Day two of The Daphne Project has dealt a major blow to the Maltese government. An email has finally been published showing concrete evidence of how the Panama companies of Chief of Staff Keith Schembri and Tourism Minister Konrad Mizzi were not only designed in the same way but destined to receive huge amounts of money from the same clients. What’s even more interesting is the way the two men have reacted. One is claiming the Dubai company 17 Black was just mentioned as part of his many business plans. The other still insisted his offshore structures were merely a family trust. They may have just painted themselves in a very awkward corner because the published emails say otherwise.
What exactly was revealed today?
The Times of Malta and the Süddeutsche Zeitung released details of a secret Financial Intelligence Analysis (FIAU) report that found that two Dubai companies called 17 Black and Macbridge had been set up as a vehicle through which to transfer kickbacks to Mizzi’s and Schembri’s Panama companies.
This part of the FIAU report had already been published a week before last year’s general election and the entire report has been handed over to a magistrate by Nationalist MEP David Casa. However, today’s leak includes an interesting email sent by Mizzi’s and Schembri’s consultants Nexia BT to Panamanian law firm Mossack Fonseca on 17th December 2015 – two months before Daphne Caruana Galizia first started writing about the Panama Papers.
The Panama companies had already been set up by then and Nexia BT partner Karl Cini emailed Panamanian law firm to open bank accounts for these two companies with the Witherbotham bank in the Bahamas.
In the email, Cini switches from referring to the two companies as plural to referring to a singular company in the section of ‘current assets of the company in USD’ and ‘Last reported earning’.
“The company has no assets for the time being. It is a new setup and has not started trading yet,” Cini wrote.
However, in the very same email, he wrote that the two companies would be operating in the maritime and fisheries sector in Bangladesh, tourism in Asia, infrastructure projects in African countries and Indian, as well as recycling and remote gaming. Cini also states that Schembri’s and Mizzi’s main target clients will be Dubai companies called 17 Black and Macbridge and that these two companies will transfer €150,000 a month to Mizzi’s and Schembri’s companies.
How have Schembri and Mizzi responded?
Keith Schembri issued a statement a few minutes after the report was published to insist that neither he nor his companies had ever conducted any transactions with 17 Black or Macbridge and that the two companies were merely “included in draft business plans for my business group as potential clients.”
Konrad Mizzi took his time and issued a longer statement, insisting his company and trust have no connection with 17 Black, and reiterating that his company had never traded or held a bank account and that a international audit firm had proven that his structure was solely intended as a family trust.
So Karl Cini told Mossack Fonseca that both companies will be operating in diverse business ventures around the world, Keith Schembri stuck with his explanation that the was expanding his business interests, but Konrad Mizzi stuck with his original line of defence that he had created the offshore structure as a family trust.
At this stage, it is clear to state that someone is not telling the truth. Either Nexia BT messed up big time by confusing Mizzi’s and Schembri’s companies with each other, or Mizzi just slipped up and gave the game away, or all the major players are lying through their teeth.
Moreover, their denial doesn’t even make sense to begin with. Let’s assume Mizzi and Schembri are telling the truth and had absolutely no idea what 17 Black and Macbridge are and what money was transferred to their bank accounts.
Karl Cini’s email to Mossack Fonseca clearly lists 17 Black and Macbridge as the only two main target clients for Schembri and Mizzi’s Panama companies, so if Mizzi and Schembri are telling the truth, then it can only mean one thing. It would mean that Karl Cini had informed Mossack Fonseca that these Dubai companies will be paying money into Mizzi’s and Schembri’s new bank accounts without even informing Mizzi and Schembri where their own money will be originating from….
What else did the leaked FIAU report reveal?
The FIAU report finds that attempts by Nexia BT to open bank accounts for the two companies halted abruptly in February 2016, right after Daphne Caruana Galizia first started writing about them. Mizzi and Schembri closed down their companies and Mossack Fonseca was itself forced to close its doors in the wake of the Panama Papers scandal.
The FIAU report also states that 17 Black had received three payments – one single payment of €161,000 from the local agent for the tanker supplying gas to the LNG power station and two separate payments amounting to €1.1 million from an unnamed Azeri national. To make matters worse, the €1.1 million was sent to 17 Black via ABLV, a Latvian bank that was recently embroiled in an international scandal after the United States accused it of enabling transactions linked to North Korea’s weapons program and of facilitating corruption connected to Azerbaijan, Russia and Ukraine. The European Central Bank eventually forced the bank to close its doors.
The FIAU’s report also confirms that US anti-money laundering authorities had flagged to it transactions concerning 17 Black as possible “shell company activity, suspicious wire transfers and money laundering”.
