Zaren Vassallo got public land for cheap, but Christmas is shutting out the Lowenbrau inquiry

Malta’s political parties are roasting each other over their favourite turkey: good governance. As the Christmas shutdown tunes out the politicians from people’s minds, an investigation by the Auditor General into the sale of public land in Qormi to a PN donor is what Labour and the Nationalist parties want to rant about at the dinner table.

Earlier this week, the NAO published its findings into the way land once occupied by the Lowenbrau beer factory in Qormi, was sold to the Mosta mayor Nazzareno Vassallo’s Vassallo Builders Group, where the site today is used for a wedding hall and conferences centre.

The 21,000 square metre plot had been granted to Lowenbrau by the Maltese government back in 1990 for Lm10,000 in annual rent (€23,294). In 2009, LBM Breweries – then owned by Marsovin – was acquired by Vassallo Builders Group but just before it proceeded to redeem the ground rent – that is, acquire the land freehold – for €465,000.

Why so cheap? The reason lies in the 1990 agreement: that entire expanse of land was given to Marsovin on perpetual emphyteusis, for just Lm10,000 a year, which means the company had the right to redeem the ground rent whenever they could and become owners of the land in question. 

The 2009 transfer of land on its own was illegal: public land can only be disposed in this way by a public tender or parliamentary resolution.

But worse, when the Government Property Department approved the transfer it also dropped the condition that the land be used as a brewery, the singular condition that effectively constrained the value of the land. The ministers at the time, Tonio Fenech and Jason Azzopardi, say the GPD could legally proceed with the redemption of the ground rent without informing them, but in 2011 they discovered that the condition to have a brewery - the 'direct dominium' specified in the original 1990 deal - had been dropped.

So to make amends, the GDP got a committee of architects to renegotiate the value of the land and demand that Vassallo Builders pay a higher price for the direct dominium, determined to be €706,400 owed to the government as a price for giving up on the condition that the land be no longer used for a brewery.

But the NAO disagrees: it says the valuation had to be on the value of the land, not the direct dominium, and that this land was worth €8 million. And now Labour are keen to milk the investigation, because it targets former lands minister Jason Azzopardi – today shadow justice minister – reportedly for having known that the hasty process was allowing Marsovin to take the land and sell it off to Vassallo at a speedy pace.

Justice minister Owen Bonnici earlier this week said Jason Azzopardi, his PN counterpart, should take responsibility for the NAO findings

This, Azzopardi contests. Because he says the GPD carried out the redemption process without alerting its minister; only in 2011 was it brought to his attention by the Commissioner of Lands that the condition of the brewery had been removed, with no additional payment requested.

€8 million price tag

The NAO insists the committee should have valued the land as the price stood in 2012, at a stunning €7.8 million to €8.4 million, which when compared to the €706,000 charge extends beyond the limit of acceptability.

The committee’s architects – Alex Torpiano, Joe Ellul Vincenti and Anton Zammit – are contesting this assertion: they say they were commissioned to establish the fair market value of the 1990 perpetual emphyteusis without the original conditions – and not the value of the land as it then stood, “because the ground rent had already been redeemed”.

Even Vassallo contests it, of course, because in 2012 the land was not the government’s freehold property. It was his by then, and had been sold to him by Marsovin. And because from 1990 onwards, the only entitlement government had was the ground rent: that is, at law, perpetual emphyteusis meant just that - all the State could collect was rent on the land only. Vassallo himself is in court still contesting the new valuation of the land as determined by the committee.

But of course the NAO insists that the committee’s valuation was warped, compromised of any fair value, which is why the GPD is answerable for this failure of good governance, transparency and accountability.

And it also says that Azzopardi “shoulders an element of responsibility” because he was aware of the nominal compensation being claimed by the GPD, charging him with having failed to “question the grossly misrepresentative value of the land was a shortcoming in terms of ministerial oversight.

“For it was the responsibility of the Minister MFCC to safeguard Government’s interests and ensure that the GPD acted in line with this objective. It is in this context that the Minister MFCC bears a degree of responsibility for this gross misrepresentation of the value of the land.”

Highly suspect process

While the NAO says it did not find “direct evidence” of political pressure, it says the manner in which the GPD concluded the 2009 contract in just days was “highly suspect”.

Before the redemption, Marsovin and Agrico had reached an agreement on 30 November 2009 with the brewery’s buyers Vassallo Builders, that the land – Lowenbrau’s only asset – would be sold freehold without any other conditions. This agreement stipulated that the land was to be transferred subject to government’s agreement to cancel the conditions burdening this land within seven weeks.

So the NAO rightly pointed out that the fact that government cancelled such conditions within the seven-week timeframe “was a highly improbable outcome had the appropriate legal mechanisms for the disposal of government land been adhered to.”

Indeed, an affidavit by Nazzareno Vassallo states that Marsovin representatives had informed him that hey had an agreement with “the minister” and the GPD for the cancellation of all the conditions on payment of €465,875. Marsovin assured Vassallo that once it redeemed the rent, the site would be rendered free “within a few days”, confirming the haste with which the transfer was made possible.

Illegal transfer of land

The NAO says the illegal transfer of land is highly indicative of pressure for the speedy disposal of the land without any charge levied by government.

“Pressure to this end could have been exerted by the GPD officials or the third parties involved in this transaction, who all categorically denied this in reply to queries put by this Office. Nonetheless, an element of political pressure was asserted by the Chair Vassallo Builders Group Ltd, who alleged that Marsovin Ltd had prior agreement with the ‘Minister’ and the GPD.”

Marsovin, as well as former finance minister Tonio Fenech and former lands and small business minsiter Jason Azzopardi, denied the allegation. But the NAO says the facts of the case “render immediately evident that pressure was in fact exerted to the detriment of Government’s interests.”

Not even an official request to redeem the ground rent was found, the NAO said.

And when the GPD’s notary failed to overtly express the Commissioner of Lands’ concern over the legality of the transfer, the request to cancel the rental conditions came awnyay.

“The authorisation by the GPD director-general was deemed equally anomalous,” the NAO said, saying the director failed to appropriately consider the implications of the renouncement by government of all conditions was legally permissible.”

Vassallo says his company was completely extraneous to the ground rent redemption, which was negotiated with LBM Breweries when it was still owned by Marsovin.