[ANALYSIS] Pilatus: The political aftermath of a banker’s arrest
How are Delia and Muscat reacting to the arrest of Pilatus Bank chairman Ali Sadr Hasheminejad and what are the stakes for the two leaders? JAMES DEBONO evaluates the fallout
The arrest of the Pilatus bank chairman in the USA may well have exposed the greatest paradox of present day Maltese politics, that the messier things become on the good governance front, the greater the temptation for the Opposition to look the other way and for the government to continue ignoring the ramifications of the moral question which continues to haunt it.
Ironically the ambivalence on both sides can be squarely attributed to their actions before the 2017 general election; the inaction on panamagate on Muscat’s part continues to feed doubts on anything connected to its protagonists while the PN now wary of over reaching again after having allowed ‘Egrant’ to eclipse other claims based on more factual evidence, before being trounced in the polls.
The ‘just ignore’ strategy
Muscat’s standard response to bad news on the good governance front has become that of ignoring it by shifting the focus to good news on the economic front.
No mention of the arrest of the Pilatus Bank chairman was made in his Freedom Day speech and during Sunday’s political meeting in Mqabba.
Muscat’s reaction consisted in passing the buck to the financial services regulator (MFSA) and turning the tables back on the Opposition by invoking the rule of law argument to shoot down calls to immediately revoke the bank licence.
“We were asked why we don’t suspend the licence. Because the rule of law, a phrase this Parliament has heard for months, prohibits an EU government from taking those decisions, and that an autonomous and independent institution takes those decisions,” Muscat told parliament.
The problem for Muscat is that judging from the facts at hand, Pilatus was not behaving just like any other private bank in Malta. It also offered personalised services to Maltese and Azeri PEPS and its chairman is now facing charges which could see him serve 125 years in prison if found guilty. It now also turns out that United States investigators probing the activities of Pilatus Bank’s chairman Ali Sadr Hasheminejad were in Malta to speak to officials at the Financial Intelligence Analysis Unit in late 2017. Moreover, this must be seen in the light of previous FIAU reports which also cast a shadow on the bank’s modus operandi.
Muscat should not be held to account for the actions of the owner of a private bank found in breach of US sanctions before even setting foot in Malta. But he cannot ignore the perception of some degree of familiarity between his administration and the bank chairman.
Neither can he shift responsibility for licensing the bank on the previous administration. For although exploratory talks took place in 2012, Pilatus Bank was registered in December 2013 and was given a licence to operate as a bank in January 2014 under the watch of a Labour government. The regulatory process fell upon the MFSA chaired by Joe Bannister, who had served under consecutive PN-led administrations and was retained by Muscat despite his directorship in companies registered in the Cayman Islands and revealed in 2012.
A question of familiarity
The cherry on the cake was Muscat’s attendance in the Pilatus Bank chairman’s wedding in Venice in 2015, well before the storm erupted and only a year after the bank started its operations here.
Judging this wedding invitation in hindsight as proof of collusion between Muscat and Ali Sadr may be a step too far. Neither can one expect the PM in 2015 to anticipate what was to happen in 2017 and 2018. It is also normal for politicians to attend weddings of businessmen – which may well turn out to be perfect occasions for networking with potential investors.
But two factors distinguish this wedding from others.
Ali Sadr was not an established Maltese businessmen with a track record which justifies the presence of Malta’s PM in his personal wedding. The second factor is that this wedding did not take place in Malta but in Venice. In fact, the PM claims that he had to include the wedding in the itinerary of a “personal holiday.” This suggests a greater sense of familiarity than a simple acquaintance.
The problem for Muscat is that he can’t ignore that the US arrest casts a dark shadow on the modus operandi of a businessman who is perceived to have been close to himself and his government.
This must be seen in the context of an account held in the bank by his chief of staff. Still, this does not in any way suggest criminal collusion and is not necessarily related to the more serious allegations related to Egrant.
But it has now become impossible not to see the latest episode in the light of previous events, simply because the perception of impunity has grown thanks to Muscat’s lack of action before 2017.
Future proof Malta
Muscat’s logic may well be that voters have elected him despite their doubts on his track record on governance and therefore he should focus on those matters which have earned him the electorate’s trust.
This may underline his focus, on Sunday, on his ambition to make Malta “future proof” by turning to new economic sectors like fintech and block-chain on the premise that unlike financial services these “do not depend on the country’s tax regime which is under attack”. In this way Muscat seems to suggest that the problem with the financial sector is not lax regulation on our part but the attacks of others.
The pitfalls of risk taking
By hinting at the need of future proof investments, he may be addressing one major criticism, that with the exception of Crane currency, his government has failed in attracting any new major economic investment to Malta.
Moreover, much flaunted investments like the American University and Vitals have not fulfilled their promise while much of the economic growth in the country can be attributed to a construction boom and the increase in foreign workers in Malta.
This why Muscat now seems focused on new industries like medicinal cannabis and block chain.
Muscat also hinted that he is not afraid of taking risks. While noting that “risk-free” decisions do not exist, he criticised his predecessors, saying they feared making a move out of fear of facing a backlash.
