Minister urges MFSA to investigate PN loan scheme

Education minister Evarist Bartolo has called on the Malta Financial Services Authority to investigate the PN’s Cedoli scheme and hit out at the authority’s head Joe Bannister for his interests in a company in the Cayman Islands, a notorious tax haven.

Speaking in Parliament, Bartolo accused the PN of hypocrisy for criticising the government over its handling of the PanamaPapers scandal, while at the same time introducing a scheme that allows for loans of €10,000 that the party will repay over the next 10 years at an interest rate of 4%.

He questioned whether the Cedoli is in accordance to Malta’s financial services law, noting that the scheme is glaringly short of information.

“All it shows potential investors is a three page document that includes a front and back cover and a message from the Opposition leader,” he said. “That’s all it is – there are no details on where investors will deposit their money and what will become of it, and that there are no loan limits.

“The law requires serious prospectuses for entities requesting loans, including their balance sheets, and details of their assets and liabilities. Where is the MFSA here? What will the risks be if the PN finds itself unable to pay back the loans? The last I heard, the party has at least €22 million in debt.

“The PN has resorted to an antiquated loan scheme of money being exchanged by hand. Can you imagine what a storm they would have kicked up if Labour had introduced this scheme? Of course, they see us as inferior gods though…”

Bartolo reiterated his pre-electoral criticism of Bannister, over his directorship of Kairos Fund – a Cayman Islands company.

He added that Bannister had deposited money in SR Global Fund Inc, a Cayman Islands hedge fund set up by Sloane Robinson, who he noted had to recently refund £2 million after being found guilty of tax evasion.

“This is nothing but hypocrisy and double standards,” he said.

He said that the law must be updated to forbid Maltese people from opening companies and bank accounts in countries with whom it doesn’t have an automatic exchange of information – such as the Cayman Islands, Guernsey, and the US state of Delaware.

“Is it any wonder that far left and far right parties are popping up over Europe? Us mainstream politicians have allowed ourselves to lose the public trust. Even [UK Prime Minister] David Cameron is trying to launch a crusade against tax evasion, but it then turned out that he had interests in a company in Panama.”

The education minister – who said earlier today that he would have resigned in Konrad Mizzi’s position – accused the PN of blowing the PanamaPapers story out of proportion.

“We should criticise where criticism is due, but pretending that this is a national catastrophe and acting as though the end of the world has come is a sign of tribalism and partisanism that I hoped the country had got rid of.”

PN reaction

In a reaction, the PN said Bartolo’s claims were “fabricated lies.”

The PN defended its Cedoli scheme as voluntary loans made as arms’ length transaction covered by a contract of loan paying 4% interests and repayable after 10 years.

“Contrary to what Minister Bartolo alleges, this is the way a modern party should raise financing through voluntary loans, whereby there are multiple lenders towards whom the party is bound to pay interest, which is the totality of the obligation of the party towards that person eliminating the expectation of ‘paybacks’ when elected, as may be the case when a few ‘donors’ are able to effectively control the party’s access to finance in return for the paybacks we are seeing taking place at the moment,” the PN said.

The party said it had a fixed asset base worth millions and was able to meet its financing obligations.

“The same Labour Party itself borrowed money off its supporters years ago with the difference that the only ones that got repaid were those lucky enough to come up in a draw; the first thing Labour did when elected was give themselves a present in the form of Australia Hall worth €10 million and only subsequent to enriching themselves did they pass the Party Financing law.”

The PN said it was the first party with the foresight to provide a clean way of party financing that did away with an ‘I scratch your back, you scratch mine’ mentality.