OTTAWA -- Handed an envelope obviously full of cash during a 1993 hotel meeting with Karlheinz Schreiber, Brian Mulroney says he hesitated a moment at what he thought was an "unconventional" payment.

But he shrugged off that fleeting doubt and took the money, he told a public inquiry on Friday.

"I hesitated because I certainly felt that this was unusual," he testified at the probe into his dealings with the German-Canadian businessman.

Schreiber treated it as a normal transaction: "I'm an international businessman and I only deal in cash."

"He told me it was cash in response to a hesitation I evinced," Mulroney added.

He'd never been paid like this before, he went on, and it struck him as unconventional, at least.

"That's when I should have said, `I'm happy to try to do this but I need a cheque.' Unfortunately, I didn't say that."

This, he said, "was the genesis of the difficulties I've had."

Mulroney said some may see a "sinister" connotation in cash-stuffed envelopes and hotel rooms, but he when he left the meeting, he was driven home by a pair of plainclothes Mounties, casually holding the envelope in his hand.

Once home, he counted the cash -- 75 thousand-dollar bills -- and stuck it in a safe.

He agreed, however, that it wasn't really clear to him what Schreiber wanted him to do in exchange for the money.

Schreiber gave him no direct instructions and Mulroney decided he was being given an international "watching brief" to promote Schreiber's interests abroad.

Earlier in his fourth day of testimony, he said he was being honest in 1997 when he told an interviewer that he had only a peripheral relationship with Schreiber.

Although he took at least $225,000 in three cash payments from Schreiber after he left office, he told author William Kaplan that his relationship with the businessman was merely "peripheral."

Commission counsel Richard Wolson said that seems an unusual way to describe a relationship with a man who paid him hundreds of thousands of dollars.

Mulroney said he was being honest.

"You can have clients, or partners or investors whom you do business with, but you might know them in a less intimate or friendly manner," he said.

He had intimate friends and close friends, but Schreiber wasn't among them.

Wolson also pointed out that in June 1993 during Mulroney's last month in office, he managed to find time for two meetings with Schreiber, one in his Centre Block office and one at the prime minister's summer residence at Harrington Lake north of Ottawa.

"You would have had time for your peripheral friend, Schreiber, twice in one month?"

Mulroney said that wasn't unusual.

"I'm seeing dozens of people, hundreds of people who want to drop by and say goodbye."

He said, though, that he and Schreiber never discussed at those meetings the possibility of Mulroney doing work for Schreiber after leaving office.