European Parliament Panama Papers Committee member Sven Giegold has questioned why the Maltese government would turn to an independent audit into the financial dealings of Minister without Portfolio Konrad Mizzi when a report penned by the Financial Intelligence Analysis Unit (FIAU) former CEO Manfred Galdes has remained unpublished.

“Normally the State should not accept a private audit firm to replace an investigation. What I do not understand is that once there is already an investigative report by Mr Galdes, why has it not been published?” he said in comments to The Malta Independent on Sunday.

“Why do you need a new audit? It looks like if one result is not liked, you simply order another one. From the outside, this looks odd. It does not help the reputation of the Maltese EU Presidency or the government. The pressure will not go away quickly because the investigation committee [the PANA Committee] is likely to be delayed,” he continued.

Mr Giegold, a member of the Greens/European Free Alliance political party, forms part of the committee of inquiry to investigate alleged contraventions and maladministration in the application of EU law in relation to money laundering, tax avoidance and tax evasion. It was set up following the Panama Papers revelations, where it was found through a trove of leaked documents that the world’s elite were employing the fiduciary services of Panama based law firm Mossack Fonseca to set up financial structures that are ultimately designed to conceal the identity of the Ultimate Beneficiary Owner (UBO) and their wealth.

Secretive jurisdictions such as Panama offer low corporate tax rates as well as secrecy, which entice the UBO to transfer his/her funds, the advantage being that the individual is able to avoid paying higher tax rates in their own country.

While this does not necessarily point towards illegalities, it does highlight the immoral practice of the world’s rich and famous successfully concealing their wealth and therefore managing to avoid paying their fair share of tax.

Minister without Portfolio Konrad Mizzi and the Prime Minister’s chief of staff Keith Schembri were both found to have a company registered in Panama sheltered by a trust in New Zealand. Both employed the services of Nexia BT to set up their identical financial structures. Brian Tonna – the man behind Nexia BT, the company that had advised Dr Mizzi and Mr Schembri on their structures is also the sole shareholder of Mossack Fonseca & Co. (Malta) Ltd, through his company BT International.

On 5 April, Finance Minister Edward Scicluna told Parliament that the FIAU was investigating the Panama Papers scandal. Minister Scicluna emphasised that the entity, which is chaired by the Attorney General, is independent and autonomous, and as such, the government is not privy to its internal investigations.

“On 5 April, Finance Minister Edward Scicluna said in Parliament that the FIAU was investigating Schembri and Mizzi. Four months later (August), the FIAU director resigned. This raises serious questions that [Prime Minister Joseph] Muscat must answer,” the Opposition had said in a statement last year.

The only reason provided for Mr Galdes’ resignation was that he wanted to move into private practice.

Speculation grew further about the contents of the report because it was reported that after it was presented to former Police Commissioner Michael Cassar, who was the only authority empowered to prosecute, he resigned citing health reasons.

No police action has so far been taken on the report, and it is not known whether it found anything incriminating due to the fact that it has remained unpublished.

 

Government’s ‘lack of honourable treatment of the European Parliament’

During Prime Minister Joseph Muscat’s EU Council presidency speech, where he outlined Malta’s programme for its six-month stint at the helm of the EU, he was asked by an MEP whether he would be cooperating with the Panama Papers inquiry. He did not directly respond to that question.

Asked for his reaction as to whether the Maltese government will be cooperating with the inquiry or not, Mr Giegold said: “Well of course I think there was a lack of honourable treatment of the European Parliament (EP) in that regard. Firstly, Mr Scicluna (Finance Minister Edward Scicluna) was invited to come before the Panama committee on 26 January. Until today (18 January) he has not even responded to our invitation letter. Secondly, the report of Mr Galdes about the two members of the government or members close to the government (Konrad Mizzi and Keith Schembri) who were mentioned in Panama Papers has still not been published.

“Both are certainly failures to cooperate. Beyond that, the invitations for Maltese delegations were only sent out recently so it’s too early to comment on this. The invitations are out and we are of course expecting that the relevant actors will meet the delegation.”

He claimed that the invites were sent to all Maltese politicians that have been named to testify, these include Dr Mizzi, Mr Schembri, shadow minister for home affairs Beppe Fenech Adami, former finance Minister Tonio Fenech and former secretary for rural affairs Mary-Ellen Mercieca. Dr Fenech Adami and Mr Fenech have both denied receiving invitations.

 

‘There is already reputational damage’ for Malta’s financial sector

Asked about the possible fallout from Malta not cooperating with the investigation, Mr Giegold spoke of reputational damage:

“There is already reputational damage for the financial sector in Malta since the Panama Papers, but also because of some more problems before that. There is also more attention to a lack of effective anti-money laundering policies and unfair tax practices, so not cooperating with the EP is of course adding to that reputational damage. We have seen with other places and this can be harmful.

“And of course we have no power to sanction. Europe is not a state so unlike national inquiry committees, we cannot force anyone, but the reputational damage is being done. If you look at the Prime Minister, he made a very pro-European speech and it looks a bit hypocritical to praise the EP while at the same time ignoring our wishes for cooperation.”

Asked whether he thinks this is damaging the EU’s reputation, especially because Minister Konrad Mizzi has been chosen to chair the EU energy council, Mr Giegold agreed, adding: “As you know he has already been the subject of negative reports in the media, and until Konrad Mizzi is cleared, and because the respective report has not been published, there will be reputational damage. I can only call once again on the Maltese government to publish the report by Manfred Galdes in order to clarify what has happened.”

To the fact that Panama-based companies are not obliged by law to cooperate with investigations, and that Malta and Panama have no information-sharing agreement on such matters, Mr Giegold said that one would expect somebody close to the Prime Minister and in government to cooperate in full.

“I ask myself: if the report has not been published, then why has Parliament not called its own investigation? The Maltese Parliament could take action in order to shed light on what has happened within the framework of the Panama Papers. Parliament has all the means to make sure that members of the government are fully cooperative.”

He concluded by saying: “I will continue working on this, I will not give up so quickly and I am not known for this. I am quite stubborn when it comes to financial crimes.”