Brian Mulroney says he wanted to keep his dealings with Karlheinz Schreiber out of the public eye because he was scarred from the ribbing he took during the Airbus scandal.

"The enormity of those events scarred me and my family for life," Mulroney told a public inquiry on Tuesday.

"And it explains my conduct in trying to keep private the private commercial transaction I entered into with Mr. Schreiber after I left office, so as to avoid the same kinds of deceitful and false purveying of information that had led to the original Airbus matter in the first place."

The former prime minister's comments came during testimony at the Oliphant inquiry, where he also said his business relationship with German-Canadian Schreiber was "legal and involved no wrongdoing of any kind."

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.

"My business relationship with Mr. Schreiber was legal and involved no wrongdoing of any kind at any time on my part," Mulroney testified on Tuesday.

"I genuinely regret, however, that the circumstances surrounding these transactions, for which I am largely responsible, give rise to suspicions as to their propriety.

"I certainly accept that inadequately documented arrangements are inappropriate for former public office holders and obviously should be avoided at all times."

Schreiber says he negotiated a 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 has testified that 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.

However, he claims to only have been paid $225,000, which he declared for income tax purposes six years after the payments started.

Mulroney said he tried to keep the transactions with Schreiber private because he wanted to avoid the kind of accusations lobbied against him in relation to the 1988 sale of Airbus jets to Air Canada.

The former prime minister said he was accused of corruption in the affair and that the "enormity of those events" scarred him and his family for life.

"It explains my conduct in trying to keep private the private commercial transaction I entered into with Mr. Schreiber after I left office... so as to avoid the same kinds of deceitful and false purveying of information that had led to original Airbus matter in the first place," Mulroney said.

Mulroney says he broke no legal or ethical guidelines and that he lobbied foreign politicians in an effort to find export markets for Thyssen vehicles.

As he headed into the inquiry Tuesday, Schreiber denied ever bribing Mulroney, saying there was "no need."

Schreiber has testified that he and Mulroney exchanged friendly letters and phone calls while Mulroney was in office.

'This was the hardest moment,' says Mulroney aide

Mulroney said he didn't remember speaking to Schreiber while in office and he said his staff often wrote responses to letters written to him.

Robin Sears, Mulroney's spokesman, said Tuesday afternoon that the former prime minister is tired after several hours of testimony, but he is also "feeling pretty satisfied with the first day's work.

"This was the hardest moment in some ways. The opening day, the tension surrounding it and how well he could bear the stress of this inquiry was obviously on all our minds, but he seemed to do pretty well," Sears told CTV's Power Play.

Sears noted that the entire affair comes down comes down to Mulroney's choice to accept cash rather than a cheque.

"I don't think there's any more explanation or deconstruction one can do."

Meanwhile, Schreiber's lawyers said Monday they were worried their client could be booted out of Canada before the inquiry is over.

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.

"I don't want to be put in a position where I wake up one day and get a phone call saying that they've whisked him away," Edward Greenspan, the head of Schreiber's legal team, told CP on Monday.

Greenspan said he was ready to go back to court if necessary to try and keep Schreiber in Canada.

With files from The Canadian Press