Joseph Muscat’s house of cards is tumbling. Keith Schembri’s arrest and charge on money laundering and corruption accusations is a watershed moment in Malta’s history.
Malta’s former OPM chief of staff has been denied bail after a court heard how he used complex offshore structures to potentially receive kickbacks on Times of Malta’s purchase of printing equipment and the controversial citizenship-by-investment scheme.
It has exposed his modus operandi. However, it raises grave fears on whether Muscat’s right-hand-man manoeuvred through opaque structures to pocket big on the many multimillion-euro deals under their tenure.
From 2013 and 2019, the two amigos reigned over the political climate – positioning Malta as an investment-ready country, regardless of who came knocking.
New revelations have taught us a lot about past misdeeds, but what could they teach us about long controversial deals?
Here’s a look at 10 major scandals that need to be examined by authorities, journalists, and the public at large.
The one that started it all. Radical change to Malta’s energy grid was the cornerstone in former Prime Minister Joseph Muscat’s crusade to get the Labour Party back in government.
Soon after becoming Labour Party leader in 2008, Muscat appointed his right-hand-man Keith Schembri as the chairman of the party’s working group of energy.
By September 2012, now disgraced former minister Konrad Mizzi was chosen to be the Labour Party’s spokesperson for energy.
An ambitious energy project was a vital part of the 2013 campaign, and barely a month after winning a landslide election against the PN government, Enemalta issued a call for expression of interests for the power station project.
The ElectroGas consortium was selected to build and operate the LNG power station in Delimara on 13th October 2013, with a deal 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.
On 14th October 2013, Daphne Caruana Galizia published an article pointing towards a pre-ordained deal, pointing to a quote Yorgen Fenech made in a Times of Malta article.
“The devil is in the detail, and the government isn’t bothering to pretend anymore. That’s how far things have slipped already in seven months,” Daphne wrote.
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 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 has now been revealed that Macbridge’s parent company, Dow Media, also received €1 million from 17 Black.
The companies are also linked to a controversial Enemalta purchase of Montenegro windfarms. But more on that later.
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, would have been devastating for the country and triggered a collapse in the government.
2. The Individual Investor Programme
The Individual Investor Programme, known also as the passport scheme, the golden visas scheme or the citizenship-by-investment scheme, was one of the first major proposals under Muscat and Schembri’s administration.
Voted into law in November 2013, despite not being in the electoral manifesto, the IIP scheme allowed non-EU citizens to become Maltese citizens through a €400,000 payment – with dependents getting a discounted price.
It has long been controversial. Beyond serious questions surrounding the ethics of selling citizenship, major doubts were raised on the due diligence processes of the IIP scheme with applicants hidden behind opaque structures and poorly defined lists.
Caruana Galizia was a vocal critic of the scheme and its questionable processes, particularly Henley and Partners’ role in leading the scheme. However, it was only until 2017 till allegations of kickbacks and commissions emerged.
On 25th April 2017, days before Muscat would call a general election, then-PN leader Simon Busuttil revealed that 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 only recently being charged with a litany of offences including money-laundering, corruption, fraud, and false declarations over the revelations.
Muscat had staunchly defended his right-hand man, going on to win the election and reappoint Schembri as his chief of staff. Busuttil has since told Lovin Malta that he fully expected the pair to resign, adding that Muscat “fraudulently” used the election to absolve the allegations.
The IIP scheme has since undergone several reforms. However, questions still remain over the practices employed by the scheme.
3. Shanghai Electric
On 11th March 2014, a beaming Mizzi and Muscat announced that they had signed a €320 million investment deal with the Chinese energy company, Shanghai Electric Power.
Through the agreement, Shanghai Electric obtained a 33% stake in Enemalta, for which it paid €100 million, and purchased a 90% shareholding in the BWSC plant for €150 million. In return, Enemalta would buy back energy from Shanghai Electric.
The Chinese company also fronted the conversion cost of €70 million to shift the BWSC plant from working on heavy fuel oil to gas.
The pair were glowing over the investment, which proved to be a catalyst in providing the foundations for Enemalta to reduce its debt and later controversially purchase a Montenegro windfarm – with Fenech’s 17 Black playings a key role (more on that later).
In 2017, it was revealed that Shanghai Electric was making €41,000 in profits every day selling energy back to Enemalta from the BWSC power plant.
Chen Cheng is said to have played a key role in negotiating the multimillion-euro deal and other Enemalta purchases. Revelations that his mother-in-law is the owner of Macrbidge raises serious questions over the deals.
Shanghai Electric has distanced itself from Cheng, insisting that he was never an employee. Still, recent revelations cast a murky shadow of China-linked deals undertaken by Muscat and Schembri’s administration.
