Canada judge stays Mulroney payment to arms dealer

TORONTO, Aug 4 (Reuters) Former Canadian Prime Minister Brian Mulroney has been granted a reprieve when an Ontario judge ruled he did not have to immediately pay German-Canadian arms dealer Karlheinz Schreiber 470,000 Canadian dollar (450,000 dollar).

In March, Schreiber sued Mulroney, charging that the prime minister received 300,000 dollar from Schreiber after he left office in 1993. In return, Mulroney was supposed to help Schreiber establish a light-armored vehicle factory in Canada for German Firm Thyssen AG -- now ThyssenKrupp AG -- and to help promote a pasta business.

Schreiber, who is also a lobbyist, claims Mulroney never provided the help he promised, so Schreiber is seeking 300,000 Canadian dollar plus interest. Mulroney denies Schreiber's claims.

Justice Frank Newbould yesterday set aside a default judgment issued last week by a court registrar. That judgment was issued at the request of Schreiber's lawyers after Mulroney missed a filing deadline.

Mulroney's lawyers argued the judgment was sought despite a written promise not to do so while defense attorneys tried to move the case to the province of Quebec, where Mulroney lives.

Mulroney's attorneys said the default judgment was issued to embarrass the former prime minister. Schreiber's lawyers said they sought the judgment because Mulroney's team deliberately delayed the case.

In his decision, Newbould said the actions of Schreiber's lawyers were ''egregious and wrong.'' ''No litigant deserves to be treated in the way that Mr Mulroney was treated,'' Newbould wrote.

The lawsuit and disclosure of the payments rekindled memories of the so-called Airbus affair, a 1990s probe into suspected kickbacks connected to Air Canada's purchase of Airbus airliners in 1988, while Mulroney was prime minister.

At the time, Airbus was a client of Schreiber, who made millions of dollars in commissions on the deal. In 1995, Canadian police sent an official letter to Swiss authorities, implicating Mulroney in a scheme to accept kickbacks. Mulroney sued them for libel.

The Airbus investigation was dropped four years ago, as the then-Liberal government said allegations of wrongdoing could not be substantiated.

Schreiber is fighting an extradition order to Germany on charges of tax evasion, bribery, and fraud.

REUTERS PBB BST0755