Brian Tonna and Karl Cini had prepared backdated documents to satisfy due diligence requirements after a magisterial inquiry started probing their actions, a police inspector said in court.
Testifying in the compilation of evidence against Nexia BT partners Tonna, Cini and Manuel Castagna, and their employee, Katrin Bondin Carter, Inspector Ian Camilleri said the documents were required by Pilatus Bank.
The four accused were denied bail by Magistrate Donatella Frendo Dimech.
Camilleri was testifying about the conclusions of an inquiry that probed an alleged kickback of €100,000 by Tonna to former OPM chief of staff Keith Schembri. Tonna had claimed the money was repayment for a loan Schembri had given him while he passed through marital separation.
The court heard how Bondin Carter, who was a manager at Nexia BT, had prepared backdated documents with Karl Cini to be presented to Pilatus Bank. The documents did not reflect reality, the inspector testified.
In other testimony, Inspector Anne Marie Xuereb said that Bondin Carter would be sent for by the firm’s partners and told what to write and what not to write.
“When I asked her why she hadn't questioned why the letters were backdated, she said as long as she wasn't signing off on them, she had no reason to. The documents were sent to Pilatus Bank for due diligence requirements,” Xuereb told the court.
She said the documents related to Willerby Trading and things that had already happened. “They were definitely backdated, but I don't remember if there were other documents except those relating to Pilatus,” she said.
Willerby Trading was owned by Brian Tonna and was the company from which money was transferred to Keith Schembri's Pilatus Bank account.
Bondin Carter’s defence lawyer Franco Debono argued that his client did not sign any of the documents and was just fulfilling requests made by her employers.
Lawyer Stephen Tonna Lowell for Tonna and Cini argued that the documents were not fake. “Brian Tonna’s and Karl Cini's document is truthful, but had been backdated,” he argued.
But Xuereb rebutted that the charge related to false documents dealt with a cheque for €84,000 to MFSP.
MFSP, later renamed Zenith, was the financial services firm that held investment accounts for Adrian Hillman, Vince Buhagiar and Keith Schembri. The owners of Zenith – Matthew Pace and Lorraine Falzon – are also facing money laundering charges.
The court also heard the police inspectors give details of various money transactions that passed through accounts attached to the various companies linked to Tonna, Cini and Castagna.
AG lawyer Elaine Mercieca Rizzo objected to bail on the grounds that investigations are ongoing, which could lead to further arraignments. She said that the prosecution feared the accused would tamper with evidence.
“Accounting firms are a gateway to our financial services sector and they are there to prevent abuse. In this case, they gave advice on how to abuse the system… We heard the inspector testify that as soon as the magisterial inquiries began, a process of falsifying documents also began, after the alleged offences took place in order to cover their tracks,” Mercieca Rizzo said.
Defence lawyers argued that all documentary evidence had been preserved in the inquiry and their clients had not absconded in the four years the investigation was going on.
Background
The four accused, who all pleaded not guilty, were charged with money laundering, along with others.
In September 2020, Tonna and Cini lost their warrants to practice as accountants after the regulatory authority initiated disciplinary proceedings against them.
The board also suspended the registration of Nexia BT, BTI Management Limited and Nexia BT Advisory Services Limited.
The court had already imposed a wide-ranging freezing order on Tonna and Cini, their companies and linked business associates.
Earlier today, Magistrate Donatella Frendo Dimech denied bail to Keith Schembri, Malcolm Scerri and Robert Zammit, all linked to the Kasco Group. Schembri's elderly father, Alfio Schembri, was the only one granted bail.
17:07 That's it for today. Thank you for following. A summary will follow soon.
17:06 The AG has until Monday to respond to the conventional reference.
17:02 The court after consulting with the lawyers, puts the case off for Tuesday at noon.
16:59 "It worries me that the AG sees a request for bail as frivolous and vexatious. I believe my arguments have some merit," he insists.
16:58 Tonna Lowell points out that he made a conventional reference and not a constitutional one, and this does not require a suspension of proceedings.
16:58 Mercieca Rizzo says that the law sustains her argument. She says the request is frivolous and vexatious. "I remind that a constitutional reference should not be taken lightly as this suspends the proceedings," she adds.
