The Malta Independent 13 August 2022, Saturday

Konrad ‘Jericho’ Mizzi

Noel Grima Sunday, 10 April 2016, 10:38 Last update: about 7 years ago

We follow every twist and turn of this national crisis but maybe we are too focused on the immediate to notice the changing contours.

When Daphne Caruana Galizia first broke the story, the immediate feeling was that it was indeed a scandal, but one like many others. Then the Minister gave a half-true admission to MaltaToday when he was found out by this paper, among others.

Since then, it has become The Scandal - it has become the National Crisis.

It has grown and grown through the addition of other facets. Konrad Mizzi’s accomplice was soon discovered in the person of Keith Schembri and then Keith Schembri was discovered in the company of The Times managing director Adrian Hillman, who was promptly removed from his post.

The kingpin in all these hidden accounts in flags of convenience like Panama and the British Virgin Islands seems to have been accountant Brian Tonna, head of Nexia BT, who this paper’s sister daily discovered last week to be holding Mossack Fonseca Malta, in fiduciary he says.

Mossack Fonseca is the huge law firm whose database has been hacked by an international group of journalists with over 11.5 million files discovered and names of people with hidden away funds revealed, including heads of government like the Prime Minister of Iceland (who promptly resigned), British Prime Minister David Cameron (who is still resisting popular pressure to resign) and Konrad Mizzi, who is the only EU minister who still has an account in Panama (Cameron sold his before he was elected Prime Minister).

It is also said there are some 600 more accounts from Malta in Panama, but the names will only be revealed in May. (Names in Italy have started to emerge).

It is riveting to track the defence by the Labour Party against the calls for Konrad Mizzi’s resignation or sacking not just by the Opposition, but also by the public at large.

Predictably, Labour, its media, its entire structure, rejected these calls out of hand, as shown by the standing ovation that greeted Konrad Mizzi at the PL AGM last week, by the virulence that went into the attacks on Beppe Fenech Adami and Ann Fenech.

But then it emerged that key senior Cabinet members had spoken in favour of Mizzi resigning and putting an end to the crisis at a parliamentary group meeting last week. Some, like Evarist Bartolo and Edward Scicluna, even gave nuanced but clear messages in public.

Then, at the Labour general conference on Thursday, Konrad Mizzi resisted all pressure to resign and lumped the Prime Minister with the hot potato.

The position of the Prime Minister bears some examination too. To my recollection, he never came out denying that Konrad Mizzi had an account in Panama, but he at first downplayed the import of this. I remember him saying that Konrad Mizzi had paid the fine to MFSA for those who invest outside Malta without permission, then it turned out that Konrad Mizzi had not paid the fine yet.

This was a serious lapse from the Prime Minister and he must be held directly responsible for it. It is unthinkable for a head of government to take so lightly the fact that a minister (even a Member of Parliament) invests money abroad. It is true that many Maltese businessmen do that, and even that an MP such as Austin Gatt did that, but Lawrence Gonzi should have acted once that fact emerged.

Successive governments have done much to get people who invested abroad to repatriate their funds. Successive amnesties, always described as ‘the last chance’, have been launched. It is unthinkable that the head of government takes so lightly such an ‘in flagrante’ abuse.

Let us look at the wider picture. Both as a result of this scandal and more in case of Brexit, the EU will ramp up its crackdown on tax havens. From yesterday’s Financial Times: “Brussels is to push for new disclosure requirements forcing companies operating in blacklisted tax havens to come clean about their profits and tax payments in a sign the crackdown response to the Panama Papers revelations has begun to snowball worldwide.

“The plans to toughen-up an EU transparency drive come after a tumultuous week where a huge leak of legal files has toppled Iceland’s Prime Minister, lifted the lid on offshore cronyism and left David Cameron under pressure over revelations about his family wealth.”

Now consider something that the Prime Minister said on One on Thursday: “Simon Busuttil cannot stomach the fact that Malta’s first EU presidency will be with a Labour government at the helm…” The Prime Minister got it all back to front. What we cannot stomach is the clear fact that heading the first presidency will be a prime minister who has taken so lightly such an infraction as Konrad Mizzi has done. He will be a thoroughly discredited president of the EU and the EU – the fellow members of the European Council, the Commission – will not let him forget it.

