Joseph Muscat: Six Major Scandals That Echo His Name
This is an updated article from 2021.
Joseph Muscat is officially being charged following a week of bubbling political tensions, attempts to take control of the narrative, and damning allegations.
He will be charged alongside his ex-chief-of-staff Keith Schembri and ex-minister Konrad Mizz with corruption, money laundering, bribery, setting up a criminal association, trading in influence and more.
As expected by the former prime minister, Muscat is being criminally charged for his alleged role in the fraudulent Vitals Hospital Deal after being named in a long list of people and companies suspected by the Attorney General of money laundering.
But, a role in the illicit hospital deal for which Muscat is being charged is not the only scandal the politician has found his name entangled in.
From the assassination of a journalist to the alleged kickbacks for a golden passport scheme, Muscat and those close to him have been suspected to have played parts in numerous corrupt misconducts during his years in politics. And these are just six of them.
1. Vitals Hospital Deal
This list has to be started with the scandal that landed Muscat in trouble with the law: the Vitals Hospital Deal. As mentioned above, Muscat was included in a long list of people and companies suspected by the Attorney General of money laundering in connection with the Vitals-Steward magisterial inquiry.
He was positioned alongside other key figures like former OPM chief of staff Keith Schembri, former minister Konrad Mizzi, former Nexia BT partners Brian Tonna and Karl Cini, Technoline managing director Ivan Vassallo, Ram Tumuluri and several original Vitals investors, Steward CEO Ralph de la Torre, Steward International CEO Armin Ernst, and former Allied Newspapers managing director Adrian Hillman.
This inquiry was requested by Repubblika around four and a half years ago and was concluded on 24th April, during this investigation Muscat’s home was subject to a police search after which he declared that he doesn’t trust inquiring Magistrate Gabriella Vella. He even opened court proceedings to remove her from the inquiry.
Amid all of this, former opposition leader Adrian Delia filed a case against the government for this deal and judge Francesco Depasquale concluded that fraud was committed during three stages of the process – before the contract was signed, when it was being negotiated and when Steward took over. He ordered that the St Luke’s, Karin Grech and Gozo General Hospitals be returned to the government.
It needn’t be mentioned that this deal – both the original deal and Steward’s takeover – went through when Muscat was Prime Minister.
2. Passport Scheme
In 2013, the Individual Investor Programme, known also as the passport scheme, the golden visas scheme or the citizenship-by-investment scheme, was voted into law despite not being in Muscat’s electoral manifesto. The scheme allowed non-EU citizens to become Maltese citizens through a €400,000 payment with dependents getting a discounted price.
It quickly became controversial with questions being raised about the ethics of selling citizenship and doubts being cast over the due diligence processes of the IIP scheme with applicants hidden behind opaque structures and poorly defined lists.
Daphne Caruana Galizia was a vocal critic of the scheme but it was only until 2017, days before Muscat called a general election, that allegations of kickbacks and commissions emerged.
Then-PN leader Simon Busuttil revealed that Muscat’s right-hand-man Keith Schembri had received kickbacks over the sale of citizenship to three Russian nationals from Nexia BT’s Brian Tonna.
According to a leaked report by the Financial Intelligence Analysis Unit (FIAU), Tonna had transferred two €50,000 payments through Pilatus Bank to Schembri.
The issue was put to a magisterial inquiry – with Schembri and Tonna being charged with a litany of offences including money-laundering, corruption, fraud, and false declarations over the revelations. The case is still ongoing.
Muscat had defended his right-hand man, going on to win the election and reappoint Schembri as his chief of staff.
This scheme also received strong objections from the European Commission which tried to get Malta to stop selling citizenship. The government eventually suspended the sale of passports to Russian and Belarusian nationals but this did not satisfy the Commission’s concerns, causing it to eventually refer Malta to the EU’s Court of Justice for the scheme.
3. Enemalta’s purchase of a Montenegro windfarm
On 28th December 2015, Malta’s national energy company Enemalta paid €10.3 million to buy a wind farm in Možura, Montenegro, in a deal spearheaded by then Energy Minister Konrad Mizzi.
It was hailed as Enemalta’s first overseas energy investment and a strong sign of its new financial prowess after it was partially bought by the Chinese state-owned Shanghai Electric Power.
However, a Times of Malta and Reuters’ investigation revealed that a Seychelles company called Cifidex had bought the wind farm for €2.9 million, making a handsome profit just a few weeks later.
Cifidex first signed a promise of sale agreement with Fersa for €2.9 million in February 2015 to buy 99% of the project’s shares. A Montenegrin company held the remaining 1%.
The deal was completed in December 2015. Just two weeks later, Cifidex sold those shares to Enemalta for €10.3 million.
The beneficiaries? None other than Yorgen Fenech and Turab Musayev, an Azeri businessman who was involved with Fenech in the ElectroGas power station project.
