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Evidence Of Collusion Between Malta’s Government And VGH Investors Renders ‘Entire Process Dubious’, National Audit Office Reveals

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Malta’s National Audit Office has issued a daming indictment of the Maltese government’s controversial concession of three state hospitals to Vitals Global Healthcare, indicating possible collusion between the pair.

“The evidence indicating collusive action between the parties acting on behalf of Government with the investors of the VGH renders the entire process dubious, irrespective of whether the process was in adherence with procedural and regulatory requirements.”

“This Office is of the opinion that the due diligence carried out by Government to verify matters relating to the VGH in its capacity and relationship to it as the preferred bidder to run three public hospitals was grossly inadequate.”

Of grave concern to the NAO was documentation submitted by the VGH as proof of access to finance. A letter issued by the Bank of India sanctioning funding for the “Malta Healthcare Projects” and put forward by the VGH in respect of the bid was dated 13 March 2015, that is, well before the publication of the Request for Proposals (RFP) on 27 March 2015.”

This Office deemed this document as definite evidence of the VGH’s prior knowledge of the planned project and proof of collusion with Government, or its representatives,” the NAO said in a statement.

VGH was forced to sell its concession to run the Karin Grech, St Luke’s and Gozo hospitals amid growing debt and a failure to deliver on contractual commitments like investing some €200 million in new medical facilities. The timeframes, the NAO said, were “overly ambitious and unrealistic”, especially in terms of the promotion of medical tourism.

Mizzi, who has since been kicked out of the Labour Party parliamentary group, orchestrated the deal, which is subject to a magisterial inquiry. Journalist Daphne Caruana Galizia had revealed that the deal was pre-ordained before any bidding process.

The murky ownership behind VGH was also brought into question. Primarily, 70% of it is owned by a particular purpose vehicle jointly owned by Tumuluri, Pawley, and two unknown figures – Ashok Rattehalli and Ambrish Gupta. The remaining 30% of the ownership remains a mystery.

“The overlap between this Agreement and the concession was clear and created major doubt and concern regarding the integrity of the eventual concession.”

“The NAO’s concerns are heightened in light of Government’s reluctance to provide this Office with a copy of the Agreement. This Office is of the opinion that this Agreement provided grounds for the disqualification of the VGH from the RfP.”

“The NAO maintains that beyond the assertion of compliance to administrative requirements and the determination of whether the technical criteria set out in the RfP were met and to what extent, it is reasonable to expect that the process of evaluation would include an element of due diligence on any bidder.”

“Significant failures were noted in developments leading to the issue of the RfP. The Health Division within the Ministry for Energy and Health (MEH) was not ‘appropriately involved, with the Energy division driving the process in its stead.”

“The Ministry for Finance was not consulted regarding the disbursement that was to result from the concession, while the authorisation of Cabinet was similarly not sought prior to the issuance of the RfP.”

“Of greater concern in terms of the governance of the process was that no ministerial authorisation was sought or provided in relation to this concession, resulting in the anomalous scenario where three public hospitals were conceded for operation by third parties without anyone actually assuming responsibility for this decision,” it continued.

The feasibility assessment, which ought to have established the basis for Government’s decision to concede the hospitals, was “bereft of any form of independent analysis or critical thought”, the NAO said. The were also several shortcomings in the design of the RFP, which had several subjective shortcomings.

“Although the bid submitted by VGH satisfied all the requirements set by Government, this Office is of the opinion that the bid was essentially robust in form but flawed in substance,” the NAO said.

The Report may be accessed by visiting the website www.nao.gov.mt or through the Office’s social media.

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