Negotiations for Fekruna Bay expropriation left unrecorded, audit finds

The last Nationalist government did not keep a record of the Lands Department’s meetings with a businessman that led to a land-swap for the expropriation of a plot of land at Fekruna Bay.

This was revealed by the National Audit Office, which warned in a report published today that the lack of documentation was a “serious shortcoming” that had impeded the NAO from establishing key developments and that had “detracted from the principles of good governance, accountability and transparency”.

Four days before the 2013 general election, the government struck a land swap deal with restaurateur Raymond Vella, giving the businessman two plots of land in San Gwann and Swieqi in return for his land at the picturesque Fekruna Bay.

The Fekruna land was valued at €4,972,007, while the sites at San Gwann and Swieqi were in aggregate valued at €4,271,583. The balance of €700,424 was offset against capital gains tax and duty on documents due by Vella.

However, a 2016 report by the Internal Audit and Investigations Department found that the government had lost around €1.1 million in the deal – as it had overvalued the Fekruna land by €875,000 and undervalued the lands traded by an aggregate €252,417.

The NAO was called in to investigate two years ago by Parliament’s Public Accounts Committee, following a request by the Labour government.

It found that the director general of the Government Propery Department had been entrusted with negotiating the land swap, but that the lack of documentation on his meetings with Vella impeded the NAO from establishing key developments, such as how the sites in Swieqi and San Gwann had been identified.

In view of the disagreement between the parties, the director general had proposed resolution through arbitration – a development that the NAO flagged as unethical.

“Although legislation does not specify whether it is permissible for owners of expropriated property to be involved in valuing government-owned land, the NAO maintains significant reservations in this respect,” the report reads. “In this Office’s opinion, arbitration, if any, was to be resorted to in the establishment of value of the Fekruna Bay property and not in the case of the San Gwann and Swieqi sites. Negotiations on the value of government-owned land present an added and unwarranted risk to Government.

The director general had written to then fair competion minister Jason Azzopardi to express doubt as to the prudence of concluding the expropriation so soon before the election. However, Azzopardi contended that the expropriation was to be concluded as it had been initiated years earlier and served an evident public purpose.

“The NAO acknowledges that there is no legal stipulation of what functions of government come to a halt, and when, once an election is announced,” the report reads. “This Office considers valid the exercise of prudence; yet, similarly deems valid the conclusion of a process long outstanding. Given the regulatory lacuna, the matter remains subjective.”

The NAO also published an investigation into a separate land deal under the previous PN adminsitration – namely the transfer of a Spinola property to Eighty Two Co Ltd in 2012 for €525,000.

It warned that the government failed to secure value for money for the site, which the NAO had estimated at around €2.4 million. Compounding matters was the fact that government disposed of the site through outright sale rather than through a temporary emphyteusis.

Although the NAO did not find direct evidence of political pressure in the process, it said that its “attention was drawn” by the direct involvement of Jason Azzopardi and his head of secretariat in the latter stages of the process.

“In the NAO’s opinion, the context of the change from temporary emphytuesis to sale indicated an element of ministerial involvement, for it was after a meeting held with [Azzopardi] and his permanent secretary that the director general recommended disposal through outright sale,” the report reads. “This contrasted with an earlier recommendation by the director genderal and the endorsement of [Azzopardi] and the parliamentary secretary for land for disposal of the site through temproary emphyteusis.”

Opposition MP Jason Azzopardi

Azzopardi: ‘Reports prove lack of political interference’

Azzopardi welcomed the two reports, arguing that they prove that there was no political interference in the transfer of the two lands.

“The reports prove that the negotiations took place between the private secttor and the civil service, as is the case in all expropriation and land transfer cases,” he said. “They have unmasked Joseph Muscat, who had invented lies about me as retribution for NAO reports that had implicated him and his ministers.”

On the Fekruna expropriation, he noted that the NAO had praised the government’s decision to set up a committee to evaluate the lands in question.

On the Spinola property sale, he noted that the NAO could not find any evidence of political interference and that the entire process turned out to be “influenced by a notarial mistake back in 1975”.