Looking back at 2017 | Egrant: how Caruana Galizia pushed Muscat into an early election

It was the most sensational news to hit Maltese headlines: the story of the year, a white-hot mystery that would push Malta’s Prime Minister to call early elections, and an unresolved matter that remains under the inquiry of a magistrate.

Did Joseph Muscat and his wife own a secret offshore company in Panama and receive money transfers from a Pilatus beneficiary, possibly no less than the daughter of Azerbaijani ruler Ilham Aliyev?

Sensational, because it hit all the buttons of the narrative of corruption that pervaded the Muscat administration under assault by Simon Busuttil’s opposition. There was Panamagate, the uncomfortable relationship with the suppliers of LNG in Electrogas, and a direct accusation of embezzlement with a private bank favoured by the PM’s chief-of-staff.

In April Malta was caught up in an unfolding drama over the identity of the ultimate beneficial owner of a secret Panama offshore company whose name first broke during the Panama Papers revelations of April 2016: Egrant.

Back then Egrant was seen as the third, mysterious company formed alongside Konrad Mizzi’s Hearnville Inc. and Keith Schembri’s Tillgate; and Prime Minister Joseph Muscat’s decision not to sack his energy minister and chief-of-staff, let alone the lack of a police investigation into the Panama Papers affair, turned him into the convenient suspect.

Muscat had always brushed aside the allegations, but matters came to a head when Caruana Galizia, the Malta Independent columnist, published one allegation after the other detailing money transfers from the Azerbaijani first family to an account supposedly held in the name of Michelle Muscat – whom she claimed is the beneficial owner of Egrant.

The proof, she claimed, was a declaration of trust – a document provided by auditors Nexia BT to Pilatus Bank showing Muscat as the UBO of Egrant – that was removed from a safe inside the Whitehall Mansions offices of the bank in March 2016.

As was customary of Caruana Galizia’s style, the story was never delivered as a plat principal but in the form of degustation menu, the sums of the part providing the enjoyment for those willing to join the dots for themselves. The information trickled out in bits and pieces, the narrative beefed up as events unfolded.

At the time the news broke, Joseph Muscat was riding high on opinions polls despite the Panama affair, which despite the scandalous revelation that embroiled Mizzi and Schembri, seemed to have left him unscathed, and Busuttil, flailing. Caruana Galizia’s bombshell promised to finally answer a mystery on that scandal, why Muscat had retained his two close allies.

She had claimed that the declaration of trust had been “scanned and uploaded to the cloud” but she only reproduced the text of the alleged document and then refused to testify in the magisterial inquiry investigating the allegations. When she finally made her way to the court to speak to the inquiring magistrate, as did the Russian whistleblower Maria Efimova – who claimed she had seen the document when she worked at Pilatus Bank – no mention was ever made of whether the document truly existed. Pierre Portelli, the former Malta Independent director who is now head of the Nationalist Party’s media, claims to have seen it.

It is now eight months since that scandal broke: a magisterial inquiry was kick-started on a formal complaint to the police filed by Joseph Muscat, who demanded he be investigated.

But more than that, Muscat staked his entire reputation on the case.

Daphne Caruana Galizia: everywhere Labour walked, she saw breadcrumbs to a scandal

Enter the magistrates

As he announced he was going to early elections on 1 May, at a massive Labour rally outside the Auberge de Castille, Muscat threw down the gauntlet for Simon Busuttil, saying he would resign if only a shred of truth emerges from what he dubbed “the biggest lie in Maltese political history”, and challenged Busuttil if he would resign after committing himself politically to the allegation.

Those who accused Busuttil of being joined at the hip to Caruana Galizia, saw him evading a clear answer to Muscat’s question on Xarabank over whether he endorsed the text she has reproduced. Muscat insisted it was fabricated; Busuttil was cautious, focusing on the institutional crisis Muscat presided over, comically illustrated by an inept Commissioner of Police on his way to eat rabbit at a restaurant when the Pilatus Bank chairman was filmed emerging from a bank with a suitcase (the court of public opinion said he was smuggling out documents, but Syed Ali Sadr Hasheminejad said he had just landed from New York).

Busuttil had indicated he was unsure about giving any additional weight to the alleged document Caruana Galizia said existed, and his performance on a live television debate with Muscat suggested that only Caruana Galizia had seen the alleged document.

Caruana Galizia, as always someone who set her own rulebook come what may, had claimed that journalists should not be forced to speak to an inquiring magistrate or the police, given that they depend on the full trust of their sources “by doing nothing that might make them fear they are breaching confidentiality and putting them at risk, even just the appearance of it”. Busuttil was not forthcoming when asked whether Caruana Galizia should testify, especially due to the impression that she has seen the incontrovertible proof of the Muscats’ culpability. “That’s not for me to answer, ask her…” He then called the inquiry a “colossal cover-up” and yet, he still trusted Magistrate Aaron Bugeja when he handed to him other information leaked from the FIAU.