4.Vitals Global Healthcare
Barely two years into the administration, Muscat and Schembri set their sights on siphoning off three state hospitals to private industry.
Then-Health Minister Godfrey Farrugia was the first to announce that the government had reached an agreement with Queen Mary University of London to open a branch of Barts’ Medical School in Gozo, way back in February 2015.
However, he unexpectedly resigned a month later with Konrad Mizzi, who was serving as Energy Minister, eating up his portfolio.
In March 2015, the Barts’ deal was signed with Mizzi, also revealing that a new wing will be built at Gozo’s General Hospital. He pledged it would boost the Gozitan economy and drastically improve healthcare services on the island.
Two days later, Caruana Galizia revealed that the government had already struck a deal with Oxley Capital Group, a Singaporean private investment firm, for the refurbishment of the Gozo and St Luke’s hospitals. Its CEO is Mark Pawley.
She reported that Oxley had sent a Pakistani-Canadian businessman called Ram Tumuluri to the Malta offices of PricewaterhouseCoopers in January 2015 and made it clear that a deal was already in place.
Projects Malta issued the bid a few weeks later. A flawed bidding process ensued with Nexia BT’s Manuel Castagna (who has since been charged with Schembri and Tonna) sitting on a three-person evaluation committee.
Documents now show that Vitals had even signed a memorandum of understanding for the concession in November 2014, a full five months before the public call.
By June 2015, Mizzi had confirmed that the Vitalis/Bluestone joint offer had won the bid to invest in the three hospitals. The renamed Vitals signed its 30-year concession in September 2015.
Vitals crashed out of business amid mounting financial difficulty around 21 months later, despite heavy funding from taxpayers coiffeurs, leaving 36 million in debt.
Schembri, Muscat, and Mizzi played a direct hand in bringing on Steward Healthcare to save the collapsing project. They were even the ones who even gave Steward certain assurances to take over the deal, like a guaranteed 100 million should the government revoke the concession.
A National Audit Office report has since found evidence of collusion in the Vitals deal, while a magisterial inquiry is currently underway.
5.The American University of Malta
Announced in June 2015, the American University of Malta immediately courted controversy as the original plan was to construct a campus on a large tract of government-owned virgin land at Żonqor Point in Marsaskala.
Sadeen Group, who was behind the project, had no previous experience in education, raising serious questions on their credentials and the government’s intentions for the project.
It was one of the first major controversies under Muscat’s administration, with the Panama Papers still a year away. Protests broke out, with the government eventually handing over the refurbished Dock 1 in Cospicua.
Since its inception, the AUM has had difficulty attracting a large number of students, with the number still remaining far lower than what was initially promised. Meanwhile, reports have raised concerns over its current financial situation.
The accounts of the AUM’s operating company, Sadeen Education Investment Ltd, show that the AUM had registered more than €11 million in losses in 2018 and 2019. It also had multi-million euro loans with its owners.
Adrian Hillman, the former managing director at Allied Newspapers who is the focus of one magisterial inquiry which led to the recent arrests, was appointed to the AUM board after losing his job over the kickbacks allegations. He was removed once Robert Abela was appointed Prime Minister.
There have been no outright allegations of corruption. However, Muscat’s insistence on ploughing through with the project despite the overwhelming red flags raises far more questions than answers.
6.Enemalta’s dodgy 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, 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 loaned the €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 continue to raise 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.
7. DB’s ITS deal
In November 2016, Projects Malta Ltd issued a request for proposals for the design, build and operation of a mixed tourism and leisure development in St Julian’s on the site occupied by the Institute of Tourism Studies.
In February 2017, the government unveiled a major private investment to be called DB City Centre. DB’s Seabank Consortium, the sole bidder, won the bid.
Pitched as €300 million investment, the project would include a hotel, residences, and commercial outlets.
The government originally said it gave the land to DB’s Silvio Debono for 99 years, in return for €60 million. This was criticised by some experts who estimated its value to be closer to €100 million.
But according to an analysis of the contract by Times of Malta, DB Group would only end up paying €15 million for the land. The rest of the money would come in the form of ground rent from those who buy apartments, offices and garages.
The deal with the government was finalised at a value of €56 million. The NAO eventually valued the ITS site in 2016 at €67 million, which was €11 million more than that agreed on the deed between the government and DB. However, it said the price was reflective of the adjusted plans.
Years before db Group’s deal for the ITS site was even signed, Caruana Galizia was already warning that a backroom deal had been struck between db Group and the government.
She would also later expose that db was already selling its plans to develop a hotel and a high-rise luxury living complex on the piece of prime government land months before it was even granted a permit.
