More Supermarkets: Ryan Schembri’s business partner details fraudulent invoice payments

Ryan Schembri’s business partner, Darren Casha, detailed how the accused lured him into his various business ventures before eventually fooling him into taking over the failing More Supermarkets chain.

Casha testified in court on Friday morning in front of Magistrate Donatella Frendo Dimech.

Schembri was brought to Malta in April on the strength of a European Arrest Warrant, having fled the island eight years ago, leaving behind a trail of creditors of the reported €40 million in debts from his collapsed supermarket business.

Casha said he met Ryan Schembri in 2009 while living in Libya. Casha had a restaurant business in the country, while Schembri had just opened a supermarket in Libya. This posed a good opportunity for Casha as he used to struggle with sourcing high-quality ingredients for his restaurant.

After building a rapport, Casha put Schembri in contact with a certain Mohammed Emhemmed, who represented a company called Copacabana Ltd.

Schembri was looking to secure investment for his meat business venture. Casha said Schembri had invited him and Emhemmed to Uberlandia in Brazil to see the meat business process, from the livestock being killed to the loins being cut out.

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Casha recalled Schembri setting up a stall at the Sial food fair in Spain for his meat venture. His aim was to meet people and suppliers interested in his business. Casha said Schembri would invite Maltese people, show them around his stall, and “lure them” into investing.

“He was the rising star in the industry. You felt your money was safe with him,” Casha said.

After this, Schembri proposed setting up a private label company called Sorriso, which would be owned by Copacabana. The idea was to create your own brand but source various food and beverage products from other manufacturers. Like this, the company would only be in charge of marketing and branding costs.

Schembri eventually presented a list of different products that could be sold under the Sorriso brand, and handed these documents to Casha.

Casha went into detail about the payment system set up for this venture. The foreign manufacturer would invoice Ryan Schembri for its products, and Schembri would pay for the products. Schembri would then invoice Copacabana for the products, and Copacabana would transfer money to Schembri.

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However, Casha said that Copacabana only ever received less than 10% of what was paid for, with the actual expense running in excess of €3 million.

Copacabana itself never made any contact with the factories, with Ryan Schembri supposed to serve as a middleman between Copacabana and the food and beverage manufacturers.

Eventually, after Casha and Emhemmed noticed that products weren’t arriving, they would try to prompt Schembri to understand the cause of the delay. Schembri would always have a reason, whether it was because of problems in labelling, or barcodes.

Casha presented several invoices worth of evidence documenting payments for such food products between Copacabana Ltd and Ryan Schembri. These invoices would run in the thousands, ranging from €54,000 to €419,000.

Casha claimed that this client relationship between Schembri and the manufacturers never really existed. Emhemmed had once asked a company directly about one of these payments, but the company in question said that no such contact was made.

At one point, Schembri had advised Emhemmed to set up a stall at a food fair in Germany in October 2015. Casha said the stall was expensive to set up, with Copacabana paying in excess of €50,000.

“The aim was for us to expose the Sorriso brand since it was a private label,” Casha said. He explained that there had been demand for the product, and the idea would have been good “should there have been good intentions”.

Casha went on to speak about the financial situation of the More Supermarkets chain when he assumed ownership of the outlets. He said Schembri had wanted to float the company on the stock exchange.

But Casha said the company turnover figures were inflated. He told the court that fake invoices were created for ship handling services, making the supermarket appear more profitable than it was.

“Even if this ship handling services actually happened, you can’t consider it as a sale in the supermarket,” he explained. After taking this into account, the net profit of the supermarket turned into a net loss of €500,000.

Schembri eventually told Casha that he was facing issues in Croatia that impacted him financially. He was being investigated by the Croatian authorities, who had frozen his assets.

“Everyone was on edge,” Casha said, recalling how people started worrying that Schembri fled the country.

Eventually, since Casha was a guarantor for Copacabana, Schembri suggested transferring the supermarkets onto Casha directly, supposedly to give him some peace of mind on the company operations.

However, instead of tranquillity Casha ended up with a queue of creditors waiting to get paid. “My only options were to pay on the spot or assume the debt.”

On the advice of his accountant and lawyer, Casha assumed the creditors and transferred the assets to his company Erom Trading Ltd.

Casha went on to hold meetings with Enemalta and ARMS to draft a repayment plan after More Supermarkets stopped paying its bills.

At this stage, the debt owed to creditors amounted to €2.6 million. However, he eventually realised that More Supermarkets owed a further €3.5 million to Edmond Mugliett and Alexander Farrugia. It turned out that after Casha assumed ownership of the chain, Schembri entered into a contractual agreement with Mugliett and Farrugia for this amount.

Casha explained that all of the supermarket’s workers were paid their full wages after setting up an agreement with the Department for Industrial and Employment Relations (DIER) to pay everyone’s salaries in tranches.

With regards to the supermarket stock, suppliers came to pick up the goods and issued a credit note. Some stock like fridge and freezer goods could not be picked up because they went bad after the electricity went out.

Towards the end of the sitting, Ryan Schembri’s lawyer Roberto Montalto made a request for bail, adding that there are several people who said they would be willing to serve as a guarantee against his bail.

He also offered that the court take into its possession the passports of his children and partner.

The prosecution argued that civilian witnesses are yet to testify, so there’s a worry that Schembri could approach these witnesses.

The magistrate will decree on bail at the next sitting, slated for 9 September.

Superintendent James Grech prosecuted, assisted by AG lawyer Francesco Refalo.

Lawyer Roberto Montalto was defence counsel.

Lawyers Stefano Filletti and Francois Dalli assisted Casha.