How The Maltese Government Responded To Damning Rule Of Law Report Prepared For Caruana Galizia Family
The Maltese government has moved to rebut a damning report prepared for Daphne Caruana Galizia’s family by third parties who have yet to be established, which warned that the rule of law in Malta has collapsed since Labour’s election five years ago.
The government’s report, acquired by Lovin Malta, was intended to “fact-check” the document that was prepared for Caruana Galizia’s family and presented to a European Parliament delegation that came to Malta to investigate the rule of law last year.
These are the main differences between the two reports:
The Judiciary
Caruana Galizia report: Since 2013, the PL has made 15 appointments to the bench, 11 of whom are connected directly to the Labour Party. These include former PL deputy leader Toni Abela, former PL MP Wenzu Mintoff, former PL international secretary Joe Mifsud, as well as Antonio Mizzi – who is married to Labour MEP Marlene Mizzi.
The Industrial Tribunal is staffed with people who used to work at or are married to people who used to work at the General Workers’ Union, which is historically sympathetic towards the Labour Party.
Government’s counter-report: Thanks to a law passed by the PL government, judges and magistrates are now recommended by a committee composed of the Chief Justice, the Attorney General, the Ombudsman, the Auditor General and the Chamber of Advocates President. All the committee’s recommendations to the bench have so far been taken on board.
Malta’s small size means it is unavoidable for some members of the judiciary to have a political history. Previous PN administrations had appointed to the bench former PN minister Joe Cassar, former PN candidates Lorraine Schembri Orland and Paul Coppini, as well as Giannino Caruana Demajo – whose father was a Nationalist minister.
The Attorney General
Police commissioner Lawrence Cutajar (left) with Attorney General Peter Grech
Caruana Galizia report: The AG is both legal advisor to the government and public prosector and no Maltese AG has ever acted against the interests of the Prime Minister of the day. The current AG Peter Grech failed to act on evidence of money laundering by senior government officials, even though he has powers vested in him by the Prevention of Money Laundering Act to initiate criminal investigations. Moreover, Grech chairs the board of governors of the Financial Intelligence Analysis Unit (FIAU) – which flagged possible kickbacks by tourism minister Konrad Mizzi and the Prime Minister’s chief of staff Keith Schembri.
Former FIAU inspector Jonathan Ferris is currently fighting a case for unfair dismissal in the Industrial Tribunal, which is itself controlled by the AG.
Government’s counter-report: Peter Grech was appointed by a PN government in 2010. Chamber of Advocates president George Hyzler and Dean of the Faculty of Laws Kevin Aquilina have described calls for Grech’s resignation as unfair, as the AG doesn’t even have the power to conduct an investigation himself.
His only investigative role is to order the courts to compile a list of assets of people suspected of money laundering, which he invariably does with the assistance of the police.
The FIAU board of governors, which Grech chairs, isn’t privy to the investigations and reports carried out by the anti-money laundering unit.
The FIAU
Caruana Galizia report: Manfred Galdes quietly resigned as head of the FIAU in April 2016, shortly after sending a damning report to then police commissioner Michael Cassar – who himself resigned shortly after receiving the report. A few months after Galdes resigned, the FIAU told Pilatus Bank that the money laundering failures it had originally observed in the bank “no longer subsist”.
Shortly after the 2017 election, Finance Minister Edward Scicluna questioned whether some of the FIAU’s reports were written to be leaked. Jonathan Ferris and Charles Cronin, who headed the FIAU’s analysis and compliance sections respectively, were fired a few days later.
Government’s counter-report: While the FIAU did express concerns in its original compliance examination on Pilatus Bank, this was merely an initial finding report. As is normal procedure, the FIAU gave Pilatus Bank some time to submit its representations, and the Bank’s representations included two independent reports by a Big4 audit firm and another from a leading Maltese law firm. In light of these representations, the FIAU conducted a follow-up onsite examination and submitted its final report in September 2016.
Manfred Galdes resigned because he wanted to move into private practice and two of the now-leaked FIAU reports were handed over to the police following his resignation. Both Ferris and Cronin were dismissed during their probationary period and this solely based on performance-related issues.
The MFSA
The government didn’t respond to reports of the MFSA’s handling of Pilatus Bank
Caruana Galizia report: The Malta Financial Services Authority received an application for the opening of Pilatus Bank from Seyed Ali Sadr Hasheminejad in December 2013 and granted him a license a month later. This is despite the fact that Sadr was only 33-year-old, had no banking experience and was an Iranian national with a St Kitts & Nevis passport. International sanctions and risk/compliance procedures were in place against Iran at the time and, in May 2014, the US Treasury actually issued a public warning to US banks against Iranians using St Kitts passports to circumvent sanctions.
