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Matthew Vella
MaltaToday can confirm that according to a report by court expert John Bonnici, appointed by Magistrate Consuelo Scerri Herrera to analyse the Foundation for Tomorrow’s Schools’ financial records, FTS board member Peter Fenech had found another batch of irregular direct orders issued in 2002 amounting to Lm250,000. These were discovered after Fenech had personally taken the initiative to check allegations of mismanagement in the award of direct orders back in 2003.
The new findings, previously unpublished in the Magistrate’s report on
the findings, are part of the Bonnici report into the inquiry’s witnesses and financial records, where details of the foundation’s indiscriminate issuing of direct orders were outlined in full by Bonnici, detailing the manner in which direct orders were deliberately issued without approval by the Finance Ministry or split up into smaller orders to appear within the confines of the Public Procurement Regulations.
Acting CEO for the Foundation for Tomorrow’s Schools, George Papagiorcopulo, has denied responsibility for any of the allegedly irregular direct orders totalling Lm250,000 during his tenure as executive director and management consultant in 2002, which according to the findings of FTS board member Peter Fenech, was the total number of direct orders issued in breach of the public procurement regulations during the year.
The magisterial inquiry into the Foundation for Tomorrow’s Schools, launched following a letter by Labour MP Carmelo Abela asking that the foundation’s workings be investigated, has revealed new testimonies into the operation of the harried foundation, after MaltaToday commenced investigations into the way direct orders had been issued by FTS officials to private sector beneficiaries.
Despite claims by FTS board member Peter Fenech of an existing Lm250,000 in irregular direct orders issued in 2002, during which present CEO George Papagiorcopulo was executive director and later management consultant to the foundation, no mention of this fact was included in either the Magistrate’s report or the opinion of Attorney General Silvio Camilleri on the inquiry.
The inquiry, launched in October 2003, encountered a minor obstacle upon its commencement when former Attorney General Anthony Borg Barthet, today a Judge at the European Court of Justice in Strasbourg, suggested to Magistrate Scerri Herrera that her inquiry would amount to nothing but a ‘fishing expedition’.
Although the inquiry elucidates the extent of FTS’s mismanagement and financial lacunae, after MaltaToday first reported that some 30 per cent of a total of Lm400,000 in direct orders had been issued to beneficiaries from Education Minister Louis Galea’s electoral constituencies, the verdict by Attorney General Silvio Camilleri would find no sufficient legal basis to take criminal proceedings on allegations of embezzlement.
Papagiorcopulo is defending his reputation at the FTS, where despite the artless denomination of his role as ‘acting’ CEO, enjoys the handsome wage packet of the Lm10-per-hour he earned way back as a management consultant, where he worked an average of 140 hours a month. He is engaged with FTS on a three-year contract.
“You are barking up the wrong tree. The word irregular does not exist in my calendar,” Papagiorcopulo told this newspaper, complaining that he had been called to testify in front of Scerri Herrera despite being mentioned regularly in court expert John Bonnici’s report on the financial records of the foundation by witnesses such as disgraced foundation CEO Alfred Ferrante, who was sacked in October 2003 for mismanagement.
The latter, who claimed he had been a ‘scapegoat’ in the entire FTS saga, declared in his testimony that Papagiorcopulo as management consultant had advised the foundation on how to issue direct orders, including the way orders could be split up – a practice which the John Bonnici report believes was “not in the spirit” of the legislation govrning public procurement.
Papagiorcopulo has however defended his record at FTS: “During my time at FTS, every piece of work was sanctioned by the board, or the Education Ministry, the Finance Ministry, or even the Contracts Department, anyway you look at it.
“Whatever the direct order was, it was always in line with the procurement regulations. Not once was a direct order issued without having been in line with the regulations.”
Other statements by Ferrante on the role of Education Minister Louis Galea in the management of FTS works have also finally attracted official reaction from the minister. According to Ferrante, Galea would go onsite at school construction sites where he would gives orders to contractors with whom he enjoyed a certain familiarity, directing them which work to do on the schools, bypassing Ferrante whilst provoking new orders for work which had not been sanctioned by Ferrante or official FTS representatives.
In an official comment to MaltaToday, a government spokesperson said that “in most instances the Minister is always accompanied by FTS officials during his visits on school sites and he is duty bound to issue instructions and direction wherever this is needed for the better performance of works in schools.”
Papagiorcopulo’s role
According to the John Bonnici report, the foundation’s audited accounts for 2001 had shown that auditors had found certain difficulties in closing the accounts, finding missing data on the payment of salaries and on amounts that had been accrued in favour of Kalaxlokk, one of the government entities that received direct orders from the foundation.
Bonnici found 511 direct orders that remain untraceable from the period in which Papagiorcopulo occupied the post of executive director, since the foundation’s inception in 2001.
According to Bonnici, despite the scarcity of documentation, there is evidence that there were “clear indications that the splitting of orders could have been intentional.”
He wrote that in 2001, although Education Minister Louis Galea had approved the first batch of payments related to the overdue Sandhurst and Mtarfa projects “there is no indication if these were passed on or not to the (finance) minister Finance simply because they had no approval or were doubtful about their regularity, and asked for the signature of the minister (Galea).”
Bonnici’s findings in fact would show how the foundation’s officials skirted round the public procurement regulations to see how direct orders or tenders could be issued by “other means… today well-known, to avoid imposed limitations. One of these is the splitting of orders,” a practice which according to Alfred Ferrante’s testimony, was suggested to him by Papagiorcopulo himself.
