Suspicions of kickbacks over Enemalta’s privatisation have been flagged by the Financial Intelligence Analysis Unit in a damning report, parts of which have been leaked to The Malta Independent.
The FIAU investigation involves Minister Konrad Mizzi and Cheng Chen, a C&I engineer for Shanghai Electric Power, the company which acquired a €320 million stake in the ailing national energy corporation to gain a foothold in the European renewables market.
The kickbacks are suspected to have been planned for Konrad Mizzi and Cheng Chen via their secret companies in Panama and the British Virgin Islands.
Mizzi and Chen owners of secret companies
As revealed by the International Consortium of Investigative Journalists in the Panama Papers, in which The Malta Independent is a partner, the company Torbridge Services Inc was incorporated on 29 May 2013 by Nexia BT of Brian Tonna, the Prime Minister’s consultant and accountant to Konrad Mizzi and Keith Schembri.
The ultimate beneficial ownership of Torbridge, which is registered in the British Virgin Islands through the Mossack Fonseca subsidiary ATC Administrations, was transferred to Chen from Nexia BT senior partner Brian Tonna, who had been holding it as a shell company until 2014.
It was in 2013 that then Energy Minister Konrad Mizzi and Prime Minister Joseph Muscat travelled to China where they announced the multi-million deal euro. The final deal was signed in March 2014.
FIAU investigated transactions into Konrad Mizzi’s accounts
The Financial Intelligence Analysis Unit’s investigation into Minister without Portfolio Konrad Mizzi’s transactions and dealings was a wide-ranging exercise, which resulted in a 120-page report. The Malta Independent is informed that the investigation was soon to be concluded but when leaked FIAU reports began to surface in sections of the media, the report was placed under lock and key without conclusion. This, however, does not discount the facts found during the investigation, which took several months of analysis and networking in countries such as Dubai, Oman, China (Shanghai), Panama, New Zealand and EU jurisdictions.
In relation to the BVI company Torbirdge Services Inc owned by Mr Chen, the FIAU raised doubts to “The fact that Mr Karl Cini advised that he will be sending the requested documentation in relation to Torbridge Servics Inc in a separate envelope, by hand, addressed to Mr Hamidreza, who being the CEO of Pilatus Bank would not usually be involved in any account opening procedures.”
FIAU also questioned “The fact that Mr Cini advised that the initial funding to the account of Torbridge Services Inc was expected in August 2015 and that the expected size of the relationship by end of 2015 would be around €1 million.” However, the FIAU said, “following initial adverse media reports in February 2016, no such activity ever took place in the account.”
Mizzi travelled 17 times to China on public funds
In its report the FIAU said that “on the basis of information obtained through Dr Konrad Mizzi’s credit card activity, Dr Mizzi travelled to China 17 times during the period 10/09/2013 to 24/03/2016. It was noted that despite having family in China he stayed in hotels for at least 16 of these trips. This fact combined with the use of his official card indicates that these trips to China were State related visits. It was also noted that no transactions were noted on Mr Mizzi’s accounts in relation to the purchase of flight tickets. The volume of trips to China at a time when Malta and China were already signing deals in relation to Enemalta raises suspicion, the FIAU said.
The FIAU noted its concerns on the veracity of Minister Mizzi’s claims when it said that “The reluctance to name the company carrying out the independent audit in relation to Dr Konrad Mizzi’s offshore structures citing that the audit was still in progress when documentation shows that the audit was in fact completed two weeks prior to the statement being made”- besides fuelling more suspicion the FIAU is here saying that Dr Mizzi avoided saying the truth in this regard.
Tonna and Cini attempted to open accounts
The suspicions the FIAU held of kickbacks FIAU came about after investigations proved that several attempts were made by Minister Mizzi’s accountants to open a bank account close to the date of the Enemalta privatisation. While Dr Mizzi continued to deny that bank accounts were opened for his Panamanian company to transfer commissions, the FIAU report leaked to this newsroom states that, “Email correspondence between Mr Karl Cini and Mossack Fonseca shows sudden and persistent attempts in setting up a bank account for Hearnville Inc during 2015. This was deemed suspicious given that the company had been incorporated since 2013 and the only measures taken since then were to have the company placed under trust. This sudden persistence in opening a bank account for the Panamanian company at significant costs coincides with the time when the required domestic company corporations, deals and agreements in relation to the privatisation of the Enemalta Corporation were nearing completion/completed.”
Dr Konrad Mizzi’s claims that he “did not sign any bank opening forms, nor did I give a Power of Attorney to the service provider to open an account” are not in line with the Power of Attorney he signed on 16 June 2015 in which he granted absolute discretionary powers to Mr Cini and Mr Tonna to carry out any actions necessary with the set up of the trust structure (which inter alia includes the Panamanian company and related bank account), including the authorisation to sign all the necessary documentation.