The (now former) chairman of the MFSA Joe Bannister is also vice-chairman of FinanceMalta, a public-private partnership to promote Malta’s financial sector, making him both regulator and promoter.
An MFSA investigation of Pilatus Bank in 2015 found that Azerbaijan’s energy minister Kamaladdin Heydarov held an account there, posing a serious money laundering risk. The inspection also found that Keith Schembri and former EU Commissioner John Dalli had accounts at the bank, but their names were left out of the MFSA’s report. No action was taken against Pilatus Bank.
In May 2017, seven MFSA inspectors refused to carry out an inspection on Pilatus Bank and one of them, Mario Felice, resigned that week. According to media reports, the inspectors feared they would incriminate themselves as part of a whitewashing operation, similar to the FIAU’s follow-up inspection.
Government’s counter-report: The section of the MFSA is somehow missing from the government’s report.
The Central Bank
Caruana Galizia report: In March 2013, Joseph Muscat immediately tried to remove the Central Bank’s then governor – former PN minister Josef Bonnici – but his request was deemed abusive. Muscat therefore installed his favoured candidate Alfred Mifsud, who used to chair ONE TV and who had once employed Muscat himself at the now-insolvent Crystal Finance investment firm, as deputy governor.
Before Mifsud could succeed Bonnici as governor, the media revealed he was under police investigation for taking bribes back when he was chairman of Mid-Med Bank (now HSBC) in the 1990s. Muscat therefore installed as governor Mario Vella, a former PL president who used to mentor Muscat.
Government’s counter-report: The European Central Bank has never called into question the operations of the Maltese Central Bank, as it has vis-a-vis other EU member states.
Having occupied a political role is not a barrier to becoming a Central Bank governor. Indeed, the ECB’s governing council includes a former Belgian deputy Head of Cabinet, a former advisor to German Chancellor Angela Merkel, a former Greek finance minister, a former Austrian MP and a former advisor to the Estonian government.
Mario Vella has vast professional and academic experience in economic development and foreign direct investment.
The Police Force
Caruana Galizia report: Since 2013, Malta has seen five different police commissioners and the current one – Lawrence Cutajar – had once declared on Facebook that Muscat has “big balls”. The police sat on a number of damning FIAU reports and instead prosecuted Egrant whistleblower Maria Efimova for misappropriating funds from her former employer Pilatus Bank. Efimova fled to Crete, prompting the Maltese courts to issue a European Arrest Warrant for her head, which was recently turned down by the Greek courts.
Government’s counter-report: A recent Sunday Times survey found that the police force was trusted by 69% of the Maltese public. Since 2013, the PL government has introduced the right to a lawyer during police interrogations, a whistleblower protection act, and the unionisation of police officers. The police force’s recent successes include the recent seizure of the largest drug haul in Malta’s history.
The Planning Authority
Caruana Galizia report: Development permits have always been used for political patronage, with a recent study published by Cambridge University Press finding more ODZ permits are granted during election months. The MEPA reform of 2016 broadened the scope for political corruption in the land sector and in the five weeks before the 2017 election, the PA issued a whopping 1,247 permits and regularised 588 illegalities.
Government’s counter-report: Environmentalists had long called for the decoupling of MEPA into separate planning and environment authorities. The MEPA reform has led to an “equity of power” between the Planning and the Environment Authority and both may appeal each other’s decision – as indeed ERA has done against the PA’s approval of the Townsquare skyscraper.
The spike in permits in May 2017 had nothing to do with the election, and in fact all preceding months that year saw an increase in planning permits when compared with 2016.
The President
Caruana Galizia report: President Marie-Louise Coleiro Preca had been active in the PL for 40 years, serving as its general secretary in the 1980s. She has employed several PL officials and their relatives, pardoned Zurrieq mayor Ignatius Farrugia from serving four days in prison for harassing Daphne Caruana Galizia, and attended several events at the Montekristo Estate – despite it being riddled with planning illegalities. Although the President takes an oath to preserve and protect the Maltese Constitution, Coleiro Preca has been absent from debates about the rule of law.
Government’s counter-report: All former Presidents, barring Sir Anthony Mamo, had been active politicians – including former PN Prime Minister Eddie Fenech Adami and former PN ministers Guido de Marco, Ugo Mifsud Bonnici and Censu Tabone. Marie-Louise Coleiro Preca’s appointment was only the second time a Maltese President was voted unanimously by Parliament.
Ignatius Farrugia was pardoned because of an error by the Court of Appeals, while it was only under a Labour government that enforcement action started to be taken against the illegalities at the Montekristo Estates.
