A privatisation scandal

The share purchase agreement between Steward and Vitals – through which the company was granted a concession to run three of Malta’s public hospitals – has lifted the lid on the deleterious effects of non-transparent privatisation of state resources. 

According to the details revealed by a local online news site, the hidden owners of Vitals Global Healthcare reportedly funded the takeover of a medical equipment company that now has exclusivity with new hospital owners Steward Healthcare. 

According to the share purchase agreement, two of the owners of Vitals – Ram Tumuluri and Shaukat Ali Abdul Ghafoor – funded the takeover of medical equipment company Technoline when it was acquired by its former sales and marketing manager, Ivan Vassallo, using a €5 million loan from one of VGH’s owners. They, and other unidentified investors, used companies in Jersey to hide their loan to Vassallo’s private company.

Technoline was then granted exclusivity to supply medical equipment to the three hospitals formerly run by VGH, at a time when Tumuluri was taking decisions on how taxpayers’ money was being spent by Vitals to run three Maltese state hospitals.  

According to the share purchase agreement for the sale of VGH to Steward Healthcare, Tumuluri and Shaukat Ali used offshore companies in Jersey to grant a €5.14 million loan so that Vassallo buys out his boss and purchase Technoline in December 2016. Only three months after Vassallo took control of Technoline, VGH entrusted this company with the procurement of all of its medical supplies in a done deal that was agreed to just 19 days after the takeover. 

The details suggest that VGH’s directors and owners were in fact awarding the Technoline deal to themselves by making it an exclusive supplier to Vitals (three companies – Evergreen Global Ventures, New Horizons Investments, and Mount Everest Investments – are the owners of Vitals Global Healthcare Jersey, which in turn owns Vitals Procurement Jersey. The owners of the original Jersey companies include Tumuluri and Shaukat Ali). 

The concession is now under investigation by the Auditor General. Once again, this is an indictment on Konrad Mizzi, who – both as minister for energy and health, as well as responsible for the government’s privatisation arm – was chiefly the architect of this privatisation contract. 

The same deal has also exposed apparent divisions within the Labour Cabinet. In comments to the press on Tuesday morning, Health Minister Chris Fearne said both he and Steward Health Care did not agree with this set-up. Opposition leader Adrian Delia lost no time in branding Fearne’s comments as “a condemnation of fellow Cabinet minister Konard Mizzi, who had negotiated the concession agreement covering the three hospitals.” 

Admittedly, Delia himself may not be in the best position to comment about internal divisions within a political party at the moment. On its own, however, this fact does nothing to invalidate his argument. There may even be legal grounds to suspend the agreement: the Nationalist Party leader has in fact initiated court proceedings, asking the court to annul the deal signed between the government and Vitals Global Healthcare.  

Naturally, one cannot predict the outcome of this case; but apart from the law-courts, there is also the court of public opinion. Government must surely realise that there is a limit to the people’s patience, when it comes to disposing of national assets so carelessly. 

More worryingly for government, Delia also voices widespread popular misgivings when he describes the deal as having been ‘set up to fail’. The new details only give new beef to an existing conspiracy theory, that assumes that Vitals never intended to deliver the goods at all… but were instead given a concession that was so profitable that it would be easy for them to find someone else to take up the responsibilities of the contract.  

For ‘ceding’ their concession, Vitals would make a handsome profit – something that was planned beforehand and not the result of circumstances. Surely enough, the ultimate beneficiaries did make a profit and disappeared from the scene – while having made little worthwhile contribution with the €55 million spent from taxpayers’ cash. 

Government clearly has a lot to answer for in this regard. While commercial sensitivity is a fact of life in such complex arrangements, it also remains a fact that unnecessary secrecy erodes trust. There was nothing commercially sensitive in informing people about the 99-year lease, or the buy-back option after 30 years. And for Mizzi and Joseph Muscat to now speak about them in such a casual, matter-of-fact way, has been nothing more than an insult to everyone’s intelligence. 

This attitude simply legitimises all the doubts that have been expressed by many over the concession deal. It was already questionable to have an international company with no healthcare background being roped in for this flagship project, let alone to spring further unwelcome surprises along the way. 

Rather than adopt a nonchalant, matter-of-fact attitude, Mizzi and Muscat would have done a better job in publishing the contract in its entirety, and giving Parliament an adequate explanation on all aspects of a deal that was ultimately negotiated on behalf of the Maltese taxpayer.