[WATCH] Joseph Muscat defends VGH hospitals concession, rejects it was a done deal

Vitals court case | Former prime minister Joseph Muscat says he fully trusts Prime Minister Robert Abela is doing what he thinks is best in renegotiating hospitals concession • Konrad Mizzi in quarantine again

18 January 2021, 11:58am
by Nicole Meilak

3 min read

Former prime minister Joseph Muscat arriving in court to testify in the VGH case initiated by Adrian Delia (Photo: James Bianchi/MaltaToday)

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Joseph Muscat has insisted that an agreement penned with a group of investors for the transfer of public hospitals was "different" from the eventual deal that saw three public hospitals being transferred to VGH.

The former prime minister defended his government's decision to rope in VGH to run the Gozo General Hospital, St Luke's and Karin Grech Rehabilitation Centre when he was called in to testify in a court case initiated by former Opposition leader Adrian Delia.

Muscat said a Memorandum of Understanding signed between Malta Enterprise and a group of private investors towards the end of 2014 on a hospitals concession did not fall within the scope of the public health service's needs. The MoU was terminated at the start of 2015 and government issued an international request for proposals. However, the same investors were eventually awarded the tender.

Muscat said in court that the MoU and the RfP were two different things despite the investors being the same.

Grilled by lawyer Edward Debono and former PN leader Adrian Delia, the former PM defended the agreement and refused to subscribe to the notion that the investors failed to carry out any work.

The former PM also insisted that then health minister Konrad Mizzi, who was responsible for the deal, did nothing behind Cabinet's back.

Muscat could not recall who had approached Steward Healthcare to take over the concession agreement when VGH faced financial difficulties. He insisted a new clause negotiated with the American company that made government responsible for all the debt if the contract was rescinded by the court was needed as a guarantee to protect a local bank.

Konrad Mizzi, who was also expected to testify, notified the court that he was unavailable. Mizzi is in mandatory quarantine after having returned from abroad. Judge Francesco Depasquale ordered that if in the next sitting, Mizzi is unavailable, his testimony could be heard via videoconferencing.

Delia had initiated court proceedings to have the controversial hospitals concession contract rescinded and have the buildings returned to the public.

On his way out of court, Muscat said he had full trust in Prime Minister Robert Abela when asked about the government's attempts to renegotiate the agreement. "They will do whatever they feel is best in the circumstances," Muscat said.

Background

Vitals Global Health Care, known as VGH, were given a concession by Muscat’s government to run the Gozo General Hospital, St Luke’s and Karin Grech Rehabilitation Hospital. As health minister, Mizzi was responsible for the multi-million-euro deal.

However, VGH failed to honour its commitments and eventually pulled out of the agreement just 21 months into the deal after it sustained mounting debt. The concession was transferred to Steward Healthcare but VGH CEO Ram Tumuluri reportedly still received a €5 million bonus.

A damning National Audit Office report found that the government had signed a Memorandum of Understanding with several investors who eventually formed VGH, months before an international request for proposals was even issued.

Government was paying VGH around €70 million per year to provide hospital beds to the State.

13:49 Thank you for following. Kurt Sansone

13:49 The sitting ends. The next hearing will be held on 8 February at noon. Kurt Sansone

13:48 Judge: “The court will assure that this addendum isn't shared to the public and remains in the possession of the court.” Kurt Sansone

13:46 The judge says that the Auditor General will come to the next hearing and present the document. Kurt Sansone

13:45 Lawyer Edward Debono asks the court to call the Auditor General to present the €100 million contract addendum, which is believed to be in his possession. Kurt Sansone

13:43 Joseph Muscat now finishes testifying. He steps away from the podium. Kurt Sansone

13:43 Muscat says that this termination clause was added as a security measure for the local bank. Kurt Sansone

13:42 Delia moves on to the termination clause. “Factually, did you know that in the summer of 2019, any material change was done in terms of the default?” Kurt Sansone

13:41 Things get rowdy again. The judge brings everything back to order and asks about timeframes. Kurt Sansone

13:41 Delia reiterates this question: “Was this contract ever amended without the Cabinet's knowledge?” Kurt Sansone

13:40 Delia asks whether any Cabinet members, specifically Konrad Mizzi, made any decisions on the hospitals project behind Cabinet’s back. Muscat says the minister didn't do anything that wasn't approved by the Cabinet. Kurt Sansone

13:39 Delia asks whether there had been any changes to the contracts over time. Joseph Muscat confirms this. Kurt Sansone

13:35 Muscat confirms that government hadn’t approached Steward itself and adds: “Whether they saw an opportunity locally, or whether they were approached by Vitals, I wouldn't know.” Kurt Sansone

13:34 Delia: “Did you ask how all of a sudden Steward came into the picture?” Kurt Sansone

