Update 2 | Keith Schembri denies 2014 money transfer to BVI company

Keith Schembri has denied reports claiming he injected $750,000 into his British Virgin Islands Company, Colson Services Ltd, in 2014, after having already been appointed as the Prime Minister’s chief of staff.

Schembri’s remarks come in the wake of a report by the Malta Independent on Sunday, which reported that according to documentation on the Panama Papers, Schembri’s BIV company, Colson Services Ltd, transferred the monies in the same year that his Maltese holding company declared $400,000 in losses.

But in a statement on Sunday, Schembri rebutted the report, and insisted that the operations and activities of his BIV company preceded his entrance into politics.

"The entire story is riddled with inaccuracies, incorrect facts and unfounded allegations and assumptions. No monies were transferred to my BVI company in 2014. All taxes have been paid on the funds held under the BVI company. The BVI company, its operations and activities all precede my entrance into politics," Schembri said in a reaction.

“It is curious that the Independent, whilst failing entirely to understand basic documents, has once again, to its detriment, decided to repeat allegations and insinuations made by certain bloggers who have no journalistic integrity. It is now evident that the Independent has agreed to form part of a character assassination attempt at the behest of certain quarters that have taken over the Nationalist Party."

In reply to questions sent by MaltaToday, Schembri insisted that the funds - $750,000 poured into the BVI company – were accumulated over time and all derive from “legitimate business activity”.

“The funds were held in Malta and all taxes have been paid thereon,” he said.

MaltaToday also asked Schembri whether he should make a full disclosure of his offshore transactions and whether he felt that his business affairs undermined the public trust in his role and in that of the Prime Minister.

“People involved in business have an important role to play in our society. It would be truly a sorry state for our democracy if people involved in business are precluded, in principle, from participating in public life or holding public office,” Schembri replied.

The Malta Independent on Sunday also said that Schembri’s company owed over US$820,000 to other companies within the “group” for over a year. It said that these companies “most likely include” Malcolm Scerri’s BIV company, Selson Holding Corporation, which showed an injection of almost US$1.2 million in 2014.

The newspaper also claimed that, possibly related to the financial machinations employed by Schembri and Scerri, is the BVI company of former Allied Group managing director Adrian Hillman, Lester Holdings Group Ltd, which shows an injection of almost US$650,00 in 2014.

Schembri had set up his BIV company in 2011, and on the same day, a second British Virgin Islands company, Selson Holding Corporation was set up for Scerri, the managing director of Schembri’s company, Kasco Limited. Four months later on 10 May 2011, Hillman, set up his own BVI company through the same Spanish intermediary used by Schembri.

Hillman has resigned since Malta Independent columnist Daphne Caruana Galizia alleged in February that he received payments from Schembri as an inducement for the purchase of newsprint from Kasco.

Both men deny the allegations.

Unnamed financial analysts told the Malta Independent that Schembri’s alleged financial manoeuvres were “highly dubious” from a legal perspective, and “at best highly unethical” when considering that it was enacted when Schembri had already been installed as the OPM’s chief of staff.

Schembri denies ‘intention’ to set up joint venture with Mizzi

Meanwhile, The Sunday Times today also ran a news report saying that Schembri and minister Konrad Mizzi wanted to avoid informing Maltese banks about their New Zealand trusts.

Quoting email exchanges between Nexia BT’s senior partner Karl Cini and Mossack Fonseca New Zealand, it appeared that two bank reference letters were being requested in order to set up the trusts for Mizzi and Schembri.

“It is not common to have more than one bank and my clients would like to avoid informing their banks here,” Cini said in an e-mail dated May 23, 2015 with the subject line “NZ foreign Trust”.

The trust documents published by The Sunday Times also show that both Mizzi and Schembri agreed not to have the trust accounts prepared or audited by Bentleys – an accounting firm that acts as an intermediary for Mossack Fonseca.

In a reaction, Schembri said that the correspondence referred to in the article is all extraneous to him, not having been part of any of the exchanges referred.

“To this extent on the 6th of May, through my local and international lawyers, I wrote to the ICIJ requesting a copy of the documentation held by them concerning my affairs so that I am in a position to effectively respond to questions concerning the setting up of my trust in New Zealand and my company in Panama,” Schembri said.

“The request was based on my rights as an EU citizen to have access to personal data held anywhere in the EU, and so that I am not subjected to a 'trial by media' without having the knowledge of the documents upon which allegations are being made. For unknown reasons ICIJ have refused to accede to this simple and reasonable demand.”

In denying the request, the ICIJ lawyers argued that the applicable law was that of America - where the information is being held - stating that “consistent with these First Amendment protections, ICIJ does not disclose unpublished materials to third parties as a matter of policy”.

Schembri said that the Sunday Times’s article confirmed that all monies received by the company – Tillgate - were to be channeled through the trust. The New Zealand Trust was declared to the New Zealand tax authorities with whom Malta has various bilateral information exchange agreements. 

“On the other hand, I categorically deny that there was ever an intention for a joint venture to be set up with Dr Konrad Mizzi,” Schembri said.

According to The Sunday Times, another e-mail exchange showed how the trustees wanted a clearer explanation of the “joint venture” Mizzi and Schembri were entering into and the business their Panama companies would be engaging in.