A provision in the recent revisions to the controversial Individual Investors Programme is set to leave Henley & Partners millions of euros richer, by allowing the company to hold on to prospective Maltese citizens’ donations for up to two years.

This issue has been raised by Canadian immigration consultant Nuri Katz, who also insists that Malta should never have granted the role of a “concessionaire” to a private company in the first place, arguing that government agency Identity Malta should assume responsibility.

Mr Katz, the president of Apex Capital Partners – which itself advises clients seeking to obtain second citizenships in a number of countries – points out that in all other similar schemes elsewhere on earth, the responsibilities the role entails are handled exclusively by government entities.

He is also adamant that the revised version of the programme announced last month has only made the situation worse, citing the abovementioned provision as a key reason.

He observes that the government’s public call for interest, which was published last June, called for a concessionaire “to design, manage and basically run the programme on an exclusive basis for the government. Such a concept of a private company managing the immigration for a country is something that I am ideologically opposed, and have seen almost happen only once before in the history of the world.”

That “almost” refers to Antigua and Barbuda, a Caribbean country with a population of some 80,000 people that recently approved its own citizenship by investment programme, and which Mr Katz currently calls home.

But the scheme had proved to be controversial, and Henley & Partners’ envisioned role – similar to the role it was granted in Malta – had proved to be a contentious issue in the country’s bicameral parliament. The Antiguan senate rejected the Bill twice before it was revised.

As a result of the revision, Henley & Partners’ role was significantly reduced, and the company was given a six-month consultancy contract which expired last month. The Antiguan government opted to build its own capacity to process citizenship by investment applications, including by recruiting a former Canadian government official on a two-year contract to set up and manage an appropriate authority and prepare for his own replacement.

On the other hand, the contract between Malta and Henley & Partners is a 10-year contract, with an option to extend it for a further 10. Only a few details of the contract have been made public, prompting an incredulous Mr Katz to wonder how Maltese MPs actually voted for the programme.

Mr Katz had also closely followed the situation in Antigua and Barbuda, and before the country’s programme was revised, he wrote to Antiguan attorney general Justin Simon to flag the inherent conflict of interest. In his reply, Mr Simon pointed out that he “always wondered” about the government’s “rush to enter into that agreement before the Bill was passed in Parliament.”

 

Why the rush?

A similar situation has occurred in Malta: the contract was signed months before the programme was approved in Parliament along strict party lines. Inevitably, this makes Dr Simon’s question equally relevant in this island nation.

The most obvious answer, perhaps, is the financial aspect: just last Friday, Prime Minister Joseph Muscat, in a display of one-upmanship, bragged that the projected revenue exceeds the €1.128 billion in EU funds secured by his predecessor Lawrence Gonzi’s government.

But at the same time, the government is strenuously denying that it is desperately in need of cash, which would suggest that there is no need to rush through the process, allowing for the drafting of a scheme which would be less controversial. However, the government’s apparent impatience in getting the law through suggests otherwise.

The Bill amending the Citizenship Act was approved in Parliament in November, only to be slated for revision in the wake of a negative international press. Consultations were far from comprehensive, and after talks between the government and the Opposition broke down, a revised programme was swiftly presented two days before Christmas, a period in which media coverage tends to drift away from politics.

Any other reasons spurring the government to seek to implement the programme in short order are unknown, although Mr Katz argues that it is likely due to Henley & Partners’ own financial interest in the programme.

He points out that the programme itself appears to have been drafted in just a few weeks: the contract with Henley was signed in late August, but in early October the company was already planning an event in London to promote the new law – which took place at the end of the month, with Dr Muscat’s participation.

Mr Katz also points out that the conference on citizenship that took place in Miami last November – when the international press was widely disparaging the scheme that had just been approved – saw the Maltese government “sponsor its own embarrassment”.

“There was a rush to help Henley make money faster. They were willing to overlook so many things, put the government at risk, the country at risk...” he muses.

 

Henley ‘should have been fired’

Mr Katz remarks that the original call for interest for a concessionaire immediately reminded him of the proposed Antiguan scheme he had strongly opposed, and is adamant that the process “was tainted in some way by those who wanted to take advantage of the Maltese government and the Maltese people”.

The original law itself, Mr Katz argues, was essentially plagiarised from the law of St Kitts and Nevis, with the addition of the role of the concessionaire.

