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Canada to make formal public inquiry into dealings between Brian Mulroney and businessman wanted on fraud

Canada will organize soon a formal public inquiry into dealings between former Prime Minister Brian Mulroney and a businessman who is wanted in Germany on tax and fraud charges.

The move follows Mulroney's request that there be a public inquiry. Mulroney said late Monday that a wide-ranging inquiry is the only way to put the issue that has dogged him for years to rest.

Opposition parties demanded a full investigation into allegations that German businessman Karlheinz Schreiber negotiated lobbying deals with Mulroney while he was still in office.

Schreiber says he paid $300,000 Canadian (US$311,000) to Mulroney in 1993 and 1994 to enlist his help in building an arms factory in Quebec and a pasta business in Ontario.

Schreiber also alleges in court documents that an adviser to Mulroney asked him to transfer funds, in connection with Air Canada's 1988 purchase of Airbus planes, to Mulroney's lawyer in Switzerland when Mulroney was prime minister and Air Canada was government-owned.

Prime Minister Stephen Harper said Friday he was appointing an independent adviser to look into the matter and recommend what the government should do, saying such a probe could be an option later.

Harper announced there will be a full inquiry on Tuesday.

"That independent party will be making the recommendation to the government on the appropriate terms for a full public inquiry," Harper told Parliament.

Mulroney, who served as Canada's Conservative prime minister from 1984 to 1993, has denied the charges.

Schreiber has filed suit against Mulroney in an effort to recover the money, arguing that Mulroney did not follow through on his commitments.

Schreiber is facing extradition to Germany as early as this week. Germany alleges that Schreiber, who has dual Canadian-German citizenship, avoided paying income tax on $46 million Canadian in commissions. The fraud charges against him arise from a deal for the sale of German army tanks to Saudi Arabia.

Mulroney has been a closer adviser to Harper's Conservative government, but Harper warned members of his government last Friday not to deal with Mulroney until the issue is resolved.

Harper's Conservatives won a majority of seats in the House of Commons in 2006 after he promised to clean up corruption in Ottawa. The previous Liberal government lost the election because of a corruption scandel.

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