Malta’s longest running political scandal in recent years took another twist yesterday when Keith Schembri confirmed that his Panama company was going to do business with murder suspect Yorgen Fenech.
This was the latest development in a saga now spanning four years, which started as a tale of harmless family trusts and has turned into a tangled web of companies, with serious suspicions of money laundering and links to the assassination of Daphne Caruana Galizia.
It’s a complex story and perhaps the best way to understand it is to trace how it has developed over the years.
This article was originally published on 4th May 2018 and has been updated on 23rd June 2020 to reflect the latest updates.
24th February 2016: Mizzi declares a New Zealand trust
After Daphne Caruana Galizia publishes a cryptic post on her blog, then Energy Minister Konrad Mizzi tells MaltaToday he will declare a New Zealand trust in his parliamentary assets. He says he set up the trust for family planning purposes and that its beneficiaries will be himself, his wife Sai Mizzi and his children.
He confirms the trust owns a shell company, which “has never been used but may be used in the future to hold my existing property and possibly investments” and that it doesn’t currently hold any bank accounts. However, he doesn’t specify that the company is registered in Panama.
“I have always been and will always be transparent in my state of affairs,” Mizzi said.
25th February 2016: Mizzi speaks about Panama for the first time
Caruana Galizia reveals Mizzi’s company is registered in Panama, but this doesn’t stir Labour delegates – who turn up en masse to vote him as the party’s new deputy leader. When questioned by the press, Mizzi changes his story for the first time – claiming he is actually the settlor of the trust and his wife and children are the beneficiaries.
He refuses to justify his choice of Panama but insists he has nothing to apologise for, arguing that: “I have worked hard for my money and property it is my right to choose where to relocate them.”
This line of defence continues in the following days, with Mizzi saying he had simply followed the advice of his financial consultants Nexia BT, who had suggested Panama due to its “cost-effectiveness”.
Here, Mizzi also pledged to subject himself to an annual audit from the Inland Revenue Commissioner for the sake of full transparency. Instead, Mizzi ended up publishing an audit from US firm Crowe Horwath and the IRS audit pledge was never heard from again.
26th February 2016 – Joseph Muscat speaks about Panama for the first time
Prime Minister Joseph Muscat is hounded by journalists about Mizzi’s Panama company for the first time. Questions at this stage focus on the name of the company, its date of registration and the fact that Panama had been blacklisted as a tax haven by the EU.
Muscat says he sees absolutely nothing wrong with Mizzi’s offshore structure, arguing that Mizzi has pledged to declare it in Parliament and that his Panama company is owned by a trust registered in a democratic country, i.e. New Zealand.
“I would only have had a problem had he not declared it,” Muscat said. “I believe the PN and hate bloggers simply wanted to undermine Mizzi’s appointment as PL deputy leader, which they failed to do.”
Asked whether he or other ministers have companies registered in blacklisted companies, Muscat said he “doesn’t think so”. Asked specifically by a Net journalist whether he and his chief of staff Keith Schembri are hiding information from the public, Muscat derides the journalist for referring to Schembri by his nickname and threatens to sue him for libel.
“Obviously I don’t….[know something the public doesn’t know],” he said.
February 28th 2016: Keith Schembri speaks for the first time
After Caruana Galizia reveals that Schembri has an identical offshore structure (a New Zealand trust holding a Panama company), the Prime Minister’s chief of staff initially states that he had set up his structure for family planning purposes. He said he set up his trust in New Zealand and not in Malta because he was informed that his local bankers were considering siphoning off their trust businesses to third parties.
“My New Zealand-based trust, together with any attached company, which have not traded so far, was opened as a contingency for this reason upon advice from my financial advisors,” he said.
Schembri insisted here that he has not been involved in his private business dealings ever since he renounced his directorships in the wake of his appointment as Muscat’s chief of staff.
2nd March 2016: Mizzi admits to breaking the law
Following a question by former Finance Minister Tonio Fenech, Mizzi admits on TV that he hadn’t declared his trust to the IRS, in breach of Maltese tax laws, and pins the blame on Nexia BT.
“Last week I sought more advice and asked lawyers to look at all the laws to make sure I had done nothing wrong,” he said. “They told me there was a notification letter, not present on the Inland Revenue’s website, but in an old legal notice which contained a formula that still used Maltese lira. My advisers didn’t know about this and I told them to rectify it.”
Mizzi said he was persuaded to set up a New Zealand trust to manage his family assets after Schembri informed him about his own plans.
“[Schembri] had been consulting his advisors and I decided to do likewise with the same advisors,” he said.
During this interview, Mizzi famously claimed to have only invested €92 in his Panama company. A leaked FIAU report later revealed he had conveniently left out two zeroes behind the numbers.
20th March 2016: Muscat brushes off Electrogas-Panama links as ‘hogwash’
The Malta Independent reveals that Mizzi transferred his Panama company to his New Zealand trust on 22nd July 2015, the exact same day that Gasol, one of the original four partners in the Electrogas consortium behind the Delimara power station, sold its shares to the remaining three shareholders.
Doorstepped at a political rally, Muscat dismisses this potential link as “hogwash”.