The Armed Forces
Caruana Galizia report: The army is led by Jeffrey Curmi, a family friend of Muscat who held the rank of Major in 2013 but who shot up the ranks three times in the subsequent three months to become Commander of the Armed Forces. His deputy commander Mark Mallia was promoted twice in four weeks.
More than half the soldiers received a salary increase during last year’s election campaign and 885 of them received promotions. The promotions were granted by an Injustices Board chaired by former AFM Commander Maurice Calleja, who was forced to resign in 1993 after his son and daughter had used the family home for drug trafficking.
Government’s counter-report: The only time army promotions were used as political patronage was between 2005-2012, as confirmed in an Ombudsman’s report. Promotions cannot be abused as a tool of political patronage as the number and type of given ranks is laid down depending on the size of the army.
Curmi is not a family friend of Muscat and was successfully promoted after going through a selection process. The selection process was decided by a committee which included retired Brigadie Martin Xuereb, a very close friend Malta’s ex permanent representative to the EU Richard Cachia Caruana.
Parliament
Caruana Galizia report: 31 out of 37 Labour MPs, as well as seven Nationalist MPs have declared government appointments, meaning 56.7% of Malta’s parliamentarians are employed by the government.
Government’s counter-report: The PL government passed a bill to render Parliament financially autonomous from the central government. A Parliament TV station has been launched, a parliamentary committee has been set up to scrutinise public appointments, and a Commissioner for Public Standards will be appointed by a two-thirds majority.
The Media
Caruana Galizia report: Reno Bugeja, the Head of News of state-owned PBS, has been criticised for bias towards the Labour Party and for failing to cover mass civil society protests in the wake of Daphne Caruana Galizia’s assassination. Complaints about due impartiality must be made to the Broadcasting Authority whose CEO is Reno Bugeja’s niece Joanne Spiteri.
After 2013, several journalists moved from One TV to PBS and programmes run by government critics – such as Bondi+, Times Talk, TVHemm and Salvu Mallia’s Madwarna – were dropped.
There is only one journalism module at the University of Malta, which is taught by education minister Evarist Bartolo and Adrian Hillman, who had resigned as the managing director of Allied Newspapers after an FIAU report found he had received alleged kickbacks from Keith Schembri. Schembri has also “co-opted” MaltaToday through its managing editor Saviour Balzan.
Government’s counter-report: The structure of PBS has not changed since the last reform carried out by PN minister Austin Gatt. However, the board of directors now includes people with diverse political backgrounds – including former PN leadership contender Frank Portelli.
Reno Bugeja is one of the most senior journalists in Malta, was the “lead journalist” following Eddie Fenech Adami in the 2003 EU referendum, and was never found in breach of impartiality obligations by the Broadcasting Authority. Bugeja’s predecessor Natalino Fenech was known to be close to the ruling PN government and was indeed condemned multiple times for pro-PN bias by the Broadcasting Authority. Joanne Spiteri has a Ph.D in news impartiality and had worked her way up through the ranks of the Broadcasting Authority.
The PBS newsroom only includes one former ONE employee and it has retained journalists who used to work for Nationalist ministers or for the PN’s media station NET.
Lou Bondi stopped his Bondi+ programme himself and TimesTalk had been introduced under a PL government. Saviour Balzan is a vocal critic of the current government and is only being attacked because he had exposed the oil scandal at Enemalta back when journalist-blogger Manuel Delia was chief of staff to energy minister Austin Gatt.
Former Times of Malta journalist Caroline Muscat resigned from The Times in 2016 to run the PN’s election campaign and former Malta Independent managing editor Pierre Portelli resigned in 2017 to head the PN’s media.
Evarist Bartolo and Adrian Hillman have lectured at the University for several years. Former EU Commissioner Tonio Borg and several former PN ministers currently lecture law.
The government is set to pass a new law that will abolish criminal libel, introduce out-of-court mediation and only permit slander cases on the basis of statements that cause serious harm to a person’s reputation.
The National Statistics Office
Caruana Galizia report: In July 2013, the chairman of the Malta Statistics Authority – which supervises the NSO – was replaced by Albert Leone Ganado, an IT professor who used to chair a PL-aligned anti-EU lobby group. A year later, Finance Minister Edward Scicluna publicly contradicted the NSO’s public sector employment statistics. His claim was refuted by the NSO’s director-general Michael Pace Ross, who was informed two months later that his contract would not be renewed. Pace Ross’s successor Reuben Fenech resigned in December 2017, reportedly due to an “uneasy relationship” with Scicluna, and his successor has not yet been appointed.
Government’s counter-report: The section of the NSO is somehow missing from the government’s report.
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