National Bank Saga • December 28 2003

The National Bank Scandal - Part 4

"Il-hajja kollha hekk. Fejn inkunu lucky, fejn inkunu unlucky. Meta inkunu unlucky irridu nkunu lkoll flimkien u kullhadd jerfa’ bicca…" Mintoff addressing Parliament, 12 December 1973

Hunting down the shareholders

- Mintoff begins collecting signatures

As the National Bank of Malta crisis verged closer to the day in which Parliament would enact a law authorising the transfer of the bank to the government, the NBM directors sought help from other quarters.
Their pleas for bridging finance from other banks had met a massive hurdle in the form of Prime Minister Dom Mintoff, who was adamant that the shareholders transfer all shares to the government. The offers of help from Barclays Bank Malta, which had already received blessing from abroad, were no use either: Dr Egdar Mizzi, Attorney General, had told the NBM directors that the Barclays Bank managers in Malta had already "swallowed the pill." There was no way out of the quandary Mintoff had placed the NBM in.
However, the NBM would have to reckon with a graver picture of the situation: they found themselves without allies in this battle for justice. On Tuesday, 11 December 2003, directors Philip Attard Montalto and Adrian Busietta, went to seek advice from Dr Mario Felice, the shadow minister of finance. It was shock for the two directors to realise that Felice was suggesting them to "lay down arms" and let Mintoff take the bank for, "as we understood him, to mean ‘whatever Mintoff wanted, Mintoff took!’," Adrian Busietta cites in his court affidavit. "Dr Felice reminded us that Mr Mintoff had television under his control – apart from being the minister responsible for the Police and the Armed Forces. How could we resist him?"
And indeed, the Nationalist Party would offer little or no resistance when the next day Mintoff presented the National and Tagliaferro Banks (temporary provision) Act for its final reading in Parliament. Felice would congratulate both shareholders and the government for the decision taken to ‘safeguard’ the bank.
The two directors proceeded to consult with Busietta’s personal legal counsel, Prof Felice Cremona: "When we told him that we were considering not signing the free transfer of shares, he told us – reacting like one who was worried and perturbed – ‘Give it to him, give it to him. This man is a madman and if he wants it, because he likes it, what can you do to stop him?’ This is daylight robbery… Give it to him, indeed, so that no one will blame you. This is robbery of the highest order that will have to go down one day in the dark history of Malta. How sorry I am that towards the end of my life I had to see so many ugly things take place!"
On that Tuesday however, the most massive withdrawals had already occurred, following Mintoff’s speech on television on the proposed hand-over of business, with Lm1.3 million being withdrawn in a day, more than what had been withdrawn over the past week (Lm1.2 million).
Early on Wednesday morning, police and armed soldiers came to the doors of the directors, who were forced out of bed and handed a letter, signed by Notary Joseph Abela, Minister of Finance, in which they were told that the bank licence had been suspended. They said the suspension was irreversible and they wanted them to sign the free transfer with urgency because the shares were of no value. At the house of the custodian of the keys of Tagliaferro Bank, Guido Sant Fournier, policemen and soldiers arrived at 3 am in the morning to tell him that if he failed to hand over the keys to them, they would arrest him.
Mintoff wanted two-thirds of the shares transferred over to the government by that evening. In the morning he again sent for the board of the directors. Another display of shouting and banging on his desk followed, warning that if by 6pm that same day the free transfer of shares are not signed, he would legislate – and that meant either appointing the Council of Administration to manage the bank, or to remove the limited liability of the NBM shareholders.
"The objective of this bill, Mr Speaker…"
"Mr Speaker, the objective of this bill is to, whilst we await the hand-over of business by two-thirds of the shareholders, to create a Council of Administration, which will be authorised by the Minister to take certain activities in hand, if possible by tomorrow morning," Mintoff said, as he started the debate on the second reading of Act XLV of 1973 – the National and Tagliaferro Banks (temporary provision) Act, in Parliament on Wednesday, 12 December 2003.
The evening parliamentary session had urgent business to conduct, and Mintoff was impatient to get the House to vote on the Act that would seal the hand-over of business from the NBM to the government.
"The current position is that we need 6,534 shareowners to authorise this transfer. Up until now there are more than 5,900. There are two applications in the Second Hall of the Civil Court concerning 1,109 shares and I hope that before we pass this law we will already have the result of this recourses," Mintoff said, referring to the shares belonging to the late Count Alfred Antonio Sant Fournier, which were administered by NBM directors Adrian Busietta and Philip Attard Montalto. They were the co-curators for the 191 ordinary voting shares registered in the name of the Count and his four children: Marie, wife of Attard Montalto, and Eileen, wife of Busietta, and their brothers Alfred and Anthony Sant Fournier.
