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
Controversial plant gets green light in Cape Breton

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 busi
nessman 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.