But Papagiorcopulo is doubtful of Bonnici’s report: “At the FTS there is all the documentation which neither the Magistrate, nor John Bonnici or Alfred Ferrante could not comment on, or exhibit. If I had been asked to testify, I would have shown that 99 per cent of what was spent in orders went to parastatal companies and government departments.”
The splitting of orders remains a contentious issue. Public procurement regulations lay down specific amounts for which orders can be purchased directly from the open market without a call for tender. It was assumed, even by Minister Galea during an answer given to PQ, that large orders could bypass the tender process by being split into smaller direct orders, for example splitting a Lm12,000 order in ten parts of Lm1,200 - a statement which was highlighted by Bonnici.
Board member Peter Fenech’s evidence however shows that the policy given to the board from the Finance and Education Minister was “always clear, difficult as it was to work by the financial regulations, we had to abide by them.”
But admissions by former CEO Alfred Ferrante had shown that Papagiorcopulo had advised him on how direct orders could be split up. Bonnici noted that “instead of seeking the advice of a lawyer, Ferrante consulted Papagiorcopulo,” and that it was in fact Papagiorcopulo who told Ferrante, according to the latter’s witness, that “the CEO or chairman could issue direct orders without authorisation on different products at a value of Lm1,500 each as long as the expense did not exceed Lm10,000 in a period of six months… .”
Bonnici found disagreement with this reasoning: “If this does not go against the word of the sub-regulations it certainly goes against their spirit… otherwise thousands could be spent in the form of small direct orders in six months. The scope of the legislator was to avoid such abuse…”
But Papagiorcopulo claims that he had never given such advice: “The problem with Alfred Ferrante was that, despite his enthusiasm, his tendency to try and take on all the demands of headmasters led him to issue certain direct orders.
“I would sit next to him and used to tell him that he had to be careful and move according to the procurement regulations. I never used to advise Ferrante in the way he said. There was no reference to me in the Magistrate’s report on the case, but if references were made about me from witnesses, why wasn’t I asked to testify? Why wasn’t I asked to give my version?”
Finance Ministry’s concern
Such was the extent of the foundation’s abusive issuing of direct orders, that according to Bonnici, the FTS never had the power delegated to it by the Finance Ministry to authorise certain direct orders.
By May 2002, the Finance Ministry had already given “explicit instructions” for FTS tenders to be referred to the ministry for clearance prior to their publication.
Yet, according to Ferrante’s witness, FTS continued in issuing call for tenders, and evaluating the offers itself and giving contracts out with the blessing of the board of directors.
Bonnici writes that in the absence of the ministry’s authorisation, the award of “relatively all contracts” happened in breach of the procurement regulations.
Up until 2004, the Finance Ministry was still warning the foundation that if its instructions continued to be disregarded, the Ministry would not be in a position to grant approval for direct orders and tenders, “and whoever places such direct orders will be held personally responsible.”
However it was evident to Bonnici that FTS officials were aware that they were skirting financial regulations. Peter Fenech himself would tell Bonnici that the values of direct orders would incur variations of some 20 per cent on their original estimated price.
Bonnici noted that “another known way, used by FTS, to avoid limitations” was to give estimates on work needed below the threshold that would warrant the issue of a tender. “When asked, Peter Fenech said there had been cases in which a direct order of Lm2,400 was issued and then its price would have incurred variations and altered to Lm12,000. Fenech said ‘yes, it results there were. That was the major part of the problem. It resulted that variations of 20 per cent had occurred when the CEO could only allow variations of five per cent’.”
The Finance Ministry had been so concerned of the financial mishaps at FTS that its representative on the FTS board, Mark Borg, had refused to attend FTS board meetings at its newly acquired Ta’ Xbiex premises because the contract to rent out the office from AON Malta had not been approved by the Finance Ministry. FTS had asked Louis Galea to approve a contract of over Lm6,000 for the rent of the office. Although Galea gave his approval, Bonnici wrote this had been a direct order which required the Finance Ministry’s authorisation.
Bonnici’s conclusions
The court expert’s report on the Foundation for Tomorrow Schools effectively noted that the possibility remains “if not the probability, that direct orders were issued and not entered in the accounts,” and that “it is practically impossible that other direct orders where work had not been completed… had not been awarded… it cannot be said with certainty that the provisions of the procurement regulations were respected, apart from a lack of complete documentation, especially in 2001.”
His report also shows how certain admissions of irregularities meant that FTS officials were aware of what was happening in the foundation. Ferrante was quoted saying it had not been the first time that he authorised an order for work which he felt he didn’t have to authorise:
“I would made a note to someone to attract their attention, to tell them ‘this is not according to the law’.”
Peter Fenech also said that it had resulted that there wasn’t a strict adherence to the financial regulations in the issuing of direct orders:
“…I would speak to Chris Pullicino [financial controller]… He would tell me ‘no, not everything’s well’. In my opinion, not everything was well,” leading to his personal investigations in which he found Lm50,000 irregular direct orders in 2003, and Lm250,000 irregular direct orders for 2002.
Bonnici’s conclusions, despite the lack of documentation in certain areas, was that there was “no doubt, that despite the warnings by the Ministry of Finance, the Contracts Director and the FTS board itself, FTS officials constantly issued direct orders, breaching the regulations. Permission from the Ministry of Finance was sought posthumously, and not always. At times, the conditions imposed by the Ministry of Finance for validation were not followed.”
matthew@newsworksltd.com
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