All The Twists and Turns Of Malta's Controversial Hospital Deal As A New Chapter Begins
Vitals Global Healthcare is about to leave Malta, but how did we get here?
Vitals Global Healthcare will this week start the process of transferring the St Luke’s, Karin Grech and Gozo hospitals to US firm Steward Health Care - a mere two years after it was awarded a 30-year concession.
Yet this is turning out to be anything but a smooth transition, as new details about Vitals and its contract are emerging everyday in the media. Ahead of this latest chapter in Maltese healthcare, we trace back the events leading up to where we stand today.
February 2014: Health minister Godfrey Farrugia announces he has reached a deal with Queen Mary University of London to open a branch of Barts’ Medical School in Gozo.
March 2014: Prime Minister Joseph Muscat removes Godfrey Farrugia as health minister and replaces him with Konrad Mizzi, who was already energy minister at the time.
March 2015: Mizzi signs an agreement with Barts Medical School for the setting up of a medical school in Gozo and announces that a new wing will be built at the Gozo hospital. The deal is presented as one that will boost the Gozitan economy, create more jobs for Gozitans and drastically improve healthcare services in Gozo.
Two days later, journalist Daphne Caruana Galizia writes a blogpost stating that the government has struck a deal with Oxley Capital Group, a Singaporean private investment firm, for the refurbishment of the Gozo and St Luke’s hospitals.
She reported that Oxley had sent a representative, a Pakistani-Canadian businessman called Ram Tumuluri, to the Maltese offices of PriceWaterHouseCoopers in January during which they made it clear to third parties that they already had an agreement in place with the government on GGH and St Luke’s.
A few weeks later, Projects Malta issues a request for proposals leading up to the award of a services concession for the management and operation of St Luke’s, GGH and Karin Grech. The government says the chosen investors will have to invest some €200 million.
VGH director Ram Tumuluri
May 2015: Konrad Mizzi confirms that three investors are competing for the bid - Vitalis Global Healthcare and Bluestone Investments (a joint offer), Image Hospitals and BSP Investments Ltd. A Creditinfo search conducted by Caruana Galizia on Vitalis and Bluestone showed that both companies have the same two directors - Ram Tumuluri and Oxley Group CEO Mark Pawley.
June 2015: Mizzi confirms that the Vitalis/Bluestone joint offer has won the bid to invest in the three hospitals. He confirms that Vitalis (which by then had tweaked its name to Vitals) is owned by Bluestones Investments, a fund managed by the Oxley Group.
The deal is announced with much gusto, with the government pledging that Vitals will invest some €200 million to transform the old Gozo Hospital into an acute state-of-the art hospital, convert St Luke’s into a rehabilitation hospital and dermatology centre, and convert the Karin Grech Hospital into a geriatric public hospital. The deal also saw Vitals agree to build a medical school as a branch of Barts Medical School, bringing to fruition Godfrey Farrugia’s announcement back in 2014.
September 2015: The government officially signs a 30-year concession with Vitals Global Healthcare.
April 2016: In the wake of the Panama Papers scandal, Joseph Muscat removes Konrad Mizzi as health minister and replaces him with Chris Fearne - who had until then worked in Mizzi’s ministry as a parliamentary secretary.
May 2016: Daphne Caruana Galizia publishes a damning due diligence report on Vitals prepared by a leading consultancy firm on behalf of one of VGH’s potential clients. The report claims that the Prime Minister’s chief of staff Keith Schembri and Malta’s ambassador to Dubai Anthony Tabone had been in cahoots with Ram Tumuluri and a certain Shaukat Ali Chaudry, described as a consultant to the Prime Minister and later revealed as a Vitals investor, from as early as the end of 2013.
According to the report, Schembri and Tabone promised Indian contractor Shapoorji Pallonji and UAE-based Global Health Care that they would be awarded the hospitals privatisation project if they worked with Tamuluri and Shawkat. Despite initial misgivings over Tumuluri’s shady finance structures, both companies eventually complied following a visit to Dubai by a “very senior former Maltese minister”.
Caruana Galizia outed this person as former European Commissioner John Dalli, who had personally known Shawkat Ali from his time working in Libya. Dalli denied that such a meeting ever took place and called Caruana Galizia a terrorist.
