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German-Canadian arms dealer Karlheinz Schreiber faced pointed questions Tuesday as the public inquiry into his dealings with former prime minister Brian Mulroney heated up.

Schreiber took the stand Tuesday at the inquiry intended to reveal details about hundreds of thousands of dollars in cash payments he made to Mulroney in 1993 and 1994.

In his testimony, Schreiber said he gave Mulroney $100,000 in cash in a hotel room in Quebec and was told "thank you." The meeting is alleged have taken place after Mulroney was prime minister but when he was still a sitting Member of Parliament.

Inquiry chief counsel Richard Wolson challenged Schreiber's credibility throughout the day.

Schreiber told Wolson on Tuesday that he met Mulroney several times when he was prime minister, including a meeting at the prime minister's summer home on Harrington Lake.

But in 2004, Schreiber testified under oath in court that he only met with Mulroney a couple of times, and he did not mention a get-together at Harrington Lake.

"When you were asked under oath, you left it out," Wolson said.

Schreiber said he misunderstood the question in 2004, when he believed he was only being asked about meetings pertaining to a European helicopter company.

"You didn't want to tell the prosecutor that you had a relationship with Brian Mulroney," Wolson said.

"That is not true," Schreiber replied.

When asked directly why he didn't tell the prosecutor in 2004 that he had met Mulroney at Harrington Lake, Schreiber said "I am somehow surprised. There is no reason I wouldn't have told him."

Schreiber said that during the Harrington Lake meeting, the two men agreed that they would work together once Mulroney left office.

According to Schreiber, details of the agreement were not finalized until two months later, when Mulroney had resigned.

The commission's chief counsel also scrutinized a series of cheques that Schreiber issued out in 1988 to a group of lobbyists close to Mulroney.

In Nov. of 1988, Schreiber issued $610,000 worth of cheques to partners of the lobby firm Government Consultants International, the firm itself, and Mulroney's former chief of staff, Fred Doucet.

Doucet was issued $90,000 when he only had three months left on his federal government contract.

Schreiber said the cheque was a "success fee" for Doucet's work getting an "understanding in principle" for the government's support for the "Bear Head project."

The project was a proposed armoured vehicle factory that never was built. A document was signed by three Mulroney cabinet ministers in September 1988 but it did not bind the military to purchase anything.

Schreiber veered off-topic at several points Tuesday, appearing a little emotional as he discussed the latest Canadian soldier's death in Afghanistan.

He said the Bear Head project would be saving lives in Afghanistan.

"This is my huge anger," he said. "It is about lives. . . . Do you read me, sir? This is my whole war with this government."

Wolson tersely asked him to only answer the questions being put forth.

Schreiber also said his involvement with Mulroney ruined his life.

"I was wealthy, I had a wonderful life and it was completely ruined by these Canadian events," he said.

Schreiber said if he managed to get the Bear Head project to take off and go to market, he would have stood to make about $1.8 billion.

Schreiber's testimony drew a harsh rebuke from the Mulroney camp Tuesday.

Robin Sears, Mulroney's spokesperson, told CTV's Power Play "this is still Schreiber circus, it always has been since the beginning . . . it all begins and ends with him."

CTV's parliamentary correspondent Graham Richardson said the line of questioning is setting the tone for the next few days of the inquiry.

"I think generally speaking in the early hours here the tone from the commission counsel is, what story are we going to hear now and why are these holes appearing in your story Mr. Schreiber," Richardson told Â鶹ӰÊÓnet.

On his way into the inquiry, headed by Justice Jeffrey Oliphant, Schreiber told reporters that he would reveal "seven scandals in one" during his testimony.

Mulroney admits to having received payments from Schreiber, and maintains they were made after he left office, as compensation for promoting a project to build German-designed armoured vehicles for the Canadian military.

He claims to have been paid $225,000.

Schreiber maintains he paid Mulroney $300,000 in a deal that was made while he was still prime minister.

'Biggest' political scandal

The inquiry has come under criticism because there are concerns nothing new will be revealed. Schreiber promised that will not be the case.

"I can tell you one thing, if you think we have one scandal, no. I tell you it's the biggest political scandal. The secret is it's seven scandals in one. You can count on me. I'm not going to disappoint," he said before heading in to take the stand.

Tuesday is the third day of the public inquiry hearings, but the first day Schreiber took the stand.

Criminal lawyer Russell Silverstein told Â鶹ӰÊÓnet that a public inquiry could lead to criminal charges if warranted.

"A public inquiry is where the government learns what is going on and perhaps with a view to deciding later what steps to take once all the facts are in," he said in an interview from Ottawa. "This inquiry is serious business, witnesses are subpoenaed under oath . . . it's a judicial proceeding."

German charges

Schreiber faces a long list of charges in Germany, including fraud, bribery and tax evasion from other deals he was involved with.

It is expected that he will be extradited back to Germany once the public inquiry has wrapped up.

While speaking to reporters on Tuesday, Schreiber dismissed criticism that the inquiry is a waste of time and he has little new information to add.

"I have an old saying from my friend Strauss. The more people try to discredit you, challenge you, be mean to you, the better you know you are on the right way. And I am on the right way now," he said.