The Malta Independent 12 July 2024, Friday
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Scicluna wanted additional payments to Steward to be blocked – Cabinet memo

Thursday, 11 July 2024, 10:03 Last update: about 20 hours ago

Cabinet secretary Ryan Spagnol has confirmed a Cabinet decision taken on 1 October, 2019, in which then-finance minister Edward Scicluna had clarified that no additional payments be made to Steward Health Care without express Cabinet approval. 

The email pertains to requests made by then tourism minister Konrad Mizzi, who stands charged with corruption in the ongoing hospitals PPP saga, for a €10 million additional outlay to American healthcare company Steward. 

Steward had taken over the original hospitals' privatisation concession granted to Vitals Global Healthcare. The concession was annulled by the courts last year in a judgement that mentioned fraud. 

Mizzi had authored a memorandum to Cabinet to fork out additional finance requested by Steward, who had claimed that the multi-million euro concession to run three state hospitals - St Luke's, Karin Grech, and the Gozo General hospitals - was not 'bankable'. 

The memo requested ministers to approve the additional payment. But Scicluna, who is also facing charges together with former health minister over dereliction of duty on the PPP, had then described in detail as to why additional payments to Steward should be blocked.  

Other witnesses in yesterday's court hearing included PricewaterhouseCoopers partner Lucianne Pace ross, who was risk management partner on various companies related to the hospitals PPP, among them the offshore company Bluestone Special Situation. 

PwC was the audit firm that green-lit all due diligence on Vitals Global Healthcare related companies like the Bluestone group, but also assisted Steward Health Care on tax and VAT issues.  

"We would request accreditation from the company, share register, the identities of the directors... screening for adverse news would then be carried out on the individuals and the company." 

PwC was also engaged in 2018 to prepare business plans and related studies, as well as project management. PwC terminated their services to Steward in the wake of the February 2023 judgement finding the concession has been fraudulently awarded to Vitals and Steward, that triggered a termination clause over 'adverse news'. 

An email was presented by defence lawyer Stephen Tonna Lowell showing then permanent secretary Alfred Camilleri haling payments and budget allocations in excess of what was stipulated in the contract; the exchange of around 30 emails, showed Camilleri instructing the DG for Budgets not to exceed the amounts stipulated in the hospitals contract. 

Defence lawyer Alex Sciberras asked witness Mark Borg, DG for Budgets, when the request for additional payment was made and from where it had originated. "The Ministry of Health," replied the witness, adding that it was around September or October 2019. "I remember that there were additional items which I had not approved." 

 

 

12:54 Debono asks about the companies Crossrange or Pivot Holdings. Did they feature in PwC records? Witness said she had searched for them in the firm’s records but had not found anything. That concludes today’s sitting.

Tonna Lowell says the AG’s reply has been received [to the request for exhibition of AG’s advice on the matter, which he said, seemed to agree with the defence’s position. Court will decide in camera.

The magistrate adjourns the case to 16 July 9:30. The sitting is over.

12:40 Lucienne Pace Ross returns to the stand to continue her testimony from this morning. She exhibits the letters of engagement for Bluestone.

These letters do not mean all work was approved or completed, she says.

July 2015 to Bluestone was to update the plan already agreed on, she says; May 2016 in which PwC were asked to conduct a review of the financial model; July 2016 to Bluestone asked to provide a value for the concession; November 2022 – to Steward Healthcare. PwC asks them to update the financial model.

The witness explains that the other documents she has brought with her deal with financial standards and deliverables:

October 2016 – to Bluestone, PwC is asked to assist it with company tax issues; August 2018 – PwC is asked to provide technical accounting advice on accounting standards; March 2020 – addressed to Steward – assistance on Income Tax and VAT; April 2020 - addressed to Steward. They had asked for advice on the tax implications of a particular issue.

Letter of Engagement to Steward, September 2022 over VAT services; another one in December 2022 where Steward asked PwC for recommendations; the letter of engagement was signed but PwC terminated their services to Steward in the wake of the February 2023 judgment.

Debono asks whether that was the reason for the termination of PwC’s relationship with Steward. “It was one of the reasons. It was adverse news... it was a trigger clause,” replies the witness. 

12:28 We’re back in the courtroom and the sitting has just restarted.

Cabinet secretary Ryan Spagnol returns to the witness stand and confirms that a cabinet decision was taken on October 1, 2019, also confirming the authenticity of an email dated October 10 that year that was shown to him.

Tonna Lowell asks the witness about a minute taken down during a meeting on 8 October 2019. In it the Finance Minister clarifies that additional payments mentioned in a memorandum made a week prior, were not to pass on to Steward Healthcare until the principles set out in the MoU are endorsed by the ministers. The memorandum dealt with the €10 million additional payment.

Magistrate asks whether this memorandum was a Cabinet memo asking the ministers to approve the additional payment. Tonna Lowell reads out a passage from the memo, stating that the finance minister had described in detail about why additional payments to Steward would be blocked. The finance minister wanted the concessionaires to work out the additional amount paid.

