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Vitals Explained: How An Inexperienced Company Was Given Reign Over Three State Hospitals And Left A Debt Of €36 Million

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Two years after crashing out of their concession to run three state hospitals in Malta and leaving a debt of 36 million, Vitals Global Healthcare remains an ever-present in the news and is still subject to a magisterial inquiry, a court case, and other revelations.

Its successor, Steward Healthcare, was brought in to pick up the pieces. However, this threatens to grind to a halt, with the operator demanding an urgent meeting with government over its failure to cough up some €18 million in due reimbursements.

Opposition leader Adrian Delia has called for the deal to be scrapped in its entirety and for the hospitals to be returned to the public, revealing that Panama Papers accountancy firm Nexia BT played a crucial role in choosing VGH.

The company crashed out of the concession after crumbling to growing financial pressure less than 21 months into a 30-year concession. It’s CEO, Ram Tumuluri, still made off with €5 million bonus.

But with twists, turns, name changes, and a takeover, VGH’s complex web has proven challenging to follow, even for the most ardent political supporters on the island. Here’s a look at the deal from its inception.

1. How did the deal come about?

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 2014.

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, journalist Daphne 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 as already in place.

A few weeks later, Projects Malta issued a request for proposals for a concessioner for the management and operation of St Luke’s, Gozo General Hospital and Karin Grech. The government binds chosen investors to invest at least €200 million into the project.

 

2. A flawed bidding process?

Three investors were eventually revealed to be competing for the bid: Vitalis Global Healthcare and Bluestone Investments (a joint offer), Image Hospitals and BSP Investments Ltd.

A three-person evaluation committee was set up and tasked with assessing the privatisation deal. One of the men, Manuel Castagna, was appointed to the committee by Konrad Mizzi’s Projects Malta.

Castagna is the Nexia BT partner assigned to audit Keith Schembri’s local Kasco empire. The firm’s managing director Brian Tonna is also facing allegations of running a passport kickbacks scheme with Schembri.

The evaluation report was finished in June 2015, around the same time Nexia BT started hunting around the globe to set up offshore accounts for Keith Schembri, Konrad Mizzi, and Egrant, eventually settling on Panama.

The report quickly dismissed two of the bidders due to a lack of bid bonds and missing documents. Meanwhile, they were full of praise for the Vitalis submission, awarding them the highly lucrative contract.

The financial assessment, carried out by Castagna, said the bidder’s financial plan shows profitability and sustainability throughout the 30-year concession period. Meanwhile, the report claimed that VGH has “experience in various sizeable projects”, had “previously invested in various portfolio projects” and “showed operational experience”.

3. A pre-ordained deal?

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 on September 2015.

There was massive debate over the contract that was signed, which was only published a year later and was heavily redacted.

After acquiring an unredacted version of the contract, Times of Malta revealed that the government and VGH had signed a memorandum of understanding by February 2015, two months before the request for proposal was issued.

After their quick-fire exit in 2017, documents show that Vitals may have even reached the agreement for the concession in November 2014, a full five months before the public call.

The revelations confirmed Caruana Galizia’s earlier reports.

4. Who owns VGH?

Eventually, the memorandum of understanding was published in court by one of Vitals’ shareholders, revealing a complex web of ownership.

Primarily, 70% of it is owned by a particular purpose vehicle jointly owned by Tumuluri, Pawley, and two unknown figures – Ashok Rattehalli and Ambrish Gupta. The remaining 30% of the ownership remains a mystery.

Pawley’s company also owns 70% of a separate company Crossrange Holdings, with the remaining 30% owned by Shaukat Ali Chaudry and Dubai-based consultant Mohammed Shoaib Walajahi.  Crossrange owns two companies which were opened to hold the assets of the aforementioned special purpose vehicle.

5. And who is Technoline?

In July 2017, VGH signed a deal with well-established medical supplier Technoline for the exclusive procurement of medical equipment for its three hospitals.

The deal understandably angered Technoline’s competitors, who were now forced to submit bids for equipment of those three hospitals to a direct competitor, giving it inside knowledge of their own prices.

Only a few months before this deal was struck, Technoline changed hands, with manager Ivan Vassallo buying out the firm’s shareholders – the Guillaumier and Cusens families – in two separate deals.

After this deal, a certain Pakistani national called Yaser Ali Badar was listed as a Technoline director, a move that raised eyebrows given that he was registered as living in the same Tigne apartment as VGH investors Shaukat Ali Chaudry, believed to be a relative of Badar.

It was later revealed VGH had actually used a Jersey company to loan Vassallo’s company €5.14 million in December 2016, a few months before he bought out Technoline’s shareholders.

6. How much did the deal cost?

VGH was set to pocket more than €2.1 billion over 30 years for the concession, with the exisiting content of the hospitals including expensive medical equipment being passed on for practically free.

The unredacted contract revealed that taxpayers were paying VGH around €188,000 a day (€70 million a year) to provide hospital beds to the state, €1.2 million a year for the Barts medical school, and a further €1 million for a helicopter service.

 

7. When did Steward take over?

Armin Ernst eventually resigned as Vitals CEO, with VGH citing “personal problems” as the reason for his departure. Ernst returned to the United States and became the president of Steward Healthcare Group

Lovin Malta revealed that Steward would be taking over from VGH in December 2017, with the agreement coming into force a few months later. During this period, Delia filed a cased to scrap the deal, which continues on till today.

8. What’s happened since?

Three ministers, Konrad Mizzi, Chris Cardona, Edward Scicluna, are now subject to a magisterial inquiry over the deal.

Spurred on by activist group Repubblika, the three have been accused of facilitating a “coordinated act of modern-day piracy”, “corruption and money laundering, among other crimes”.

Meanwhile, Steward entered renegotiations of their contract with the government sometime last year. However, this seems to have ground to a halt ever since Prime Minister Robert Abela took over the administration.

After revelations that VGH left a debt of €36 million, several government figures, namely Health Minister Chris Fearne, have issued strong statements on the issue. On the other hand, Steward has since revealed that the government owns them a huge €18 million.

Abela has been non-committal telling NET News that decisions would be taken but failed to say who would take responsibility for the failures of the controversial hospital deal.

However, with massive penalty clauses should the government default on the contract, it remains to be seen how the situation will develop.

 

READ NEXT: Here’s Why Malta Should Be Taking Pieter Omtzigt, The Author Of A Damning Rule of Law Report On Malta, Very Seriously

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