16:56 Tonna Lowell: "Whether or not this court should request a reference or not is one that should be decided immediately and not at the leisure of the AG."
16:54 Tonna Lowell asks that another breach of Article 5 be brought to the attention of the constitutional court because the AG deemed fit to dictate how a constitutional reference is made, "when the law doesn't indicate that it should be made in writing".
16:53 AG lawyer Elaine Mercieca Rizzo: "Nowhere does it emerge where these complaints are breaches of rights. We will be responding in writing by Monday."
16:53 Tonna Lowell asks that the reference be made today: "We aren't going to sleep on this, this is a request for liberty."
16:52 At this stage, lawyer Stephen Tonna Lowell for Brian Tonna and Karl Cini stands to make submissions.
"As this is independent from the operation of the prosection and how it investigates and how it arraigns people and also because in this decree, the court entered into the merits of the charges by raising the lack of trustworthiness of the accused because of the allegation of falsification, when effectively from the evidence so far there is no falsification, I am requesting with the greatest respect that this honourable court refer this issue to the First Hall of the Civil court in its Constitutional jurisdiction over a breach of Art. 5 of the European Convention of Human Rights."
16:50 Magistrate Donatella Frendo Dimech reads out her bail decree.
On Karl Cini and Brian Tonna: She notes the allegations of forgery and says this doesn't give the peace of mind required. "There is no doubt that all the evidence in this case has not yet been collected and presented in court," the magistrate says.
"If granted bail there is the risk that evidence could be tampered with. It is in the public interest that their arrest continues," she says. She quotes the case Yorgen Fenech vs Malta which supports the view that continued detention is permissible and not to be taken in the abstract and has to take note of the public interest.
"It is the opinion of this court that the fears are still in place and the court denies bail to Tonna and Cini," the ruling reads. The magistrate urges the prosecution to act expeditiously.
The court also denies bail to Manuel Castagna and Katrin Bondin Carter.
16:39 We are back inside the courtroom.
14:26 We will take a break and be back at that time.
14:25 The court will decree on bail at 4:30pm.
14:24 Tonna Lowell in closing says: "These are all people with clean criminal records."
14:24 Lawyer Michael Sciriha for Manuel Castagna interjects. "We are now moving from the probable to the possible. I hope I am misunderstanding- there are investigations on third parties and on the strength of this they will keep my client in custody. If you look at all the UK cases on financial crime, bail is given because it is all paperwork," says the veteran lawyer.
14:20 Mercieca Rizzo explains that there is a charge of complicity with Kasco... there is a need for further investigations. From the investigations, it emerged that there was complicity when the crimes were committed and when they were being investigated.
14:12 The defence lawyers continue with their bail submissions.
14:07 The court asks from where the risk of perverting the course of justice is supposed to arise. "Bondin carter did not tamper, did not escape when the investigations were ongoing," points out Franco Debono. "So, she didn't tamper or pervert the course of justice in her case, but she might in the cases of others?"
13:58 Tonna Lowell goes on: "How do you continue to insist that there are ongoing investigations when you hurriedly decided to arraign, after four years of investigation? And without even letting the investigated persons have their say."
13:54 Tonna Lowell interjects. "This is all a game," he comments dejectedly. "Expediency is not the same as rushing things. It is very dangerous to have the AG mention the gravity of the case, delving into the merits during bail arguments. In her opinion, they are already guilty," he says.
13:53 The court asks when the prosecution will know when it will finish.
13:53 Mercieca Rizzo says the second inquiry built on the conclusions and information gathered in the first one. The prosecution believes a risk of tampering with evidence exists since investigations are ongoing and these may lead to more arraignments.
13:51 The court asks her: "I note that whilst the first inquiry finished in September, the second one finished on 1 March and they were arraigned 19 days later. Can you explain this."
13:46 Mercieca Rizzo: "We heard the inspector testify that as soon as the magisterial inquiries began, a process of falsifying documents also began, after the alleged offences took place in order to cover their tracks. The AG's fear is not absconding, but tampering with evidence. There could be further arraignments as the investigations are still ongoing..."