Costs to open companies not justifiable
In its investigation the FIAU noted that “The fact that the costs associated with setting up a structure involving a Panamanian company which is held under trust in New Zealand are not justified when one takes into consideration the fact that Dr Mizzi’s 2014 declaration of assets consisted of:
· A house in London which includes a garage (which has a potential rental value of GBP20K per year)
· An apartment in Sliema (which still has an outstanding bank loan attached to it and therefore cannot be placed under trust or used to generate further income such as rent)
· Bank deposits totalling €310,279 (It is pertinent to note that the analysis carried out by the FIAU failed to corroborate this amount. Information obtained by the FIAU identified bank deposits totalling just over €92,000 which are held in joint accounts with Ms Sai Mizzi Liang);
· 4,000 shares in Malta International Airport plc (the dividends in these shares are being credited to Dr Mizz’s domestic accounts. It is interesting to note that the amount of dividends being paid out would is minimal and therefore not worth concealing in an offshore set up such as the one mentioned earlier).”
The FIAU investigation into Minister Konrad Mizzi led the FIAU to another mystery in Dr Mizzi’s declaration of assets. FIAU’s report says: “In addition to this information, it is worth noting that in Dr Mizzi’s 2015 declaration, bank deposits of €389,440 were declared. Again this is not in line with the sums identified in this analysis.” The FIAU also noted that, “The apparent lack of these bank deposits, which would be one of the most significant assets Dr Mizzi holds, further begs the question as to why such a structure was required, given that the costs of setting up and maintaining such a structure would outweigh any financial benefit derived solely from the property in the UK.”
In the meantime, the FIAU argued in its report that, “The fact that Dr Konrad Mizzi’s assets in Malta, namely the bank deposits as well as the apartment in Sliema (which has an outstanding bank loan attached to it and is therefore hypothecated in favour of BOV) are all assets which are held jointly with his wife Mrs Sai Mizzi Liang. In view of this Dr Mizzi would not be able to transfer any of these assets to a trust of which he alone is the settlor.”
Furthermore, the FIAU stated that the fact that the passport numbers provided for the last four beneficiaries listed in the Trust Questionnaire and the Due Diligence Sheet are diplomatic passport numbers are deemed suspicious given that the passport is not assigned to an individual on a permanent basis and should therefore not be used for personal affairs.
The FIAU went on to ascertain what it would cost to open and maintain such financial structures. In its report the unit said that, “On the basis of the information available to the FIAU, this whole set-up cost Dr Mizzi at least €4,839.16 to BTI Management (as per K Mizzi’s BOV bank statement) and USD5,235 to set up Roturua Trust with the underlying company (as per independent audit).”
“Such costs totalling approx. €9,700, which do not include the annual fee charged by the trust services provider, again show that such a setup is too costly to justify it being used simply to hold a property in the UK which is expected to generate rental income of approximately GBP 20K per year and average bank deposits of €92,000 which are not even held in Dr Mizzi’s sole name,” said the FIAU.
Mizzi travelled to Dubai to open bank account
In addition, the FIAU said in its report that during the attempts to set up bank accounts for his Panamanian company, Hearnville Inc., Dr Mizzi personally travelled to Dubai in order to present the bank with the relevant documentation but the FIAU is unaware of the costs incurred during this trip.
During its investigation the FIAU became more suspicious of Dr Mizzi’s true intentions by stating that, “In addition to the lack of proportionality in the size of the asset and the structure set up to manage it, one also begs the question as to why the house in London was not placed in the trust immediately rather than leaving such a costly structure with no assets. The fact that Rotorua Trust was initially set up for purposes of confidentiality and privacy and instructions were given to not have the trust audited is not in line with Dr Konrad Mizzi’s subsequent claim to the PANA Committee that he had subjected his set-up to an independent audit which was an unprecedented level of openness.”
The FIAU report states that, “The fact that Dr Konrad Mizzi, who claims to be a well-off individual looking to safeguard his assets, opted to set up a complex structure shortly after he was appointed as a government minister, a role which carried a financial package that was significantly less than his previous employment” needs to be explained by Dr Mizzi.
Timing of bank accounts suspicious
The FIAU says in its report that, “The fact that the set-up of these structures also coincided with the time when the Government of Malta was entering into numerous agreements directly concerning Dr Konrad Mizzi’s ministry is suspicious given that, in the event that Dr Konrad Mizzi wished to protect his assets for his family’s benefit, it would have been logical to do so shortly after the birth of his children in 2007 and 2010.”
Following revelations published on independent.com.mt last Friday, the FIAU issued, through the DOI, a short but unprecedented press release confirming what The Malta Independent said in its report - that the FIAU investigation was not yet concluded. It, however, did not take ownership of the conclusions reached by this newsroom based on the investigation carried out by the FIAU.
Last Friday The Malta independent revealed other parts of the FIAU report which confirm the transfer of money from a company connected to Armada Floating Gas Services Malta, owners of the LNG tanker berthed in Marsaxlokk, to a Dubai-based company, 17 Black, created for the purpose of transferring kickbacks to then Minister for Energy Konrad Mizzi and the Prime Minister’s Chief of Staff Keith Schembri. The FIAU report categorically states that “a transaction was carried out successfully on 23rd July 2015.”
Reacting, Konrad Mizzi said the report was a “continuation of a character assassination campaign, originally charted by blogger Daphne Caruana Galizia.”