The other shares belonged to late Marquis John Scicluna, 918 in total, and these were administered by his son Baron Patrick Scicluna and Alfred Delia. Mintoff was getting impatient – he wanted to notch up the two-thirds of shares (9,800 in total) as soon as possible: "The number that is needed is 6,534," Mintoff said in Parliament amid interruptions in the House, "Isn’t that why? They are looking for those who have a lot, not those who have just one otherwise they’ll take long… fancy looking for all of them! They are looking for the big ones to say: ‘We have so much.’ Now there are two applications in Court for 1,109. And we think the decree will not take long."
Attard Montalto and Busietta found themselves in a difficult and embarrassing position as they faced the threats of the removal of their limited liability whilst resisting Mintoff’s irrational requests: "We were going to cause trouble to the other shareholders and directors, our friends, who had already signed – doubtless under constant threat, fear and tension," Busietta wrote in a Court affidavit some thirty years later. "Since as Mr Mintoff did not have the majority of the shares he was going to do his worst to everyone. On the other hand, we as curators were responsible for the shares of Count Sant Fournier. Mr Delia and Baron Scicluna were in the same situation. We were in a really difficult situation."
Attard Montalto and Busietta had been summoned, along with Scicluna and Delia, before the Second Hall of the Civil Court on the afternoon of Wednesday, 12 December, hours before Mintoff would repair to Parliament and commence procedures to transfer the NBM to government. The testamentary administrators of these shares could not legally surrender the shares of Scicluna and Sant Fournier, which is why they had to appear in Court.
"We appeared before an almost empty courtroom," Busietta writes in his affidavit. "I do not know whether the application was filed by the Attorney General Dr Edgar Mizzi or by Dr Robert Staines on the Prime Minister’s instigation. The application requested the court to decide whether the shares of Marquis Scicluna and Count Sant Fournier could be transferred for free in accordance with Government’s requirement.
"Dr Mizzi was going in and out of the Hall and informed the judge that the Prime Minister wanted a decision quickly so that this affair could be closed. The position of that side was that it was better that the shares administered by us be ceded to the government for free, for otherwise the consequences to those shares would be bad. Besides, went the argument, those shares carried no value today, once the bank’s licence expired. I remember Judge Xuereb’s words to Dr Mizzi very clearly - Edgar, I cannot visualise ‘zero value’ in a share because if it has no value, why is he selling it? In that case he keeps it. Everything has some value, even if only for the design on the share certificate’."
Although the judge told Mizzi he refused to be hurried and pushed "here and there on such a delicate matter," it seemed apparent that Attorney General was exerting more pressure on the situation. As witness, Dr Mizzi assured the judge that at that stage the shares had no value because the licence was suspended and because the government would be taking over the bank. Above all, it would be in the interest of those shareholders who themselves had deposits with the bank, that the government should save it.
Present in the courtroom was also Louis E. Galea, director of Barclays Bank Malta, who although a rival had earlier on offered bridging finance to the NBM. Now, following Mintoff’s statement in Parliament that Barclays would be a partner in a new banking venture which would rise out of the ashes of NBM, it seemed that in Edgar Mizzi’s words, he had truly "swallowed the pill."
"The courtroom scene, in the smallness of that chamber, was truly a drama that I would never forget," Busietta recalled. "The appearance there of Mr Galea for the third time in three days shocked me. First he phoned me on Monday morning to offer me ‘help and solidarity.’ Then in the afternoon at Castille, Mr Mintoff referred to him as the ‘No 1 of Barclays’ and that Galea was shoulder to shoulder with him to form a joint venture or a company between Government and Barclays and together take over our bank. The third time, now, I had to see him giving what was described to the Court as independent advice or technical advice, namely – that our shares had no value! I do not know if he appeared as an expert appointed by the court or as a witness for the ‘prosecution’."
Both Galea and Mizzi said that since the government had taken over the licence, the shares on that particular day had no value. Busietta contested their claims in Court, saying that it was the Court’s responsibility to see whether the removal of the licence was legal and that no circumstance such as this could remove the intrinsic value of the shares, consisting in the true proportional share of the net assets of the company up to the moment of the ‘takeover,’ having also to take into account the cash deposits of millions of liri, cash in the vaults, the value of the 25 branch offices and other assets of the bank.