From this due diligence report, it emerged that both subcontractors were growing frustrated at VGH’s failure to obtain funds for the projects, a situation brought about by banks refusing to lend money to Tumuluri’s shell company.
October 2016: The government finally publishes its contracts with VGH, over a year after they were signed. However, the contract released to the public is heavily redacted, with 63 whole pages deleted and practically all numbers blacked out.
November 2016: VGH appoints Armin Ernst, the chief administrative officer of US-based Steward Medical Group, as its new CEO. In an interview with Lovin Malta, Ernst described the VGH project as “an opportunity of a lifetime”.
Oxley Group CEO Mark Pawley confirms that the multimillion investment was the company’s first medical venture.
PN MP Claudette Buttigieg holds up a copy of the redacted contract
May 2017: Hitherto secret details of the Vitals deal start getting leaked to the Times of Malta, including a revelation that the government and VGH had already signed a memorandum of understanding by February 2015, two months before the request for proposal was issued.
July 2017: More leaked contract documents reveal that taxpayers are paying VGH €188,000 a day (€70 million a year) to provide hospital beds to the state.
The Times reveals that VGH has signed a deal with medical supply firm Technoline for the exclusive provision of medical equipment for its three hospitals. Technoline’s competitors rue the deal as blatantly unfair competition, given that they now have to submit bids for equipment of those three hospitals to a direct competitor.
Interestingly, Technoline had been purchased by its sales and marketing manager Ivan Vassallo only a few months before entering into this lucrative deal with Vitals.
August 2017: Even more leaks from the contract show the government is paying VGH €1.2 million a year (€36 million over 30 years) for the Barts medical school. A month later, the Times reveals taxpayers are also paying VGH €1 million a year for the use of a helicopter air ambulance service.
Health minister Chris Fearne during an interview with Tim Sebastian
October 2017: Armin Ernst resigns as Vitals CEO, with VGH citing “personal problems” as the reason for his departure. Ernst returns to the United States and becomes president of Steward Healthcare Group.
December 2017: Chris Fearne distances himself from the privatisation deal during a hard-hitting interview with Tim Sebastian from Deutsche Vella. Asked by Sebastian why he had failed to enquire about the deal with an untested outfit, Fearne’s response was: “I did not sign this deal myself…the government did, just to make that clear”.
Lovin Malta reveals that VGH will be sold to Steward Medical Group, the largest private healthcare provider in the United States. Chris Fearne confirms the deal later on that day, adding that VGH’s former CEO Admin Ernst had played a crucial role in connecting his old employer with his current one.
January 2018: More and more details about Vitals spill out into the media, including a memorandum of understanding which proves that the government had reached an agreement with Vitals for the takeover of the three hospitals in November 2014, five months before the public call. The MOU, published in court by one of Vitals’ shareholders, also reveals the complexity of Vitals’ ownership. Essentially, 70% of it is owned by a special purpose vehicle jointly owned by Tumuluri, Pawley, and two hitherto unknown figures - Ashok Rattehalli and Ambrish Gupta. The remaining 30% of the ownership remains a mystery.
However, Pawley’s company also owns 70% of a separate company Crossrange Holdings, with the remaining 30% owned by Shaukat Ali Chaudry and Dubai-based consultant Mohammed Shoaib Walajahi. Crossrange owns two companies which were opened to hold the assets of the aforementioned special purpose vehicle.
Under pressure, Konrad Mizzi says the MOU actually referred to an idea by Vitals to develop a large hospital in Gozo that the government had rejected because it was only after a medium-sized hospital.
Elsewhere, MaltaToday reported that Vitals was forced to sell its concession after it failed to obtain funding and was rebuffed by Deutsche Bank and Allianz.
Meanwhile, Lovin Malta asked Technoline’s Ivan Vassallo how he managed to raise the money (an estimated €5 million) to purchase the company, but were left without an answer.
This website also revealed that Vassallo is the Grand Secretary of one of Malta’s two freemasonry Grand Lodges and that Technoline director Yaser Ali Badar is registered as living in the same Tigne apartment as Shaukat Ali Chaudry, raising suspicions of collusion between Vitals and Technoline.
Also, the co-founder of the private equity firm which owns Steward is revealed to be Donald Trump's top choice for the position of financial intelligence advisor to the US President.