Two remanded in custody over €62 million VAT money laundering scheme

Arrests understood to have been in connection with the issuing of receipts with artificially inflated values in order to claim large VAT refunds, on amounts larger than what was actually paid

File photo
File photo

A man and a woman have been remanded in custody on money laundering and fraud charges in connection with a police investigation into a €62 million VAT carousel scheme.

Martin Farrugia, 45, from Rabat who told the court he works in construction, and Henriette Cassar 49, of Zebbug, who told the court she was choosing not to reply as to what she did for a living, both denied fraud and money laundering charges.

The arraignment comes after the arrest and questioning of at least five businesspeople earlier today. The remaining three individuals are expected to be charged in the coming days.

The suspects were arrested on Tuesday evening and Wednesday morning and have been questioned at length by the police.

During tonight's arraignment before magistrate Gabriella Vella, Inspector Joseph Xerri told the court that the investigation began in 2022, after the VAT department informed the police that Martin Farrugia might be evading tax due to discrepancies between claims and returns. 

Investigations revealed a discrepancy of €4.2 million and that Cassar had deposited over €900,000 in cheques related to Farrugia’s business, the inspector said. In addition to this, a profit of €150,000 relating to business had not been declared, he said.

The two defendants were arrested yesterday on the strenght of a warrant issued by the duty magistrate. 

Inspector Xerri said that he had arrested Farrugia himself and had read him his rights as Farrugia did not know how to read. Cassar was arrested at her home.

The prosecution requested a freezing order over all of the defendants' assets. The defence objected to the request, which the court however ruled to be justified and upheld.

Bail was requested and was immediately objected to by the prosecution on the grounds of the very grievous nature of the charges. During the searches a number of electronic devices had been seized and could lead to more people being charged, the court was told.

In his submissions on bail, lawyer Franco Debono argued that his client had a spotless criminal record and was presumed innocent. Every infringement of the country’s criminal laws were grievous, he said, but the money laundering crimes she is accused of fell “somewhere in the middle of the spectrum of criminal offences.”

The only alleged victim of his client was the taxman, submitted the lawyer.

He said that while the AG had said that there were others who had been arrested, only the two defendants were in court today. “I would hope that when a person is arraigned, the investigations into that person have been concluded,” he said, arguing that there should be no risk of tampering with evidence. Additionally, there was nothing to suggest that if released on bail, Cassar would attempt to suborn witnesses, he said.

Magistrate Gabriella Vella asked if there were any other possible victims. Inspector Xerri explained that Farrugia had worked as a clerk and administrator with Farrugia. Discrepancies were noted in the manual fiscal VAT receipts submitted by clients and the receipt books returned to the VAT department by the defendants.

Caruana Vella explained that Farrugia was additionally being charged with defrauding individuals who are yet to testify and that there was also the risk of him being difficult to notify as he had more than one address.

Lawyer Dominic Micallef, appearing for Farugia, replied that the police had not informed the court of any difficulty in locating his client and that he could easily be served with summons when signing his bail book at a police station. The prosecution had already collected all the evidence against Farrugia and so it was presumed that the investigation had been concluded, said the lawyer. With regards to witnesses yet to testify, the prosecution had brought no concrete evidence to substantiate their fears of him tampering with evidence. “I doubt he even knows all of the witnesses they mentioned.”

The court denied bail to both defendants, noting in Cassar’s case, that the potential witnesses were not necessarily limited to the taxman, but could also potentially include individuals, and in Farrugia’s case that there were discrepancies in the address information he supplied.

Lawyer Abigail Caruana Vella is prosecuting on behalf of the Office of the Attorney General, together with police Inspector Joseph Xerri.

Lawyers Franco Debono and Francesca Zarb represented Henriette Cassar, while lawyers Etienne Borg Ferrante and Dominic Micallef appeared on behalf of Martin Farrugia.

Lawyers Arthur Azzopardi, Jacob Magri and Rebecca Mercieca appeared as parte civile on behalf of the alleged victims Paul Azzopardi, William and Josephine Farrugia in their own capacity and in representation of their companies: Farm Meat ltd, San Blas Farm Ltd, Breeding Ltd, Magvin Ltd.

Lawyers Stefano Filletti is representing a group of other companies which allegedly fell victim to the defendants.