When that inquiry kicked off, the much-reviled Pilatus Bank said it had given the magistrate access to its CCTV system and IT platform, the suggestion being that any evidence of a $1 million transaction paid to Michelle Muscat from the Aliyev family would have been revealed there and then. Muscat has always insisted any such transaction would be recorded by correspondent banks which processed the international payments.

But then came the serious FIAU leaks.

The Panama connection resolved?

First was that of a preliminary investigative letter sent to Commissioner of Police Michael Cassar in April 2016 from the FIAU director Manfred Galdes. According to Galdes, the FIAU’s ongoing compliance visit to Pilatus Bank had revealed that Keith Schembri had received a $100,000 payment from Nexia BT auditor Brian Tonna, possibly forwarded to him after his BVI offshore company – which held a Pilatus account – received a payment from three successful applicants for a Maltese passport.

Cassar did not take up the investigation. He resigned two weeks later, possibly unwilling to take on an investigation into the PM’s éminence grise. Galdes would follow suit months later to move through the revolving door into a private sector anti-money laundering role.

When the revelations hit the news in April and May 2017, PN leader Simon Busuttil said this was a kickback for the IIP sale through Tonna’s offshore company, and paid to Schembri. The accused claimed this was a loan payback. But Busuttil took the claims to Magistrate Aaron Bugeja and kick-started an inquiry.

Another inquiry was to follow: again from an FIAU leak, this time into a series of payment Schembri paid to a savings plan account in the name of Adrian Hillman. Hillman had been the former Allied managing director whose relationship with Schembri predated Labour’s election, namely through the creation of BVI offshore companies with one of the contractors in the construction of Allied’s printing press in Mriehel – the printing press Schembri’s Kasco Group supplied to Allied in 2011.

And finally, yet another explosive allegation.

This time, a rejoinder to Panama and another mysterious breadcrumb first posted by Caruana Galizia in February 2017. It was a composite image of Schembri, Muscat, Mizzi and disgraced EU commissioner and former PN minister John Dalli. On top of their images, the name ‘Black 17’.

Black 17, we learnt later, was an offshore company set up in Dubai by Orion Engineering, the Maltese agent for the LNG tanker company Buni Armada, which was used to supply gas to the Electrogas gas plant. According to an unfinished investigation by the FIAU, the notes of which were leaked to the press, the Dubai company was to wire money to the Panama companies owned by Schembri and Mizzi. Mario Pullicino, the owner of Orion Engineering and company secretary of the Armada Floating Gas Services company which operates the LNG tanker, denied accusations that his company was involved in kickbacks destined for Schembri and Mizzi.

The notes were unclear as to what evidence was buttressing the claim. It was surely an explosive declaration, the kind that basically tied the big Labour electoral plank – the gas plant – to the mysterious reason Schembri and Mizzi opened their Panama accounts.

Jonathan Ferris, a police inspector who at this point had been just months working at the FIAU, was supposed to be investigating the claims by Maria Efimova, the Pilatus Bank employee. Ferris had actually been the police inspector prosecuting Efimova for an accusation of fraud by the bank, for allegedly misappropriating funds from the bank’s travel budget. When he was removed from the FIAU investigation over the resulting conflict of interest, Ferris must have been unhappy. When he was sacked just before his six-month probationary period was over, he claimed unfair dismissal, insisting his had been a political dismissal.

Panamapants: in 2017, a new question mark about an FIAU report that suggests, but not proves, a link between a Dubai company and Konrad Mizzi’s (pictured) and Keith Schembri’s Panama companies

Ferris has also claimed in his protest to the courts, that his termination of employment was politically motivated, referring specifically to comments made by finance minister Edward Scicluna in Brussels which Ferris said were “without doubt the politically partisan background that informed the actions of the [FIAU].”

Ferris was referring to Scicluna’s comments after the elections, where the minister surmised that excerpts of an unfinished FIAU investigation were written with “an intent to be leaked” to the press in the run-up to the election. Ferris has suggested his sacking was an attempt to dampen his investigations into PEPs while at the FIAU.

Ferris still claims he will be able to produce documents that allege millions of euros were processed by Pilatus Bank for powerful Azerbaijanis.

But the Attorney General is arguing that Ferris is still bound by FIAU secrecy requirements, which apply to former employees, and that Ferris’s affidavit to the employment tribunal divulges secret FIAU information “illegally and abusively”.

Now working as a security manager for a hotel, Ferris has insisted that the government is attempting to stop him publishing further accusations that allegedly detail Malta’s mysterious links to Azerbaijan’s ruling clan.

“I will fight to get this information out, which is really damaging for the state and for the politicians and other government officials involved,” he said.

He told interviewer Manuel Delia that in specific FIAU reports he stated that persons in government had breached the law – “whether they’re guilty or not is up to a court to decide – an investigation has to start. It is plausible that there is interference… how can reports of breaches of law, especially on money laundering, not be investigated?”