“If decisions turn out to be a success the merit goes to the people, if not government has to shoulder responsibility”, he rightly notes.
But what if these risks come at the cost of good governance as was clearly the case with the acquisition of public hospitals by Vitals?
Muscat acknowledged that this “weakness” was being addressed by attracting Steward Health Care. But as has become the norm nobody is expected to take political responsibility for investments which not only failed to materialise but which raised reasonable doubts on governance.
Equally problematic is Muscat’s failure to send a strong message against corruption and bad governance in any of his keynote speeches. While Muscat risks being perceived as being hypocritical if he does so, his silence may be interpreted that he is too compromised by the actions of those around him to take a firm stance on a crucial issue.
By sidelining the issue, Muscat could be inadvertedly sending a message to underlings that all is well as
long as the country becomes more prosperous. This
may well end upcreating even more problems in the future as the ‘anything goes’ mentality further digs its roots in the Maltese psyche. He could at least acknowledge that his party could have done a much better job in cleaning up the stables, as promised before 2013.
The Opposition’s dilemma
Delia was absent during a debate on the Pilatus Bank in parliament as this coincided with his first international outing as PN leader-by attending a European summit of centre-right leaders, which is in itself an important step for a new leader finding his place in his international political family.
But in so doing he allowed former leader Simon Busuttil and internal critic Karol Aquilina to take the centre-stage in last week’s parliamentary debate.
But Delia can’t be accused of remaining silent on this issue. He immediately called for the revocation of the licence in a press conference in front of the law courts and repeated the same message while addressing a political activity on Sunday. Yet ironically what grabbed public attention was his remark that the Christian population in Europe is diminishing and by 2050 and Europe will ‘no longer be Christian’.
In search of the holy grail
Although he made this remark only after calling on the government to shoulder political responsibility for tarnishing of Malta’s reputation in the financial sector, the quip on migration may suggest that Delia is keen on touching another raw nerve in Maltese society.
Delia is ignoring the fact that many foreign workers in Malta hail from ‘Christian’ countries but linking migration to Christian identity may be his own way of linking mounting concerns on foreign workers with his party’s cultural roots.
Yet this risks further alienating both liberal voters and businesses thriving on foreign labour. Delia may be seeking to tick the concerns emerging from surveys but he seems oblivious to the complexity of his own electorate.
Delia has understandably refrained from interpreting the arrest of the Pilatus Bank chairman as a sign of vindication of his predecessor’s endorsement of claims made by slain journalist Daphne Caruana Galizia on Egrant.
On the other hand Simon Busuttil was keen on emphasising that the Opposition has long been speaking out against Pilatus Bank, and that the Attorney General, the police and FIAU “could and should have done something, but did nothing.”
Inevitably the allegations against the bank chairman raise questions on his modus operandi, making the allegations made in Caruana Galizia’s blog more plausible. This is so because the creativity allegedly used to skirt around US sanctions in itself raises doubts on whether the bank used the same creativity to dodge other constraints. But there is always a danger in joining dots which can only be connected in hindsight.
Delia’s reluctance to do so is understandable, considering the electoral fall out in 2017. In fact, Egrant was clearly the weakest link in the Opposition’s arsenal before the 2017 general election. In reality Egrant simply gave Muscat the opportunity to call an election from a position of strength and served to eclipse serious accusations against Keith Schembri and Konrad Mizzi. Muscat’s showdown with Busuttil on Xarabank, days before calling for an election which exposed the Opposition’s flimsy case on the Egrant claims, at that point in time, may well explain the outcome of the election.
This time round there still exists the risk that serious concerns on the operations of Pilatus Bank are once again obscured by the parallel saga involving Russian whistleblower Maria Efimova.
Delia may also be paralysed by uncertainty on the pending magisterial inquiry on Egrant which may bring some form of closure to the case. For the PN, Egrant remains a sort of holy grail, which may potentially bring Muscat’s downfall but also risks destroying any credibility the party has if the allegations are dismissed.
The best strategy for the PN may be that of sticking to the facts at hand – which are serious enough to warrant a strong response – and stray away from speculation on matters which have yet to be established. Rather than raising the heat, the PN may well let the protagonists slowly boil in their own stew.
Delia’s game may be to let Busuttil – whom he appointed as spokesperson for good governance – continue his past battles while he tries to steer the party in another direction. Still if he is too absent on corruption, any vindication on Egrant risks strengthening the hand of his adversaries within the party and re-opening the leadership question.
The problem for Delia is that he seems lost in his quest for an alternative holy grail; a battle cry which can broaden the appeal of his party. In the meantime, issues related to good governance and corruption continue to dominate the news cycle and the PN is constantly forced to react. The question is how to tackle the corruption issue because to narrow the gap in the next electoral appointment Delia also needs to win over voters who voted Labour, despite its bad record on governance before 2017. This means that he needs to seduce them by finding a narrative which can keep the anti-corruption crowd on board while attracting middle-ground voters who still doubt the credentials of the PN as a party of government.