Now let’s rewind the clock a bit
Back on 22nd February 2016, Daphne Caruana Galizia uploaded a cryptic blog post saying then energy minister Konrad Mizzi will be eating New Zealand lamb courtesy of Brian Tonna, partner of San Gwann based audit firm Nexia BT. Mizzi reacted by revealing he set up a trust in New Zealand and Caruana Galizia then swept the rug from under his feet, revealing that the trust also owns a Panama company and that the Prime Minister’s chief of staff Keith Schembri owns a similar offshore structure. What followed was months of political chaos, with the information revealed to be part of a worldwide expose on Panamanian law firm Mossack Fonseca and Mizzi eventually stepping down as Labour’s deputy leader but maintaining a ministerial portfolio.
Throughout the ordeal, Mizzi and Schembri’s main line of defence was that their companies never traded or held any bank accounts, ie. no money was ever laundered through them.
On 22nd February 2017, exactly a year after her ‘lamb’ blog that triggered the Panama Papers, Daphne Caruana Galizia published another cryptic post on her blog. The blog merely read “17 Black – the name of a company incorporated in Dubai” and included the faces of Muscat, Schembri, Mizzi and former EU commissioner John Dalli. After Muscat denied any knowledge of the company, Caruana Galizia teasingly said that he should ring up police commissioner Lawrence Cutajar or Financial Intelligence Analysis Unit (FIAU) boss Kenneth Farrugia.
So what happened to 17 Black?
The story died for a few months but returned with a bang a week before last year’s general election. On 26th May 2017, moments before the final Xarabank debate between Prime Minister Joseph Muscat and then Opposition leader Simon Busuttil, The Malta Independent published transcripts from an unfinished FIAU document which said that 17 Black and another Dubai company called Macbridge were set up in July with the express intention of transferring kickbacks to Mizzi’s and Schembri’s Panama companies. The Malta Independent didn’t publish the report but quoted excerpts from it, including how Nexia BT partner Karl Cini had described the two Dubai companies to Mossack Fonseca as the “target clients” of Mizzi’s and Schembri’s Panama companies.
The report also said there were two attempts to transfer money to 17 Black by Orion Engineering – a Maltese company owned by Mario Pullicino, who is the local agent for the tanker supplying gas to the LNG power station. A week later, Pullicino issued a categorical denial that his company had paid any kickbacks through 17 Black.
Other revelations include how Mizzi’s bank deposits only amounted to €92,000 despite his having declared €389,440 in Parliament and how he had travelled to China 17 times between November 2013 and March 2016.
So what happened next?
The story’s impact was drowned out by the general election, which saw Labour return to power with a massive majority, Konrad Mizzi increase his vote percentage and earn the tourism Cabinet portfolio, and Keith Schembri re-appointed as Joseph Muscat’s chief of staff.
Ten days after the election, finance minister Edward Scicluna demanded the FIAU answer how the sensitive reports were leaked and suggested they had actually been written to be leaked for political purposes. Three days after Scicluna’s statement, the FIAU dismissed Charles Cronin and Jonathan Ferris, who headed the anti-money laundering agency’s compliance and financial analysis sections respectively. Both Cronin and Ferris were dismissed during their probationary periods and the FIAU has insisted they were only removed because they were not up for the task.
While Cronin has disappeared into the night, Ferris has insisted he was sacked because he was digging into stories that could harm the government and is currently seeking legal whistleblower status.
What key questions remain unanswered?
There are still quite a lot of questions surrounding the case:
– Who owns 17 Black?
– Do Konrad Mizzi and Keith Schembri know who owns 17 Black?
– Why did Daphne Caruana Galizia include John Dalli’s face in her original exposé?
– Who is the Azeri national who paid €1.1 million ($1.4 million) to 17 Black?
– Is the story in any way linked to Caruana Galizia’s famous claim that the Panama company Egrant is owned by the Prime Minister’s wife and had received several payments, including one of $1.017 million from a Dubai company owned by the daughter of Azerbaijan’s ruler Ilham Aliyev?
– Did 17 Black receive any other payments besides the two mentioned in the FIAU report?
– What about Macbridge? Who owns it and did it receive any payments from anyone?
– What exactly were the maritime, tourism, infrastructure, gaming and recycling companies that Mizzi and Schembri were planning to set up?
-Why did Karl Cini refer to Mizzi’s and Schembri’s Panama companies in the same breath if they had different reasons for opening up their companies? Were they planning to enter business together and, if so, how does Mizzi feature in Schembri’s business plans?