In what became a recurring theme towards the end of Caruana Galizia’s life, DB’s owner Silvio Debono issued a massive 19 libels against her, one for each sentence in a particular blog post.
Matthew Pace, the Zenith director part of the 10 facing money laundering charges with Schembri, sat on the PA board that approved the project.
The conflict of interest issue saw Pace leave the board and send the plans back to the drawing board.
The controversial tower project has been linked to corruption and political favouritism claims for more than four years now. Nothing has been proven. However, recent revelations mean the issue must be scrutinised further.
An NAO report into the deal was particularly critical about the RfP issued by Konrad Mizzi’s Projects Malta in late 2015 and questioned its legal validity.
The NAO said that Projects Malta had failed to obtain authorisation from the Contracts Department before issuing a request for proposals in November 2015 for the design, build and operation of a mixed tourism and leisure development on the site occupied by the Institute of Tourism Studies.
It raised concerns about the entire process. However, no wrongdoing was found.
8. Crane Currency
Next up is Muscat and Schembri’s plans to bring Crane Currency to Malta’s shores. On 21st September 2016, Independence Day, Muscat announced that he had signed an agreement worth $100 million with Crane Currency.
Schembri, who led the negotiating team, was described by Muscat as being “the catalyst in making sure things got done” when announcing the deal.
Soon after, Ivan Camilleri at the Times of Malta revealed that Schembri’s company would supply crane’s printing machinery. Supplying the machines would also see the company benefit from regular income from maintaining the machines.
It was also revealed that the government would fork out €27 million to build Crane’s Ħal Far base, while the government would guarantee around 75% of the company’s €72 million loans.
Crane is yet to face any major allegations of corruption. However, the deal itself is uncomfortably similar to that at Progress Press, which saw Schembri overcharge the publishing house by over 6 million to distribute kickbacks. His company also earned around 21 million in supplying raw materials in the years that followed.
Schembri and 10 others are currently facing criminal charges over the Progress Press deal. Questions must be asked whether the National Audit Office should look into the deal.
9. Tuna kickbacks scandal
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 are seen by this newsroom also showed that some officials at the Ministry, including now-FMAP spokesperson Charlon Gouder, Minister Jose Herrera and Permanent Secretary Joe Caruana, were well aware of the numerous abuses taking place in Malta’s fish farms.
Soon after calling a general election in 2017, then-Prime Minister Joseph Muscat unveiled a proposal to spend €700 million (spread over seven years) to upgrade Malta’s road network.
Once Muscat and Schembri orchestrated another electoral win, the pledge became a reality. Infrastructure Malta’s Frederick Azzopardi, who was at the helm of Enemalta while the controversial deals took place, has been key to that.
Over the last few years, roads around Malta have been stealthily upgraded, oftentimes at the expense of agricultural land. It has created a tense atmosphere with activists, with Infrastructure Malta often times instituting road works with questionable permits.
However, the focus should be geared towards where that €100 million-a-year kitty is going. Should Schembri be found guilty, it would raise serious questions on whether the early election proposal was a pledge or an invitation.
Schembri and Muscat had a lot riding on that election – with two magisterial inquiries instituted in that period resulting in charges. Getting cash-rich developers on board to help fund a stellar campaign would help ease concerns.
Meanwhile, Schembri’s wife, Josette Schembri Vella is a shareholder in Carmel Limited, the sole shareholder of Central Asphalt Limited, a roadworks company.
Official figures show that Central Asphalt Limited made millions under the Labour Government, pocketing €2,345,747 over 14 contracts and two direct orders. Meanwhile, the Kosta Joint Venture is estimated to have earned the company around €14,000,000.
The company was also part of a consortium awarded a €6,000,000 contract to help complete the Marsa Junction Project.
This puts Central Asphalt’s total government earnings between 2013 and 2019 at around €16,435,000.
Schembri Vella does not play an active role in Central Asphalt. However, her husband’s role in key electoral pledges means that every road contract must be looked at with a new lens.
Schembri’s charge could be the start of a years-long dismantling of a decades-old structure of corruption and organised crime that invaded the very top levels of our government.
The list of deals led by Muscat and Schembri is far too long for one article, which is why a collective effort from authorities, the public, and those who are too scared to come forward is necessary for the nation to find justice and finally move forward.
Inaction likely cost Daphne Caruana Galizia her life. We cannot wait any longer.
If you’ve got a personal experience with corruption, whether it involves Schembri or not, and regardless of which government administration it happened under, we’d like to hear from you.
Share if you believe investigations should be opened into every Keith Schembri-linked deal under Joseph Muscat’s tenure