Musayev, who owns Cifidex, was allegedly loaned €2.9 million to purchase the Montenegrin wind farm by Fenech via 17 Black. He repaid Fenech’s loan along with an additional €4.6 million, leaving him with €2.8 million in profit.
Musayev has denied all wrongdoing.
Schembri and Mizzi’s links to 17 Black raised questions over their involvement in the deal.
According to one e-mail found in the Panama Papers, Schembri and Mizzi were set to receive payments of up to $2 million from 17 Black.
4. Daphne Caruana Galizia’s assassination
Former investigative journalist and vocal critic of the Muscat administration Daphne Caruana Galizia was assassinated by a car bomb outside her home in 2017. And the suspected mastermind behind the callous event, Yorgen Fenech, enjoyed a close relationship both with Muscat and Schembri.
While the former prime minister was not directly implicated in the murder of Caruana Galizia, a board of inquiry investigating the case said his actions led to a culture of impunity that allowed the murder to take place.
The inquiry also noted that while it could not state with confidence that the Maltese government was being run by the mafia, the happenings leading up to the assassination were leading the country in that direction and would have done so had the murder not happened.
The inquiry did not find the state to have been involved in the murder plot, but it concluded that the government, through a small group of bad apples, had created an environment that ultimately led to it.
The murder case is still ongoing, Fenech has pleaded not guilty, and a clear motive for the murder has yet to be established.
5. Electrogas
The Electrogas consortium was awarded a €5 billion contract to take over and manage the Delimara power station in September 2013, a deal was eventually signed in April 2015.
ElectroGas is equally owned by three companies – German conglomerate Siemens, Azeri state energy company Socar and GEM Holdings, a Maltese business venture split between four entities. Tumas Energy, Gasan Enterprises, CP Holdings, and Fenech.
Socar purchases gas from standard suppliers like Shell and resells the stock at a benchmarked value to ElectroGas, who transports the gas in liquid form and holds it in a tanker nestled in Delimara Bay. It is then converted to energy and distributed among homes in Malta.
Just days after Muscat’s landslide victory in 2013, Nexia BT began its attempts to open three offshore companies in Panama, Schembri’s Tillgate, Mizzi’s Hearneville, and the mysterious Egrant. Yorgen Fenech’s 17 Black and Cheng Chen-linked Macbridge were listed as its target clients in December 2015.
A leaked report by the FIAU found that 17 Black had received at least three payments – one of €161,000 from a Maltese local agent for the tanker supplying gas to the LNG power station and two separate payments amounting to €1.1 million from Baratzada through ABLV Bank by an unnamed Azeri national.
It was then revealed that Macbridge’s parent company, Dow Media, also received €1 million from 17 Black.
The deal has been suggested to be a possible motive behind the murder of Caruana Galizia, with potential revelations on corrupt dealings putting a crucial €360 million state guarantee in doubt amid mounting financial pressure.
A €360 million state guarantee was granted on the €450 million loans to finance the project. Defaulting on the loan, whether because of corruption allegations or financial mismanagement, could have been devastating for the country and the government.
6. Tuna kickbacks
The forgotten €25 million scandals have been swept under the rug. In February 2019, Malta emerged as a central figure in a €25 million illegal tuna trade across Europe, with two leading operators and state authorities allegedly involved in the cross-country crime.
Spanish companies allegedly acquired the tuna fished over and above-allocated quotas to Malta (which has the largest share in the Mediterranean) and Italy.
Leaked Spanish Police documents named two Maltese operators, Malta Fish Farming Ltd. (MFF) and Mare Blu Ltd., as critical suppliers of tuna illegally caught and fattened in Malta and sent over to Spain.
It is believed that illegal operators would either pass off their tuna as a cheaper species, forge documentation, or transfer catches between different cages.
The operators were allegedly able to bypass EU quotas through the help of Malta’s Fisheries Directorate, in particular its Director-General Andreina Fenech Farrugia.
A magisterial inquiry was opened, and the Fisheries Director-General paid the political price. However, not much has happened since.
Fenech Farrugia has long maintained her innocence, insisting that she was “singled out” in a wide-reaching investigation, that payments made to her in return for quota increases were always regular and that the published transcripts were poorly translated to Spanish and easily misinterpreted.
Lovin Malta had uncovered that Fisheries Directorate director Randall Caruana filed two police reports, one to the Economic Crimes Unit and another to the Administrative Law Enforcement Unit.
The alleged crimes included making use of an unlicensed fishing vessel for commercial purposes, fishing outside the legal zones, not rendering their fish traceable, keeping fish that was either caught illegally or in amounts that exceeded that permitted by the stock protection laws, and recidivism.
The people recommended for prosecution were directors Francesco Fuentes, Jose Fuentes Garcia and John Cappitta, managers Pedro Martinez Gonzalez, Massimo Cappitta and Peter Paul Spiteri, and registered captain Mario Frendo.
Several messages seen by this newsroom also showed that some former officials at the Ministry.
Which scandal shocked you the most?