13:38 Mercieca Rizzo: "We have never mentioned civilian witnesses because they had testified in the magisterial inquiries. Our objection is about tampering with evidence. The accusations are related to very grave things. Accounting firms are a gateway to our financial services sector and they are there to prevent abuse. In this case they gave advice on how to abuse the system."
13:36 AG lawyer Elaine Mercieca Rizzo stands up and gives her counter arguments.
13:36 The court says that it doesn't see any civilian witnesses or the prospect thereof.
13:30 The court points out that the superior courts had decided that there was no inequality of arms.
13:30 Debono: "The AG can appeal from the granting of bail, but the defendant cannot. This is inequality of arms."
13:26 An inquiry represents all the proof, he says, so much so that if someone changes their version they are prosecuted for perjury.
13:22 He touches on the media coverage of the case. "We must differentiate between conjecture and facts. The evidence is that I have inspectors of police whose testimony bring to naught the prosecution's fears," Debono says.
13:21 This had been confirmed by the prosecution, says the lawyer. "It is useless saying this is the hall of evidence if we ignore the evidence," he adds.
13:18 Debono insists that his client - Katrin Bondin Carter - had cooperated with the police investigation and that there was no suspicion or fear that she would tamper with evidence.
13:15 Defence lawyer Franco Debono prepares to make his arguments. The court recapitulates what has been said for his benefit as he had to briefly leave the hall.
13:15 Sciriha insists that the cases at hand deal with paper trails, which his client cannot disturb.
13:14 Sciriha: "With respect, when I see my colleague's reply - where is the concrete evidence, the hard proof, that someone is going to tamper with evidence? It is this which the court has the duty to examine. This is the temple of the rights of the individual. Because the decision on whether or not to grant liberty to an individual is decided here."
13:13 Defence lawyer Michael Sciriha makes the point that the legal points raised by Tonna lowell are inconfutable. Even though his client is in a completely different position, one cannot but appreciate their wisdom. He draws comparisons with the Italian courts and quotes from the Enemont case which gave rise to the mane pulite movement.
13:12 Tonna Lowell: "This language - 'threatened' - I am simply requesting what is my client's right."
13:12 Tonna Lowell says he asked for a constitutional reference to the First Hall of the Civil Court in its Constitutional jurisdiction. AG lawyer Elaine Mercieca Rizzo says that this is not the correct method to request a constitutional reference. "This should be a separate application, laying out the description of the complaint... The AG doesn't feel threatened by a constitutional reference," Merceica Rizzo says.
13:10 Then there's the "risk of absconding". "They have been investigated for at least four years - now they're going to abscond? Where are they going to abscond to? Into the memorandum and articles of their foreign companies? The accused satisfy the requisites for bail," Tonna Lowell argues.
13:08 "After 10 days in custody we have not heard one civilian witness," he says.
12:54 The lawyer tears into the prosecution's arguments, saying that the fact that the names of his clients are Brian Tonna and Karl Cini does not make the charges they are facing more serious.
12:52 The defence lawyer points out that Inspector Xuereb had said that there was no danger as mentioned in the criminal code of the accused tampering with evidence. "The prosecution had vociferously objected and bail was denied. In the meantime, we have not heard a single civilian witness," he insists.
12:50 Tonna Lowell: "When you have the AG able to conduct proceedings as it sees fit, God forbid there isn't the court to keep it in check. Today I cross-examined Inspector Xuereb. One would expect that... after a four-year investigation, they are given time to explain all the documents to the police. This didn't happen - there was a decision by this superpower that they had to be arraigned. Here we have an institution that decides on who and when to arraign and there is no check on its powers. Its powers are not scrutinised."
12:48 The court stops him and asks the prosecution if it had other witnesses, pointing out that it had given the prosecution till 4pm to fill with testimony. There appears to have been a misunderstanding. Tonna Lowell continues his bail submissions.
12:47 Tonna Lowell says that "this superpower" allows the AG to do what it likes and ignore the timings given by the court.
12:43 Tonna Lowell: "Over the past 20 years the powers of the Attorney General have consistently increased. Last year these powers grew disproportionately. We look to foreign jurisdictions for inspiration on such issues. Nowhere does it have an omnipotent AG who can do anything. The law has created a superpower that needs a structure to control it. Today all we heard were police officers give testimony which could not be easily tampered with."
12:38 Tonna Lowell stands up to make his arguments on bail.
