Former Bank of Valletta employee Michael Falzon, who in April 2014 was appointed as a Parliamentary Secretary, was not eligible for any retirement benefits under the BOV collective agreement but was nonetheless granted €260,000 in tax-free terminal benefits. Following a story carried on The Malta Independent online this week, in which it was revealed that Dr Falzon made “a particular request” to the bank for early retirement benefits while also securing the possibility to return to BOV should he lose his portfolio, information by insiders was given to this newsroom that corroborates the facts as reported.

Dr Falzon’s request was discussed by REMCO, an internal board headed by the bank’s Chairman John Cassar White with two other appointees: Deo Scerri and Joe Zrinzo Azzopardi. Sources told this newsroom that the internal board concluded, “It is a moral duty for the bank to assist as much as possible a bank employee who is called to give a public service e.g. by serving in a Cabinet.”

Such a precedent of ‘moral nature’ established by the bank vis-à-vis political appointments should have been brought to the attention of the bank’s board of directors before, and not after, it was granted, a high-ranking official told this newspaper.

It is, however, the scheme under which Dr Falzon was granted the quarter of a million euro tax-free retirement benefit which has raised eyebrows at the bank, and across the country, following this newsroom’s report.

As stated in a short reply to the media issued late in the evening that the story was published, Dr Falzon was granted the retirement benefit on the basis of a clause in the collective agreement that says “the bank will exercise its discretion when awarding early retirement to employees between fifty to fifty eight years.”

However, in its statement, the bank did not disclose the main clause governing this part of the collective agreement, which states: “This scheme is applicable to employees who as at 1st January 2005 are fifty years of age and over and have a minimum of ten years of continuous service.”

It is clear that Dr Falzon was not eligible for any retirement benefits under the scheme quoted by the bank because in 2005 he was 42 years of age, and not 50.

Moreover, the bank felt it should be even more generous with Dr Falzon than it usually is with other bank employees eligible under one of its schemes because it gave the new Parliamentary Secretary a “3.5 multiple of his salary” at the bank when the collective agreement states that in the case of “those who reached the age of 58 and who were 50 years of age in 2005 a lump sum payment equivalent to three years salary” will be offered.

Yet this was apparently not enough. Due to the fact that “the appointment to a cabinet post is at the discretion of the Prime Minister who may withdraw such appointment at any time during the legislature” which ends in June 2018 “Dr. Falzon will have the right to return to the bank with the same salary he had before leaving but will have to pay back that portion of the early retirement benefits calculated on the formula: €260,000 divided by the number of months from June 2014 to June 2018 multiplied by the number of months remaining between the date of return to the bank and June 2018.”

In his right of reply to this newsroom earlier this week, Dr Falzon denied that the he received a termination benefit for which he was not eligible and any other form of golden handshake that would have been subject to 35% income tax. But the facts presented above ought to open Dr Falzon’s eyes (and that of the Commissioner of Inland Revenue for that matter) that the bank had no scheme under which he could cash in a quarter of a million overnight.

Interestingly, it is only now following this newsroom’s investigation that the bank is to present to the board of directors “a revised early retirement policy.”

Insiders told this newsroom that the new policy will take into consideration requests for early retirement benefits “on humanitarian grounds, when an employee is deemed not capable of contributing to the bank’s success and when a bank employee is called to perform senior executive duties at a national level either in the public or voluntary sector.”

Had the new policy been in place by April 2014 Dr Falzon would have been eligible and could have smoothly cashed in the quarter of a million euros, but, as reported by this newsroom, no such policy was in place. The revised early retirement policy should come into effect in January 2016.