13:34 Delia asks whether Steward was brought in by Vitals or government. Muscat says he doesn't know, but confirms that it wasn't from his end. “I didn't even know who they were,” the former PM says. Kurt Sansone

13:33 Muscat: “When the MoU was dropped, it wasn't because the people involved weren't efficient. It was simply because the MoU didn't reflect our vision for the public health sector.” Kurt Sansone

13:32 The judge asks Muscat: “This MoU expired in February in 2015, and in June an RfP was signed. Can you explain whether these two are linked?” Kurt Sansone

13:31 Delia questions this, asking how this could be such a pure coincidence that both were signed by the exact same entities. Kurt Sansone

13:31 Muscat continues to insist that the MoU and RfP are completely separate initiatives despite the investors in the MoU eventually ended up winning the hospitals concession. Kurt Sansone

13:29 Muscat clarifies that a proposal was presented in relation to the MoU, but when this was found not to fit with the government's vision for public health an RfP was published. Kurt Sansone

13:29 Delia moves on to the MoU that had been signed months in advance of the RfP being issued. He asks about time frames and whether the MoU was extended or terminated earlier than intended. Kurt Sansone

13:28 Muscat is asked about the choice of VGH. “The choice was carried out on the criteria of the request for proposals. I understood that Vitals satisfied those criteria,” he says. Kurt Sansone

13:26 Muscat objects to Delia’s description of the concessionaire having “cashed” in the money. He insists the figures are all accounted for. “They received the €265 million but they spent them too. They don’t just send invoices and the government pays. The government verifies,” Muscat says. Kurt Sansone

13:25 Delia asks about the €265 million Vitals received in five years. “Did they take those millions? Did €6 million go to VGH CEO Ram Tumuluri as a settlement fee?” Kurt Sansone

13:22 Muscat says that was the way of making the investment viable. The former PM gets heated again. “Mater Dei took all those years to build and the concrete was not up to standard, and you come here to speak about this!” he tells Delia. Kurt Sansone

13:21 Delia presses on. “But was that the original plan. The first substantial investment, of €35 million was for the medical school,” he says. Kurt Sansone

13:20 Muscat insists there is misinformation. He says his government did not want to introduce fees for medical services, so to make it sustainable investment was needed. “We got an English school of international repute [Barts] to train students in Gozo,” he insists. Kurt Sansone

13:19 Delia: “Was the medical school meant to directly serve the people?” Kurt Sansone

13:16 The judge advises Delia to avoid asking about numbers, as he has all the relevant numbers in front of him anyway. Kurt Sansone

13:16 Delia continues to ask about the expenses incurred throughout the project. Muscat insists that all expenses were accounted for. Kurt Sansone

13:15 Delia turns to the breakdown of costs in the Vitals deal mentioned earlier by Muscat, but again things get rowdy. Judge Francesco Depasquale chimes in: “You've turned this courtroom into Xarabank. I will not tolerate this anymore.” Kurt Sansone

13:05 Delia pulls out the concession contract. There is uproar in the courtroom with the judge warning the parties not to turn this into a political exercise. Kurt Sansone

13:04 Muscat appears to be avoiding questions relating to the investments that had to be undertaken directly by Vitals as part of the concession agreement. Kurt Sansone

13:03 Delia stands his ground. “Did Vitals have to do this investment?” he asks, referring to the 450 beds that had to be added to the Gozo General Hospital. Kurt Sansone

13:03 Muscat questions the relevance of this to the case. He turns to the judge: “I will not play charades.” Kurt Sansone

13:02 Former Opposition leader Adrian Delia begins his own grilling. He asks about the investment done by Vitals. “From the investment that took place by Vitals, they did not manage to fix these problems, correct? What did Vitals do?” Kurt Sansone

12:58 The lawyer asks Muscat whether he has a copy of the agreement. He says that is an issue for Cabinet. Kurt Sansone

12:56 Muscat says the €100 million clause was a backdoor guarantee for a local bank that was exposed by the deal. He says the bank had sought a state guarantee but that could not be granted and so while avoiding the issue of state aid, in case the contract was annulled in court, government would take the medical school and make good for all of it. “That’s the only thing I can recall about this €100 million issue,” he says. Kurt Sansone

12:55 Questions now move on to the €100 million termination clause, which was part of an agreement signed in August 2019 with Steward Healthcare. Kurt Sansone

12:52 The former PM’s reply brings a few giggles and Debono says it’s best not to use sexual arguments. Kurt Sansone

12:50 Debono continues to ask about the milestones tied to the concession and Muscat again loses his temper. “Dan argument żobiku,” Muscat shoots back. Kurt Sansone

12:42 He admits that there were disagreements between Vitals and government, but holds that it was the best decision strategically. Kurt Sansone