11:50 Sitting suspended until 12:15pm for earlier witnesses to testify again

11:49 Back again Lawyer Joseph Camilleri from Mamo TCV takes the stand. He had been legal counsel to Steward Healthcare and explained that his client had not waived his obligation to professional secrecy.

Debono asks the witness whether he had replaced former lawyers Deguara Farrugia (DF Advocates). He replies that what he can say is that public documents indicate that this was the case.

Had Mamo TCV been approached to assist or testify before the magisterial inquiry? asks Debono. “Certainly not me, and I do not know if there were other lawyers from the firm,” witness replies. Neither did the witness know whether Kevin Deguara or Jean Carl Farrugia continued to assist the concessionaires after Camiilleri and his law firm took over.

Witness steps off the stand. Magistrate notes that lawyer Andrei Vella had submitted a note stating that he was unable to testify as his client had not agreed to waive professional secrecy. The defence lawyers suggest that he be called to the stand at the next sitting to declare this in person.

The magistrate observed that, besides the two witnesses from this morning who are to continue their depositions, Camilleri was the last scheduled witness for today. The court suspends the sitting until 12:15pm for those witnesses to appear.

11:14 Magistrate suspends sitting for recess.

11:14 An MBR representative takes the stand next. She had been asked to confirm the involvement of lawyer Kevin Deguara in a number of companies. She says there was none. With regards to DF Advocates she confirms that it had never been registered as a partnership or a company with the MBR. The witness confirms that Deguara has no involvement in DF Corporate Services Ltd.

11:10 Franco Debono takes up questioning, asking whether he had communication with Alfred Camilleri at the time. “I had regular comms with him at the time because he was my permanent secretary and we had been working on the budget at the time.”

Debono shows the witness an email, showing Alfred Camilleri halting any payments or budget allocations in excess of that stipulated in the contract. There was an exchange of around 30 emails, says the lawyer, as one dated 10 October to Camilleri from the witness is brought up on the courtroom big screens. Camilleri instructs him not to exceed the amount stipulated in the contract.

“For the 2020 budget we had stuck to the amounts in the contract in force at the time.” It is clarified that the services were not yet being provided at the time, and it was forward planning for the coming years. Tonna Lowell suggests that the request for additional allocation had come as a result of the MoU signed by Konrad Mizzi. Witness says he doesn’t know and didn’t delve into the MoU’s contents.

Lawyer Alex Sciberras joins Fearne's legal team and asks when the request for additional payment was made and from where it had originated. “The Ministry of Health,” replies the witness, adding that it was around September or October. “I remember that there were additional items which I had not approved.” He did not exclude the possibility of a Cabinet decision approving further payments but said he was not aware of any.

11:03 Financial estimates do not report payments, explains the witness. Total expenditure and total revenue are listed in the financial estimates, but the actual expenditure is recorded in the financial report, which is prepared by the treasury department.

Tonna Lowell exhibits a document listing expenditure at Karin Grech and Gozo hospitals, asking the witness whether he could confirm that it showed the full amounts. Borg says he could not because there might be other documents.

The lawyer refers to Cabinet minutes which had been exhibited earlier this week, that state that a €10 million increase to the budget could not be approved because of the MoU that had been approved by Cabinet. “It depends on what was allocated in the contract. I do not have access to the MoU,” replies the witness.

10:54 Mark Borg takes the stand next. He has been DG Budget Affairs for 15 years and had been in the position when the concession was entered into. His office handles between €6-€7 billion in revenue and expenditure across ministries and departments.

The process of drawing up and allocating budgets takes a year to complete, he says. As Budget day approaches, towards end-August, bilateral meetings with ministries to discuss the plans and requests submitted in detail. Mid-October, they present financial propositions which are tabled and discussed in parliament until the spending and income frameworks are completed in December.

The process with regards Vitals was no different to any other. The ministry would have made the request in terms of financial plans in April and the allocation would have been made. The Finance Ministry draws up the budgets and their implementation is up to the ministries themselves.

Tonna Lowell asks about payments to Steward. Witness replies that he has no information about any payments, because these would be made by the ministries concerned together with the Central Bank.

Magistrate: “So the amounts and details of transactions are in the ministry’s hands, while the order for payment is in the Treasury’s.”

10:50 Before the next witness takes the stand, Franco Debono asks the court to order the first witness to try and find further information relating to the purpose of the transactions. He insists that the Treasury did have this information and asks the court to order the witness to verify this. A sample of ten vouchers from the relevant years is requested.

10:38 The lawyer asks who had been representing Projects Malta at the time. “I don’t remember,” Cachia replies.

In reply to a question from Stephen Tonna Lowell, Cachia says his department was not involved in evaluating any bids. Ministries are classified as contracting authorities too, he adds.

Cachia steps off the stand.

10:36 Next witness is Anthony Cachia, former DG of Contracts Department. Franco Debono asks whether they had a copy of the RFP on the Vitals PPP.

“The RFP took place in 2015. At the time the law on public procurement...excluded public service concessions.” The department had no role in the process, he says.