12:36 An administrator is to be appointed to take stock of the situation before any payments from the companies are made.
12:35 Defence lawyer Stephen Tonna Lowell revokes his request for dissolution of the companies.
12:34 The court will now be dealing with applications made by the parties. One deals with the appointment of an administrator, another the dissolution of companies and the third the payment of employees.
12:28 No more witnesses for today. The court is thrashing out dates for the next sitting.
12:28 Ciantar steps off the stand. Another police constable takes the stand - Samantha Zammit. She has a report to present to the court. The court asks her how she came to write it. Zammit replies that she was part of the task force set up to observe all transactions in Nexia and other companies. Her job particularly concerns Nexia BT Advisory Services. Her deposition is suspended so that the parties can read it.
12:26 The witness says that she did not analyse the transactions.
12:25 Her job was to pass on the information to investigators. Tonna Lowell: "So, if I tell you that many of them are internal transactions, what do you say?"
12:24 Ciantar: "No."
12:24 Stephen Tonna Lowell asks the witness what her part in the investigation was. "Were you an analyst?"
12:23 Willerby Trade received €583,671 over a year, she says.
12:14 In one account, a number of cheques originating from companies and persons of interest were deposited. The figure of €9 million is mentioned, however it is impossible to confirm without access to the documents, she says.
12:12 One account used by notaries and lawyers featured the name of a known fraudster, she says. He had received some €7,000. Ciantar is going through each and every transaction, many of them are not of interest.
12:06 The company received money from three individuals into a BOV account, totalling over €36,000. The police officer is giving an overview of the activity relating to various accounts.
12:05 Ciantar says that BT International is a company which would receive payments from IIP applicants.
12:05 Another police constable, Ritienne Ciantar, takes the stand. She was assigned to the task force in October 2020 and tasked with investigating accounts of interest belonging to Nexia and BT international. She had been instructed to divide transactions into various categories - those between legal or natural persons, inter-account transactions, business overdraft and others.
12:02 She wants it clarified that a payment involving Keith Schembri which Cauchi had referred to was for €650, not €600,000. Cauchi confirms this. The witness steps off the stand.
11:58 Lawyer Giannella de Marco, for KBT cross-examines the witness.
11:57 AG lawyer Elaine Mercieca Rizzo asks who KBT Holdings directors and UBOs are. "Brian Tonna was originally director, administrator and shareholder. On 18 February, Beverly Tonna replaced her father as director, legal representative, administrator and shareholder," Xuereb says.
11:55 KBT Holdings had two HSBC accounts, one of which was rarely used. One of the accounts had all income from cheques and held in excess of €83,000.
11:55 KBT outgoing funds:
Nexia BT Ltd received €36,000
In two transaction to an HSBC account held by the same company, Nexia BT received over €50,000
Beverly Tonna received €10,000 while Brian Tonna received over €21,000 in six instalments
11:52 Other companies involved in similar large transactions included Kasco Ltd and Zenith. The witness is reeling off figures relating to payments received by the company.
11:49 In one of the companies, KBT Holdings, there were 511 transactions to a Bank of Valletta account, he says. In one of the transactions, BT International paid KBT €25,000 in a single transaction.
11:47 A new witness, PC John J. Cauchi from the FCID takes the stand and is administered the oath. He presents a copy of a report which he will be referring to during his testimony. He had been part of the task force entrusted with investigating Nexia BT. He explains that officers were assigned several companies to investigate.
11:46 Sciriha suspends his cross-examination.
11:46 She says that Castagna's assets, include a semi-detached house, where he lives and on which he has a loan.
11:45 Xuereb confirms that Castagna worked himself up from employee to partner in the firm.
11:45 Defence lawyer Michael Sciriha, for Manuel Castagna, cross-examines the witness.
11:44 Xuereb says that Tonna and Cini were asked if they were consulted by Kasco Group of which they were the auditors. This second inquiry deals with fraud between several people, including Adrian Hillman, Vince Buhagiar and Keith Schembri, in which foreign structures were set up.
11:43 She is now asked about the second inquiry that covered allegations of bribery in the private sector involving Allied Newspapers and Kasco Group.
