An inquiry into the Schreiber-Mulroney affair struggled to answer a key question Wednesday: Why did the German arms dealer give the former prime minister hundreds of thousands of dollars, but not check whether he had done any work?

Karlheinz Schreiber said he made a series of payments -- in cash -- to Brian Mulroney in the early 1990s, hoping he would lobby for a controversial armoured vehicle project.

The inquiry's lead lawyer, Richard Wolson, repeatedly asked Schreiber why he continued to give Murloney money, when it seemed as if no work was being done.

"You stood to gain, if everything went your way, $1.8 billion and you don't call the man who's working for you -- who you're paying -- and say to him, 'Brian, come on. What's happening? Give me something. Tell me what you're doing.' You don't do that?" asked Wolson.

Schreiber replied: "He could do nothing at the federal level... there was no need for him."

Wolson then pushed him further, asking: "If he couldn't do anything, why did you pay him $100,000 in 1993, Dec. 18, if he couldn't do anything?"

"Well, I hoped he could do something," said Schreiber.

At one point, Justice Jeffrey Oliphant asked Schreiber to clarify what he said -- that he had paid Mulroney without checking on his progress.

The inquiry is trying to get to the bottom of the hundreds of thousands of dollars in cash payments Schreiber made to Mulroney in 1993 and 1994.

Schreiber says he negotiated the deal with Mulroney not long before he resigned as prime minister in June 1993. He wanted Mulroney to lobby on behalf of a proposal by Thyssen AG to build light-armoured vehicles in Canada.

Schreiber said he made three $100,000 payments to Mulroney: the first in August 1993, another in December of that year and a final payment in December 2004.

Mulroney admits to having received cash payments from Schreiber, and maintains they were made after he left office.

He claims to have been paid $225,000.

When Schreiber says he made the second payment, Mulroney was no longer prime minister, having been replaced by Liberal Jean Chretien.

While Schreiber hired former Trudeau cabinet minister Marc Lalonde to lobby the new Liberal government, he believed Mulroney could still be of service to him given his contacts on Parliament Hill.

"Things can change," he said. "Assume Mr. Chretien would have a car accident and die. And the next prime minister (would be) Paul Martin, a very close friend of Mr. Mulroney.

"How would you know what's going to happen?"

Schreiber said he believed that if Lalonde could get the Chretien government on board with the project, then Mulroney could lobby officials in Quebec Premier Robert Bourassa's government, with whom he had ties.

The manufacture of the vehicles was planned for Quebec.

However, in the fall of 1994, the Bourassa government fell and was replaced by the Parti Quebecois.

Schreiber vehemently denied that the payments were for work Mulroney did while he was still prime minister.

He said Mulroney was paid for lobbying services after he left office, though he was not required to submit receipts or invoices detailing what he was doing.

Mulroney and lobbyist Fred Doucet have both said that Mulroney gave Schreiber complete details off his lobbying work during a December 2004 meeting with Schreiber in New York City's Hotel Pierre.

Mulroney has said that he lobbied foreign leaders of countries that may have been interested in purchasing the armoured vehicles, and not Canadian officials.

Schreiber's integrity attacked

Earlier Wednesday, Schreiber continued to face a tough line of questioning as Wolson challenged his credibility and accused him of lying under oath.

Wolson asked Schreiber about his 2004 testimony, in which he told court he hired Mulroney to work on his pasta business in December 1993 or early 1994.

But he has told the current inquiry that he hired him for the armoured vehicle project.

Wolson said Schreiber's testimony on the two occasions simply doesn't add up.

"My suggestion to you is you weren't telling the truth when you were at this hearing for Eurocopter when you were under oath. What do you say to that?" he asked.

"No," was Schreiber's terse reply.

Wolson, who will also be grilling Mulroney when he comes before the inquiry, suggested Wednesday that Schreiber may have to re-appear for further questioning after Mulroney's testimony.

On Tuesday morning on his way into the inquiry, Schreiber promised to reveal "seven scandals in one."

That didn't happen, and Schreiber instead spent much of the day on the defensive as Wolson challenged his credibility throughout the day.

Schreiber is wanted in Germany on a list of charges that includes fraud, extortion and tax evasion. He has been allowed to remain in Canada to participate in the inquiry.

His testimony is expected to end this week, but he may be recalled after Mulroney appears at the inquiry.

Schreiber also has legal standing at hearings scheduled for later this year on federal ethics policy.

With files from The Canadian Press