But the repercussions will not be solely on Joseph Muscat. They will inevitably reverberate on Malta, especially in its battle against the Financial Transaction Tax which will undermine Malta’s financial services sector by making Malta as a jurisdiction less competitive, especially if the British choose Brexit and Malta loses its great ally.

By resisting all calls to sack Konrad Mizzi, Joseph Muscat is exposing our vulnerability.

Over the past days, there has been a significant change in the Prime Minister’s approach to the issue. Just a few days ago, he was at his most belligerent in Parliament when faced with the Opposition’s criticism. At his Sunday speeches, he focused on the achievements of his administration, producing list after list of achievements. Since then, he has shifted his stance: he is now saying that the issue is a serious one and carries repercussions on the financial services sector and that he shares the widespread concern among the party grassroots at the turn of events.

Yet Konrad Mizzi has now dumped the whole issue in his lap. If Konrad Mizzi was irresponsible to go and open up those accounts in Panama and New Zealand, he is doubly irresponsible now to leave the matter in the hands of the Prime Minister.

So, in the end, there is nothing more to be done except to continue pressing for Konrad Mizzi’s resignation, even, if it is so required, for the country to do to him what the Israelites did to Jericho in biblical times – go round it seven times, with blaring trumpets, until the bastions collapse.

We have seen, over the past days, the party in government using all ruses – some even borderline democratic – to deflect public attention. It has not worked. The issue is still there, massive and solid, despite the non-attention paid to it by the State broadcaster, prompting even the Church PRO to protest (at the time of writing) that “TVM.com.mt is the only news portal not to give due priority to the Bishops’ appeal for unity, compassion, liberty, truth and justice in our country at this present time. The State broadcaster should know better.”

 

The issue has now got to the point of no return. From here, it looks like there is something massive holding back the government and the Prime Minister from taking action. What it is, no one can say with certainty but the conclusion is pretty inescapable. If it were a case of incompetence, it would already be grave, but the probability points to a far more serious scenario.

As someone said on Daphne’s portal: “My professional opinion is that a trust is most certainly not necessary to safeguard, tax-shelter or protect Minister Mizzi’s financial affairs. It serves no purpose based on his declared, existing asset base. But then it would be a trust registered in Malta and not an offshore trust.

“It is my professional view, too, that a company of any kind is most definitely not required to safeguard, tax-shelter or protect Minister Mizzi’s financial affairs. It serves no purpose based on his declared, existing asset base. It would be unnecessarily cumbersome and awkward to manage and use, most especially so a company in Panama, which jurisdiction is blacklisted in many parts of the world.

“Minister Mizzi does not qualify as a high net worth (HNW) individual with an asset base of at least $15 million, which means that the use of an aggressive tax mitigation strategy is completely unnecessary and irrelevant. The use of an offshore company in Panama and offshore trust is New Zealand qualify as an aggressive tax mitigation.

“If anyone came to me saying that a Maltese resident formerly working in the UK has a Panama company held by a New Zealand trust, I would immediately conclude that the only possible reason for this cumbersome and clunky arrangement is that they are hiding something. This could be either the siphoning off and hiding of ill-gotten gains; criminal tax evasion on legal gains (but all Minister Mizzi’s legal gains are declared); hiding the proceeds of past tax evasion from, for example, selling a large asset or earning income in another country which hasn’t been disclosed and due tax paid where applicable; the proceeds of crime, which includes embezzlement, bribery, fraud and other ‘financial crimes’.

“The advice which Minister Konrad Mizzi received, to set up a company in Panama and transfer its ownership to a trust in New Zealand, isn’t ‘naïve and politically insensitive’. It is wrong and unsuitable advice, and therefore the Malta Financial Services Authority would normally have started an investigation immediately into Brian Tonna’s ability to advise individuals, as required by ‘conduct of business’ rules.

“It appears that Nexia BT did not advise the Inland Revenue Department about the setting up of a trust by a Maltese resident, as required by law. It appears that they were hiding something. It also appears the Minister Mizzi did not advise the Inland Revenue Department that he was the ultimate beneficial owner of a company in Panama. It appears that he was hiding something too. It appears, too, that Minister Mizzi’s company administrators tried to open bank accounts in Dubai and Panama, but were rejected.

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