12:42 Muscat: “The whole point is that when faced with a situation where a primary American company is seeing how to expand its operations in other countries, and wants to enter Malta, it would be irresponsible for that government not to let them in. I believe in the private sector. The only way some sort of sustainable and accelerated development could take place in the health sector was to bring in this company. For as long as I was PM, the concession made most sense.” Kurt Sansone

12:40 As he testifies in court, Muscat’s Facebook page is live reporting his testimony. Muscat had done something similar when he testified in the Daphne Caruana Galizia public inquiry. Kurt Sansone

12:37 Debono clarifies and asks for an answer on structural milestones within the hospitals concession agreement. Muscat begins to lose his temper, angrily pointing out the new prosthetics unit. Kurt Sansone

12:34 Muscat points out that through the concession new physiotherapy services were provided, 48 new beds were added at St Luke's, a new orthopaedic ward was set up, and there was an increased capacity within the ICU. “It cannot be said as fact that no work was done,” he insists. Kurt Sansone

12:33 Debono and Muscat are in a brief squabble over whether the hospitals are owned by government or not. Muscat insists that they are still under the ownership of government and available to the public, but Debono begs to differ. Kurt Sansone

12:28 Muscat insists that there has been a lack of understanding on the way the hospitals concession was structured. Kurt Sansone

12:27 After providing a breakdown of costs, he says that at most the deal is costing €64,000 per day in taxpayer money. “Government was cost-neutral in this and that amount would have had to be paid anyway,” he says. Kurt Sansone

12:26 Muscat says that one of the things he read stated that taxpayers are paying €250,000 daily for this contract. “This is completely incorrect. It is not true,” he says. Kurt Sansone

12:24 Muscat: “Cabinet.” Kurt Sansone

12:24 Debono: “Was the decision taken as a Cabinet or between you and the minister?” Kurt Sansone

12:24 QUICK REMINDER: A Memorandum of Understanding had been signed between Malta Enterprise and a number of investors, who eventually formed VGH for a project that involved the Gozo hospital. Prior to government issuing a request for proposals, VGH investors were already making detailed presentations about their project. The National Audit Office found there was collusion between VGH and the government. The NAO also found that VGH had secured a financing guarantee from a bank in India before the request for proposal was even issued. Kurt Sansone

12:21 Muscat confirms that an MoU had been signed prior to the publication of a request for proposals but says that this was dropped. “That MoU has nothing to do with the Vitals project,” he argues. Muscat adds that the MoU was signed with the same persons but not for the same project. Kurt Sansone

12:20 Debono: “There was already an agreement with Vitals from before a request for proposals was published by the government.” Kurt Sansone

12:18 Debono points out that when Projects Malta officials came to testify, they said that they were only employed for an evaluation and due diligence report. Their job was to put things into motion. Kurt Sansone

12:16 Muscat pauses and says the ministry acted according to protocol. Kurt Sansone

12:15 Lawyer Edward Debono asks how the project was sent to Projects Malta, a government entity under Konrad Mizzi’s wing, after Muscat appointed Mizzi health and energy minister. Kurt Sansone

12:14 Muscat: “My decision at the time - approved by the whole Cabinet - but I will take responsibility for, was to opt for a model that was successful in previous administrations and rope in the private sector.” Kurt Sansone

12:13 Muscat says that when he became prime minister the health service was falling to bits. “There wasn't enough money to buy pills and medicine, let alone to create investments in the health sector,” he says. Kurt Sansone

12:12 Joseph Muscat’s testimony starts now. Kurt Sansone

12:06 Adrian Delia’s lawyer, Edward Debono verbalises a request for Mizzi’s testimony to be heard via teleconferencing. “This is the 5th time he was asked to appear in this case before the court,” Debono argues. The court accepts this request for the next hearing if Mizzi is unable to show up. Kurt Sansone

12:03 The court is informed that Konrad Mizzi will not be attending since he is under obligatory quarantine as he travelled recently. The court received the notification today. Kurt Sansone

12:02 We're starting and Joseph Muscat takes to the witness stand. Kurt Sansone

12:00 Good afternoon. Kurt Sansone

MaltaToday had reported last year that Mizzi entered into an agreement with Steward in August 2019 that should the hospitals concession be terminated by a court of law, irrespective if Steward is in breach of contract, this would be considered a government default and the State would be liable to pay €100 million to buy out Steward.

The agreement also meant that all debts incurred by Steward would be passed on to the government.

Since January last year, government has been renegotiating the hospitals concession with Steward. On Sunday, MaltaToday revealed that a new deal is likely to see the government ‘take back’ the three hospitals but retain Steward as facility managers.

Nicole Meilak is deputy online editor and IĠM press awards (Most Promising Journalist) wi...