly focusing on the workings of businessman Karlheinz Schreiber.
  • citation-type="booksimple"

    xlink:type="simple">Kaplan, William. Presumed Guilty: Brian Mulroney, the Airbus Affair, and the Government of Canada. Toronto, Ont.: McClelland & Stewart, 1999. Kaplan investigates the widespread presumptions that defined the Airbus affair and Mulroney’s role in the scandal. Also examines how Mulroney worked to gain his own exoneration.
  • citation-type="booksimple"

    xlink:type="simple">_______. A Secret Trial: Brian Mulroney, Stevie Cameron, and the Public Trust. Ithaca, N.Y.: McGill-Queen’s University Press, 2004. A comprehensive account of the Airbus scandal with much attention paid to the role of journalist Stevie Cameron in revealing the affair to the public.

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