The House of Commons ethics committee examining the relationship between former Prime Minister Brian Mulroney and German businessman Karlheinz Schreiber heard Mr. Schreiber testify on Tuesday that he didn't discuss money with Mr. Mulroney during a private 1993 meeting when the latter was still in office.

Instead, Mr. Schreiber said that the two made an oral agreement to work together when Mulroney returned to private life.

"We made an agreement in principle to work together. We did not speak about money," Mr. Schreiber testified during his second appearance before the committee.

The testimony led Dufferin-Caledon MP David Tilson, co-chairman of the committee, to conclude that Mr. Mulroney has been "exonerated" of any wrongdoing.

The ethics committee will reconvene today, but Mr. Tilson suggested in a telephone interview that in light of Mr. Schreiber's testimony the committee should disband.

"My view is that Mr. Mulroney was completely exonerated by Mr. Schreiber," said Mr. Tilson.

"His dealings with Mulroney weren't when he was prime minister. I don't know why we're continuing the hearings."

Mr. Schreiber said the $300,000 in cash he paid Mr. Mulroney wasn't related to Air Canada's $1.8- billion purchase of Airbus jets, but involved a proposed light- armoured vehicle plant known as the Bear Head project.

While acknowledging that Mr. Schreiber met Mr. Mulroney in 1993, Mr. Tilson pointed to earlier court documents - and a book on the Airbus affair - where Mr. Schreiber said any financial deals occurred after Mr. Mulroney left office.

Opposition MPs questioned whether it was ethical for Mr. Mulroney to accept a cash payment from Mr. Schreiber, who lobbied the government on behalf of German business interests, while he was still an MP.

A $100,000 payment was made in August 1993 at a Montreal hotel.

The two later had a public falling out when the Bear Head project failed to proceed, during which Mr. Schreiber referred to Mr. Mulroney as "a liar."

Yet Conservative MPs maintain that the Schreiber testimony shows nothing more than a failed business relationship between two private individuals, and not an issue for the ethics committee.

Mr. Mulroney is currently scheduled to testify before the committee next week.