It is later revealed that Gasol’s parent company is actually controlled out of the offices of Mossack Fonseca in the Seychelles.
7th April 2016: Mizzi starts changing his tune
Days after the Panama Papers breaks worldwide, Mizzi tells Labour’s annual general conference that the ongoing scandal has angered him as it has diverted public attention from the Labour government’s achievements.
“I have an internal conflict on the Panama Papers. I know I have done nothing wrong, that I worked for my money and have every right to take care of my family legally. However, at the same time, I cannot ignore the sense of public anger this whole issue has created.”
Mizzi confirms that, while his company didn’t yet have a bank account, he intended to open one in the near future for the sake of rent from his properties and other future investments.
“Simon Busuttil thought the power station investments were carried out so that I could get rich, when they were actually carried out so we could reduce electricity tariffs,” he said to applause. “No one will find anything illicit or illegal and the audits will clear my name. Had I had bad intentions, why would I have put down my children’s names as beneficiaries of the trust?”
10th April 2016: Schembri denies business dealings through Panama company
After the Australian Financial Review publishes a report on Schembri’s long history of offshore dealings with contractor Malcolm Sladden and then Allied Newspapers managing director Adrian Hillman, the OPM chief of staff reiterates that his Panama company was only set up in 2015 for the purpose of family and estate planning.
28th April 2016: Muscat changes tune and disciplines Mizzi
Only two months after claiming the Panama story was designed to harm Mizzi’s chances of election as PL deputy leader, Muscat announces Mizzi’s removal from the post. Mizzi is stripped of his energy and health portfolios and becomes a Minister Within The Office Of The Prime Minister – largely still responsible for the energy sector.
“The Panama affair hurt us politically and personally,” Muscat said. “Although there was nothing illegal, we expect better behaviour.”
4th May 2016: Mizzi apologises
A few months after insisting he had nothing to apologise for, Mizzi backtracks and apologises during a parliamentary debate on a no confidence motion against him filed by the Opposition.
“I did what I did in the best interest of my family, but I recognize this issue has cast a shadow on myself and on the government. There is nothing illicit in what I did, but I know I have political responsibility. I shoulder it, I feel it and I believe it.”
15th May 2016: Schembri denies business plans with Mizzi
As a partner in the Panama Papers investigation, the Times of Malta quotes emails from Mossack Fonseca to Bentley’s Chartered Accountants in New Zealand for the setting up of Mizzi’s and Schembri’s trusts.
Mossack Fonseca tells Bentley’s that the two Panama companies which will hold the two trusts will be involved in a “joint venture” in used-tyre trading, waste trading and remote gaming and that clients have already been lined up in India and China.
Schembri reacts by categorically denying any plans to set up a joint venture with Mizzi and by demanding the International Consortium of Investigative Journalists hand over documentation related to him from the Panama Papers so that he would be in a better position to respond to questions. The ICIJ refused his request.
20th February 2017: Mizzi publishes independent audit
Ahead of a MEP delegation to Malta, Mizzi publishes an audit into his trust and company – not by the Inland Revenue Commissioner but by the US firm Crowe Horwath. The audit confirms Mizzi is the settlor of the trust, unlike his original explanation, and that neither the trust nor the company have undertaken in trading activity.
The audit was completed in September 2016, contradicting Muscat’s statement the following month that it was “a work in progress”.
Mizzi suggests that the lack of bank accounts in his offshore structure was due to his not needing them.
“Regarding the reports that there were attempts by the service provider to open a bank account, this was part of the service that was offered to the trust,” Mizzi said. “Nevertheless, as a statement of fact confirmed by the reports, the trust did not pursue this option and never opened any account for the structure, either in Panama or elsewhere.”
However, the Panama Papers later revealed that Mizzi and Schembri had approached banks in Dubai, Panama and other Caribbean countries, but had been turned down because they were politically exposed.
27th May 2017: Mizzi, Schembri respond to 17 Black report
On the eve of the general election, The Malta Independent publishes parts of a leaked FIAU report which reveals the existence of a Dubai company called 17 Black. The report states that 17 Black had been set up to transfer money to eventual bank accounts connected to Mizzi’s and Schembri’s Panama companies. It also states that it had already received a sum of money from Orion Engineering – the Maltese agent of the tanker providing LNG to the Delimara power station.
The FIAU also confirmed that Mizzi had granted Nexia BT’s partners Brian Tonna and Karl Cini power of attorney over his trust and company, contradicting Mizzi’s statement to MEPs that Nexia BT had no remit to open bank accounts on his company’s behalf.
Later reports also established that Orion Engineering had transferred its funds to 17 Black on 23rd July 2015, exactly a day after Mizzi transferred ownership of his company to his New Zealand trust. This was also the day that Gasol sold its shares to the other three Electrogas partners.
Mizzi denounced the story as an “invention and a total lie”, while Schembri denied it as part of a coordinated smear campaign against him. Neither men admitted to having any knowledge of the existence of 17 Black.
16th October 2017: Schembri swears on the cross that he isn’t corrupt
Testifying in a libel case he had filed against Simon Busuttil, Schembri swears on the cross that he had never received kickbacks.
