Keith Schembri’s companies hit by asset freeze to be run by court-appointed administrator

Constitutional court accepts demand by Keith Schembri’s companies for the appointment of an administrator to run things while asset freeze is in place

Keith Schembri and his businesses were hit by an asset freeze as part of an ongoing police investigation into money laundering
Keith Schembri and his businesses were hit by an asset freeze as part of an ongoing police investigation into money laundering

A constitutional court has upheld a request for the appointment of an administrator to temporarily run Keith Schembri’s companies that are subjected to an asset freeze.

Schembri, the former chief of staff of ex-prime minister Joseph Muscat, was hit by a wide-ranging asset freeze that also involved his companies as part of a money laundering investigation.

Mr Justice Lawrence Mintoff presiding over the First Hall of the Civil Court in its Constitutional jurisdiction upheld the request for the appointment of an administrator to avoid irreparable damage to the businesses pending other court proceedings.

The judge issued a decree early this morning, to a request for interim relief filed by Navis Logistics Limited, Kasco Limited, Kasco Recycling Limited, Its Good Limited, FSV Limited, Kasco Engineering Company Limited, Berner Malta Limited, 3City Designs Limited, and Kasco Holdings Limited.

The assets of the companies had been frozen by a court order issued to aid money laundering investigations by the police in which the suspects include Schembri and his spouse, his parents, his companies, business partners and their family members, as well as Nexia BT partners Brian Tonna and his family, Karl Cini, Manuel Castagna, Nexia BT related companies, and a host of offshore companies.

Over 80 full-time employees were affected by the order. They had filed a request for the appointment of an administrator before the criminal court but this was denied after the AG objected to the request. 

The applicants insisted that as they had no right to request the criminal court to vary its order and appoint an administrator, they were forced to file urgent constitutional proceedings asking for an interim measure or face irremediable prejudice and job losses.

Whilst a person accused of any crime had access to remedies for a fair hearing, a person investigated on suspicion of committing a crime finds himself with all his assets frozen and unable to contest it before an ordinary court from six months to one year as the right to revoke it rests solely with the AG.

In this case where individuals were still being investigated after a magisterial inquiry on alleged kickbacks of €100,000 on the sale of passports, the applicants found themselves in a “catastrophic” position that was going to lead to their insolvency and that of their businesses.

The draconian measure had brought the companies to their knees as debtors were unable to pay into their accounts, creditors are not being paid, wages were not being paid on time and the companies were unable to function as normal.

The companies asked the court to appoint an administrator as an interim measure and allow the companies to continue to operate, whilst under the surveillance of the court.

The AG had objected saying that it was too early a stage for an administrator to be appointed.

In his judgment on the matter, Mr Justice Mintoff said the point of a garnishee order is not to stop the companies from operating but to preserve their assets pending the outcome of the investigations and prevent tampering with evidence.

The evidence had shown that the order had paralysed the companies “in the most drastic and devastating way” and that they would be compelled to shut down for good in the space of a few weeks.

The judge recommended that the legislator be clear with regard to when an investigation and attachment order strikes an ongoing business concern, the appointment of an administrator must be compulsory and not optional.

The garnishee order without the counterbalance of a provisional administrator is an “entirely disproportionate measure” which had the same effect as the taking of the companies’ property by force, said the court, noting that it could deal the “death blow” to the companies.

As a provisional measure, the court ordered the appointment of an administrator to take over the operation of the companies to avoid their bankruptcy.

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