11:42 Xuereb: "At the time, he was not legally separated. There was also a Lombard Bank account and the money he was receiving in cash and cheques from an accountant."
11:41 Xuereb: "He had told us that he had opened it to start saving money..."
11:41 Tonna Lowell: "Was it part of the community of acquets?"
11:40 Xuereb: "There was the SPX account..."
11:40 Tonna Lowell: "So in the middle of separation proceedings, Tonna should have taken from funds from the community of acquets?"
11:40 Tonna had told the police he would end up with nothing.
11:38 Tonna Lowell grills the witness on the separation of assets after Tonna's marital separation. "Everything which the couple had was subject to the community of acquets," the lawyer notes.
Tonna has claimed that the €100,000 he paid Keith Schembri was the repayment of a personal loan he had received during the time when he was separating from his wife.
11:36 Xuereb says that the loan between Keith Schembri and Brian Tonna, for €100,000 was the subject of a magisterial inquiry. The inquiring magistrate made reference to the court experts' reports on the availability of cash for Tonna. The magisterial inquiry had said that he never needed the loan, as he was in a good financial position not to.
11:34 Xuereb: "With regards to false documents we are also dealing with the cheque for €84,000 to MFSP."
MFSP, later renamed Zenith, was the financial services firm that held investment accounts for Adrian Hillman, Vince Buhagiar and Keith Schembri. The owners of Zenith - Matthew Pace and Lorraine Falzon - are also facing money laundering charges.
11:32 Xuereb is asked about documents that were falsified to mislead investigators. Tonna lowell asks that this means they are not actual counterfeits but intended to mislead investigators. "Brian Tonna's and Karl Cini's document is truthful, but had been backdated," says Tonna Lowell.
11:30 She is speaking about the IIP applications made by Russian individuals. The agent who introduced them to the scheme was based in Russia.
11:29 Xuereb: "Tonna had told us that by the end of March they had to hand back the keys. The desks were taken to a garage in Mqabba. In the notitia criminis per se there was no mention of 'bogus loan' or 'kickbacks'."
11:28 Tonna Lowell: "Am I correct in saying they informed the police that they were going through a rough patch as they had to return the San Gwann offices to the landlord. Due to the attachment order they couldn't sell off the desks and other office equipment. Right?"
11:27 Xuereb says that in March, Tonna had given copies of emails of which his lawyer had not been informed of. She says that when they were arraigned on 20 March they hadn't given an explanation with regards to several documents.
11:23 Tonna Lowell is representing Tonna and Cini.
11:23 He asks whether the inspector recalls the first questioning session, where no answers were given. "This was simply a reading of the conclusions of a report," he says.
Tonna Lowell says he had asked for disclosure several times but this had not been given before 9 December.
"Do we agree that Brian Tonna and Karl Cini had answered all the questions put to them bar those which they had already told the inquiring magistrate?"
11:21 Defence lawyer Stephen Tonna Lowell begins his cross-examination.
11:20 Xuereb says the documents related to Willerby Trading and things that had already happened. "They were definitely backdated, but I don't remember if there were other documents except those relating to Pilatus," she says.
Willerby Trading was owned by Brian Tonna and was the company from which money was transferred to Keith Schembri.
11:16 Xuereb: "She would be sent for by the partners and told what to write and what not to write. When I asked her why she hadn't questioned why the letters were backdated, she said as long as she wasn't signing off on them, she had no reason to. The documents were sent to Pilatus Bank for due diligence requirements."
11:16 Debono asks her whether Bondin Carter had signed any documents. Xuereb says no.
11:15 Camilleri steps off the witness stand and Inspector Anne Marie Xuereb is next.
11:15 Camilleri: "She had explained that Nexia BT would pay for team building activities, and the like. There was never any suspicion of her tampering with evidence or attempting to flee the islands."
11:14 Debono: "Am I correct in saying that there was nothing inappropriate from the transactions you referred to?"
11:12 The inspector clarifies that he investigated the money laundering aspect, not documentation checking, when asked by Debono whether the accused had signed off on anything.
11:10 Debono asks whether his client had told the police that she was just a manager following instructions from her superiors. Camilleri replies: "Yes... she had testified that she was the senior accounts manager."
11:10 The defence lawyer says Bondin Carter would receive orders from her seniors and she would type them out.
