Former Labour Deputy Leader Michael Falzon, now Parliamentary Secretary within the Office of the Prime Minister, will have to return at least €200,000 in cash to Bank of Valletta should he give in to pressure to resign over the Gaffarena ‘Old Mint Street’ property scandal.

Michael Falzon was a BOV employee up until 2 April 2014 when Prime Minister Joseph Muscat appointed him as a parliamentary secretary in a mini Cabinet reshuffle, which saw the exit of former health minister Godfrey Farrugia.

Sources told this newsroom that upon his appointment as parliamentary secretary, Michael Falzon asked BOV to grant him a ‘termination benefit’ which amounted to a total of €260,000. Asked why he had insisted on a ‘termination benefit’, sources explained to this newsroom that Dr Falzon cannot benefit from any scheme offered by the bank to its senior employees because he isn’t eligible.

The bank this evening replied to the TMI story but did not specify under which scheme Dr Falzon benefited.

Had the bank insisted on issuing an early retirement one-off payment, Dr Falzon would have had to declare it in his Income Tax return as revenue, and pay 35% on the total sum.

Instead, he asked the bank to give him the golden handshake as a terminal benefit which is tax-free by law, and in the process avoiding a tax payment of €90,000.  Termination benefits are usually given to employees who end up unemployed, but in Dr Falzon’s case he moved to a ministerial post with a €42,000 salary, while retaining the right to return to the bank should he lose his parliamentary seat.

In his declaration of assets presented to Parliament this week, Michael Falzon declared the €260,000 as an “early retirement”.

However, in his agreement with the bank he also managed to nail down a clause which gives him the right to return to the bank up until 2018. Should he decide to do so the agreement stipulates that he will be forced to return a pro-rata amount of the sum he cashed from BOV under the termination benefit clause based on the date when he returns to the bank.

Prime Minister Joseph Muscat declared publically that he would do all that is in his power to get to the bottom of the Old Mint Street scandal and those found responsible will have to answer for their wrongdoing. 

However, the Prime minister is still to declare whether Michael Falzon’s political position is still tenable following calls from the PN Opposition for the Parliamentary Secretary to resign. In the case of former Minister Manuel Mallia, the Prime Minister took over a month to finally react to people’s concerns on the shooting incident which involved Mallia’s ministerial driver. An independent inquiry into the matter was concluded by then. Currently there are two separate inquiries investigating the Gaffarena-Falzon ‘Old Mint Street’ property issue.

Technically, if Dr Falzon is asked to resign in the coming days over the Gaffarena scandal, he will have to return at least two thirds of the golden handshake he was given by BOV before returning to work there. He can always opt to stay out of the bank and retain the sum.

 

Michael Falzon denies ‘termination benefit’ and €90,000 tax avoidance

Parliamentary Secretary Michael Falzon this afternoon threatened to sue this publishing house after this website exposed his ‘termination benefit’ with Bank of Valletta, where he worked before being appointed as a Parliamentary Secretary within the Office of the Prime Minister in 2014.

In a Right of Reply issued in the wake of this afternoon’s story, Dr Falzon’s office insisted that the “information published is factually incorrect and is aimed solely at character assassination”.  His office added that Dr Falzon will be taking legal action against this publishing house.

This newsroom, in turn, has requested Dr Falzon’s office to publish the Parliamentary Secretary’s agreement with the bank but the request has not been answered as yet.

 

Bank of Valletta statement

The Head CEO Office at BOV wrote:

We wish to make reference to the article which featured in the online version of your newspaper earlier today.

The article of the Malta independent on the early retirement benefits granted to Dr Michael Falzon is peppered with false allegations and inaccuracies.

While the bank may not divulge information on specific early retirement cases, the outline of the bank's policy on early retirement are quite clear. Any employee who is over 50 years of age can apply for early retirement. 117 employees were granted early retirement in the last 5 years.

The grounds for applying include health reasons or circumstances where an employee of the bank is appointed to a senior public role on a temporary basis. In the latter case the employee retains the right to return to the bank once his temporary public appointment is terminated. In this latter case if an employee returns to the bank's employment he has to refund his retirement benefits on a pro rata basis.

It is utterly unacceptable to suggest that the bank has at any time colluded to help anyone avoid tax. The amount of retirement benefits paid to employees depends on the age of the employee, his years of service and the time left for him to reach pensionable age. The tax implications of any retirement benefits paid are the sole responsibility of the employee.