Pardoned oil trader used to pay commissions in cash, says he paid 'for nothing’

Oil trader George Farrugia testifies against former financial controller Alfred Mallia in connection with the alleged kickbacks Mallia received for the supply of oil to Enemalta. 

Oil trader George Farrugia
Oil trader George Farrugia

Pardoned oil trader George Farrugia has said that he paid LM 40,000 in commissions to former Enemalta officials Alfred Mallia and Tarcisio Mifsud in cash, and testified that irrespective of Total’s “competitive” prices, he still had to pay kickbacks in order to win tenders for the supply of oil to Enemalta.

Farrugia was summoned to testify in the compilation of evidence against Enemalta’s former petroleum Chief Alfred Mallia who, along with Enemalta financial controller Tarcisio Mifsud and five other men, is facing corruption charges in connection with kickbacks and commission they are alleged to have received by pardoned oil trader George Farrugia for the supply of oil to Enemalta.

Taking the witness stand, Farrugia, once the local agent of French oil giant Total, explained to the court that in 1997, he started giving Mallia a cut from the commissions he received for sales to Enemalta.

However, the relationship with Mallia changed in 1999, when a strike by port workers left Enemalta’s oil reserves running low. To alleviate its oil shortage, Enemalta – through a direct order – decided to tap into 20,000 tonnes of gasoil that Total had stored at Has-Saptan.,

“In 1999, there were only offshore products available from Malta, and subsequently Mallia approached me to see if Total was interested in selling its oil at Has-Saptan to Enemalta. Mallia wanted half of the commissions I was earning.”

“I got a commission of US$1.50 per tonne, but told him that I was receiving $1. We then agreed that I would pass 50c to him [Mallia],” he said.

From then on, Farrugia, started bidding for Enemalta’s oil tenders and is said to have been successful in about two thirds of them. Despite paying commissions to Mallia, Farrugia insisted that Total had won these tenders on merit because they had the most competitive prices.

“I used to pay commissions to work, even though Total had the most competitive prices. I now realise that even though you pay, it is for nothing,” he said while arguing that irrespective of their prices, Total would not have won any tenders had he not paid any commissions.

Grilled by prosecuting inspector Jonathan Ferris, Farrugia explained that his business relationship with Mallia dates back to before 1997, as the two were involved in the trading of 'small parcels' part of shipments of 25,000 tonnes of oil imported to Malta. Mallia would receive commissions on these purchases, but these had nothing to do with Enemalta.

When Farrugia's company, Powerplan Ltd - which represented Total - sought a contract from Enemalta to store oil, Mallia wanted a commission on that too, and after being given the "go ahead by his brother, who are also his business partners," Farrugia agreed to pay him the commissions.

Farrugia, who in 2013 received a presidential pardon in exchange for his testimony against former Enemalta officials implicated in the oil scandal, told the court that from 1997 to 2000, he used to personally hand over commissions to Mallia.

This however changed when in 2000, Mallia, who in court today appeared frail, was involved in a serious traffic accident and admitted to hospital.

Describing their relationship as “good,” Farrugia told the court that after Mallia’s accident, he went to see him in hospital and it was then that he was approached by Enemalta’s former financial controller Tarcisio Mifsud.

“In 2000, I visited Mallia in hospital and I was told that Tarcisio Mifsud wanted to speak to me. Mifsud, in turn, told me that he wanted the commissions that I was giving to Mallia. It then transpired that the two were splitting the commission between them.”

“From then onwards, up until 2003, I started to pay the commissions on every consignment to Mifsud. He promised that he would divide the money with Mallia, but I am in the dark as to whether Mifsud actually shared the commission,” Farrugia said.

Asked how much money he had paid Mallia, Farrugia explained that in total he gave Tarcisio Mifsud and Alfred Mallia LM 40,000 (€93,000).

Cross-examined by defence lawyer Kris Balzan, Farrugia insisted that from 1997 to 2000, Mallia had approached him for commissions but insisted that after Mallia was hospitalised, Mifsud had approached him.

“I stopped personally giving the money to Mallia in 2000, but after Mallia was hospitalised I started paying commissions to Mifsud. I do not know whether Mallia actually received these commissions, as you have to ask Mallia or Mifsud about this,” Farrugia said.

Asked what proof he has of these payments to Mallia, Farrugia told the court that he always paid in cash.

“There were no invoices for the commissions. I always paid in cash, I never any made any payments via bank transfer, and I do not remember whether if I ever paid Mallia by cheque.” he said.

Inspector Jonathan Ferris is leading the prosecution while Lawyer Kris Balzan is defence counsel. 

The case has been adjourned until October 9.