11:09 Debono continues to hammer the point. "Am I right in saying that 'prepared' for you means 'typed'?"
11:08 The inspector says this is the territory of his colleague Inspector Anne Marie Xuereb. She will be asked at a later stage.
11:07 Camilleri says that "it appears that she and Cini had prepared documentation". Emails would be sent and she would prepare them, type them out and send to the relevant parties as instructed by Karl Cini. The court asks what he means by "prepare".
11:06 Camilleri says she was spoken to a second time and again released on police bail. Debono reflects on a previous statement made by the inspector. "You mentioned that she prepared documents. Did this consist of just typing?"
11:04 Camilleri: "Yes, she brought them and explained the contents."
11:03 Debono notes that Bondin Carter did not feature in the arrest warrants and the first time she was spoken to was on 26 February this year. He says the police sent her a "letter to call" and she complied, going to the Financial Crimes Investigation Department in Santa Venera. Debono refers to bank transactions mentioned by the inspector. "She brought you copies of documentation relating to this, correct?"
11:01 Defence lawyer Franco Debono cross-examines the witness.
11:01 Bondin Carter had told the police that she was not a chief financial officer or an accountant and had no warrant as an auditor and was simply a manager, obeying the instructions of those above her. She was later released on police bail. The inspector presents the court with various documents relating to Bondin Carter's statements.
10:56 Camilleri says that Bondin Carter was later arrested. Her statement was taken and she said that she was a manager in the administration with Nexia BT. She has since left the position.
10:55 The inspector says that Katrin Bondin Carter's involvement in the first inquiry - related to allegations of kickbacks between Tonna and Keith Schembri over the sale of Maltese citizenship to Russian nationals - was "considerable". She had prepared backdated documents with Karl Cini to be presented to Pilatus Bank, which the inspector says did not reflect reality.
10:53 Camilleri says that questioning sessions were repeated several times. In March 2021, Cini was questioned in the presence of his lawyers and chose to answer. Similarly, Tonna did the same on the same day. From the inquiry, it emerged that there were monies being paid as backhanders to several people, including Adrian Hilman, the former managing director at Allied Newspapers.
10:49 Neither did Cini and Tonna, answer any questions, the inspector tells the court.
10:48 Castagna was interrogated but did not answer any questions.
10:48 He is describing the police searches at Nexia's San Gwann offices, in which laptops and other electronic devices were seized. The search was carried out at 1am and finished almost an hour later at 1:50am.
10:47 On 21 September, Camilleri had asked duty magistrate Josette Demicoli to issue an arrest warrant against Manuel Castagna, Brian Tonna, Keith Schembri and Karl Cini. The arrest of Brian Tonna took place at his home in Marsaskala.
10:45 Camilleri, together with his colleagues had been ordered to evaluate the findings of the magisterial inquiry conducted by Natasha Galea Sciberras. A task force was set up. The witness recognises the accused in the dock.
10:44 Inspector Ian Camilleri from the Anti-Money Laundering squad takes the stand.
10:43 The magistrate orders that the sitting continue, despite the fact that the accused have not yet arrived. Just in time, at 10:44am, the other accused are brought in. The escorting guards receive a reprimand from the magistrate.
10:42 Magistrate Donatella Frendo Dimech enters the hall. She notes that at 10:41am the accused have still not been brought into the courtroom. It is not acceptable that the court has to wait when the time had long been fixed since Thursday. She asks the director of Corradino Correctional Facility to ensure that the court's orders are respected by his subalterns. So far, only Katrin Bondin Carter is in the courtroom. Her lawyers are Franco Debono and Amadeus Cachia.
10:40 Lawyers Matthew Xuereb, Stephen Tonna Lowell, Giannella de Marco and Amadeus Cachia are chatting with the prosecution lawyers. Lawyer Franco Debono also walks in.
10:12 Earlier this morning, Magistrate Donatella Frendo Dimech denied bail to Keith Schembri and his Kasco Group associates Malcolm Scerri and Robert Zammit. Schembri's father, Alfio, was granted bail.
10:10 Proceedings against Brian Tonna, Karl Cini, Manuel Castagna and Katrin Bondin Carter are expected to start at 10:30am.