Filletti confronts the witness with an email sent by Cachia himself. The court asks the witness to read it, which he does in silence. “I think it’s clear here,” he finally says. He confirms he sent the email to the ministers concerned, former permanent secretary Alfred Camilleri, former minister Konrad Mizzi and his then permanent secretary Ronald Mizzi.

The email refers to unnamed consultants to give an overview of the legal aspects of the project, Filletti points out. “Do you know the name of those consultants?” The witness does not remember.

“Do you remember the recommendations you gave that day?”

“Overall, that they had technical criteria that were fitting. I didn’t stay going into detail,” Cachia replies.

“So the Department of Contracts had already recognised that it was not their remit at the time,” suggests the lawyer. Witness agrees. “As far as I remember they were talking about issuing an RFP. I didn’t see it though.”

10:29 The legal argumentation here seems to be going around in circles.

Defence lawyer Michael Sciriha, asking for information, with the witness insisting that she has no further information about those transactions. Magistrate: “Dr. Sciriha, if I am understanding correctly, the Treasury does not have access to this information.”

Sciriha: “They have the payment vouchers.”

Witness: “All we have are the spreadsheets relating to the payment. Further information must be requested from the department concerned.”

10:26 Next witness is Caroline Portelli, Assistant Director at the Treasury Department.

“The Treasury acts as an intermediary between the finance minister and the Central Bank. We do not enter into the merits of the payments. We don’t look at whether they are capital expenditure or for services.”

Magistrate asks about the role of the Treasury. Is it just a facilitator? he asks. “The payments are made out of public accounts which are owned by the Treasury...the payment per se is logged on the system by the ministry concerned.”

She confirms that she found no information about payments to VGH between 2015 and 2016. Payments to Steward were made between 2019-2023. No records of payments for 2015-2018, says the witness.

Debono suggests that the payments to Vitals were not paid out of government funds.

The witness is asked about specific documents, which are shown on large monitors in court, none of which are visible from the public gallery. Lawyer Michael Sciriha asks: “Do we agree that those payments were for services delivered in the hospitals, Gozo, Karin Grech?”

Witness says” “They are addressed to Steward and Vitals, to the hospitals mentioned.” She says Treasury doesn’t have access beyond the descriptions attached to payments. “The ministry is better placed to answer this question because the treasury is simply an intermediary,” adds the witness.

Although a description of the expenditure is listed on the payment voucher, this could be inaccurate, explains the witness, repeating that the Treasury had no access to further information.

10:14 Before stepping off the stand, she is asked to return to court later today and exhibit the letters of engagement relating to the concession. 

10:10 Next witness is Lucianne Pace Ross Partner at PwC, accountant by profession. She tells the court that she is a Risk Managment Partner at PwC.

The court exempts the witness from professional secrecy. Debono asks whether she was involved in the onboarding process with anyone involved and to explain the process.

“Risk management is there to establish what procedures are required.” She clarifies that Bluestone Special Situation is the company she was dealing with. Onboarding processes provide due diligence. “We would request accreditation from the company, share register, the identities of the directors... screening for adverse news would then be carried out on the individuals and the company.”

Pace Ross exhibits a letter of engagement from November 2018. It appoints PwC to do the business plan and related studies. Later the firm was also asked to assist with project management. Another letter of engagement April 2015 is also exhibited. Debono asks the witness what laws they observe in the process.

“As accountants we are regulated by AML law: the Prevention of Money Laundering Act, PwC’s internal policies and FIAU implementing procedures for subject persons,” Pace Ross replies.

10:01 Debono asks the witness to explain the memo. Spagnol explains that it is about extending the financial terms and ratifying the transfer of shares from Bluestone International Ltd and VGH to Steward Healthcare. He reads from one of the documents, which states that ministers were expected to grant approved bidder status to VGH for the administration of the hospitals.

09:59 Spagnol confirms documents from a Cabinet meeting of 9 January 2019. He confirms that a second document contains a decision taken during a meeting on 27 October 2015. A third from 23 June 2015, a fourth from 19 December 2017. He recognises one document exhibited from 2019 that had been exhibited in the inquiry, but tells the court that he had not been asked to exhibit his copy to court today. He will exhibit them when he returns to the witness stand at midday today.

Defence lawyer Franco Debono asks him to read from minutes of one meeting in 2015. “The Cabinet decided that the minister, Konrad Mizzi, sign these contracts and that the government give the sites over for works to begin.”

The sites are the three hospitals, he confirms.

Shown another document about a Cabinet decision, the says that the MoU was brought before Cabinet urgently. Konrad Mizzi had been tourism minister at the time and responsible for Public Private Partnerships, he says.

The 2018 MoU referred to the transfer of the concession from VGH to Steward. 

09:51 Permanent Secretary to Cabinet, Ryan Spagnol, is the first witness. He is shown a set of documents and asked to confirm their authenticity. 

09:51 When the sitting begins, Magistrate Leonard Caruana observes that a number of lawyers are not present. In fact, only lawyers Giannella De Marco, Stephen Tonna Lowell, Charles Mercieca, Stefano Filletti and Maurice Meli are present in the courtroom. The defence appear to have renounced the need to hear a number of witnesses. 

09:50 Good morning.

 

 

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