“In his speech, Busuttil insinuated that I am corrupt,” Schembri said. “He’s been here for an hour and a half and has not repeated his allegation that I am corrupt. If he is going to continue to allege this, I will continue to chase him until he proves it.”
Daphne Caruana Galizia wrote a blogpost about Schembri’s statement, which turned out to be the last thing she ever wrote as she was assassinated in a car bomb minutes later.
18th April 2018: Mizzi and Schembri contradict each other
The Daphne Project publishes an email Nexia BT partner Karl Cini had sent Mossack Fonseca for the sake of opening accounts with a Bahamas bank for Mizzi’s and Schembri’s Panama companies.
The email states that the two companies would be operating in business ventures across the world – from maritime business in Bangladesh to tourism business in Asia (the entire continent of Asia listed as a target country). Cini also states that Schembri’s and Mizzi’s main target clients will be 17 Black and another Dubai company called Macbridge and that these two companies will transfer €150,000 a month to Mizzi’s and Schembri’s companies.
The Daphne Project cites a FIAU report that 17 Black had received €161,000 from Orion Engineering and €1.1 million from an Azeri national, later named as security guard Rufat Baratzada.
Schembri issues a statement that 17 Black and Macbridge were included in draft business plans for his Kasco business group as potential clients, in itself contradicting his earlier claim that he had set up his company for family planning purposes.
Mizzi reiterates his mantra – that his company and trust have no connection with 17 Black, that they never traded or held a bank account, and that an audit firm had proven his trust was set up solely for family planning purposes.
5th June 2018: Schembri dismisses ‘stupid’ questions
Schembri refuses to answer a journalist’s questions about the identity of 17 Black’s owner, describing the questions as “stupid” and stating there are magisterial inquiries ongoing.
10th November 2018: Schembri and Mizzi keep silent as Yorgen Fenech’s identity revealed
An investigation by Reuters and Times of Malta finds that 17 Black is owned by Yorgen Fenech, the CEO of the powerful Tumas Group and a shareholder in the Electrogas consortium.
It also found that Fenech had changed 17 Black’s name to Wings Development after the company was named by Daphne Caruana Galizia.
Muscat, Schembri and Mizzi all denied knowing who owns 17 Black at this stage.
11th November 2019: Schembri drops libel case to avoid questions
Schembri faces questions about 17 Black in court as part of a libel case he had instituted against former PN leader Simon Busuttil. He tries to get out of answering by saying he has been legally advised not to answer questions related to ongoing inquiries.
However, the magistrate orders him to answer the questions and Schembri promptly drops the libel suit.
20th November 2019: Yorgen Fenech arrested
Yorgen Fenech is arrested in connection with the assassination of Daphne Caruana Galizia, triggering an unprecedented political scandal.
26th November 2019: Mizzi and Schembri resign
Schembri resigns as the Prime Minister’s chief of staff after Fenech implicates him in the assassination and the police call him in for questioning.
During a subsequent Cabinet meeting, Mizzi resigns as Tourism Minister. In his resignation message, Mizzi reiterates that he has no association whatsoever with 17 Black or Yorgen Fenech and that there were no irregularities in the construction of the LNG power station.
19th June 2020: Montenegro wind farm scandal exposed
Reuters and Times of Malta reveal that Cifidex, a company which Reuters said is owned by Azeri national and former Electrogas director Turab Musayev, had bought the Montenegrin wind farm for €2.9 million in December 2015 after receiving a loan from Fenech’s 17 Black, and had sold the farm to Enemalta for €10.3 million two weeks later.
Cifidex then repaid Fenech the loan, along with a further €4.6 million, with the money passing through 17 Black.
Mizzi defends the deal and insists he had no idea 17 Black was involved in the project, reiterating that he has “no association” with Fenech’s company.
Musayev denies any wrongdoing and says he had no reason to suspect Fenech had any involvement in Caruana Galizia’s murder.
He says Cifidex had its own independent management and that his business with Fenech involved due diligence from reputable and established bankers, accountants and lawyers.
22nd June 2020: Schembri confirms he wanted to do business with 17 Black
After years of dodging questions, Schembri finally confirms in court that 17 Black was a target client for his Panama company because he and Fenech were planning a post-politics business venture together.
He said he opened his offshore structure because he realised he couldn’t trust Maltese banks after details of his Bank of Valletta trust fund were leaked to the Nationalist Party.
“I was advised to have a target client. I chose 17 Black because Yorgen Fenech is a good friend. It was meant to be temporary. Having 17 Black as a target client means it either does or does not do business.”
“However, I was planning to do business with him once I left politics. He was one of the most highly regarded businessmen in Malta and it was prestigious to do business with him. We had spoken and we were looking to working in either gaming or the food industry.”
Meanwhile, PN MP Jason Azzopardi, the lawyer of the Caruana Galizias, has said the entire Cabinet have been told who owns Macbridge, the other secret Dubai company which was supposed to transfer funds to Mizzi’s and Schembri’s Panama companies. It certainly seems that, no matter how hard the main players try, this scandal is simply not going away and justice is closer than it has ever been.