He points out that he found it strange that Malta – a country with no experience in such programmes – would opt to create an unprecedented structure by outsourcing such an important task to a for-profit company. He insists that it is likely no coincidence that this model was the same one which Henley & Partners was lobbying for in Antigua and Barbuda.

“I therefore knew that it would not even be worth trying to show interest in the programme, as I already knew what was going to happen,” Mr Katz adds. His company opted not to file a bid.

But he also insists that having a company act as both advocate and judge is “wrong, immoral and endangers Malta’s interest”, and is unconvinced by Henley CEO Eric Major’s recent assertion that the company would set up a “Chinese wall” between the two potentially-conflicting roles.

 “There is no Chinese wall between [Mr Major] and himself. He will ultimately be responsible for both sides of the Chinese wall, and most importantly, he is in charge of generating income for Henley, and that will negatively affect the whole process and endanger Malta,” he observes.

Mr Katz maintains that amending the programme alone does not suffice, arguing that there were numerous reasons for dismissing Henley & Partners – beyond the fact that he believes that the role of a concessionaire is entirely unnecessary, and possibly harmful to the country’s interest.

While the actual contract itself has been kept under wraps, Mr Katz argues that the call for bidders reveals enough to suggest that Henley & Partners has violated it.

In the call, bidders are told that “it is important to safeguard the reputation of Malta and respect its wider obligations by applying a well developed framework of operation, well defined regulations and guidelines, including, without limitation, those relating to due diligence, the contracting with representatives for IIP applicants and marketing of the IIP internationally”.

Mr Katz states it is clear that Henley had amply failed to meet this requirement. He is also critical of the way the company promoted the programme before it was even debated in Parliament, as well as the way it went around doing so – by stating that a Maltese passport was the easiest way to visa-free travel to Europe and the US.

 

Revisions ‘make programme worse’

But not only has the government refused to dismiss the company, Mr Katz notes: the amended programme actually enables it to make “even more money on the back of the Maltese”. He refers to a somewhat innocuous-looking provision to back his claim.

Under the amended programme, a certificate of naturalisation can only be issued, at the very earliest, six months after the application for Maltese citizenship has been made. The maximum applicable wait is of two years.

But the contribution each applicant has to make – a minimum of €650,000, or more if applicants also seek to acquire citizenships for their spouses, children or parents – has to be paid at the outset.

According to the legal notice amending the programme, this money is to be held by Henley & Partners until the certificate of naturalisation is issued. As a result, any interest earned on these contributions – which, as Dr Muscat pointed out, will exceed €1.1 billion should the quota of 1,800 applications be filled – would go to the company, and not to the government.

Last Friday, Dr Muscat dismissed claims that the concessionaire could lose the money in the interim, but Mr Katz remains unconvinced. He insists that the law, as it stands, does not prevent Henley & Partners from using the money any way it sees fit, with all the risk that might bring, as it does not cater for any escrow arrangements.

He also points out that there would be little Malta could do if the company ended up filing for bankruptcy.

The situation could easily have been addressed, Mr Katz insists, by ensuring that the contribution is directly paid to the government.

“What reason could there be not to make the contribution directly to the government? Malta is a financial centre in Europe... is it unable to receive money and hold on to it,” he asks.

Mr Katz confirms that he has attempted to alert the Maltese government to the programme’s inherent problems – as he had done in Antigua and Barbuda – but to no avail.

His emails to Dr Muscat have been left unanswered: the only government representative to write back was the Prime Minister’s special envoy for business promotion, Joe Zammit Tabona. But that correspondence ended last November, when Mr Zammit Tabona informed Mr Katz that there was nothing he could do as the decision had already been taken.

The government, he insists, has refused to speak to experts in the field except for Henley & Partners. He points out that stakeholders would have been only too happy to help, if only because they fear the effect of a poorly-designed scheme on the reputation of the entire sector.

“We all would have been proud to participate, and all it would have cost the Maltese government is the cost of a hotel meeting room, coffee and snacks. The government could have received a multitude of expert opinions on what is best for the country and then chosen the right path for themselves. However, they refused to listen to others and only listened to one company that is totally exclusively financially interested in the way that they can make as much money as possible on this program,” Mr Katz laments.