Vitals corruption case: Muscat, Schembri and Mizzi can stand trial

There are sufficient grounds to merit the indictment of Joseph Muscat, Konrad Mizzi, Keith Schembri and others for crimes relating to the fraudulent hospitals’ concession. 

Magistrate Rachel Montebello issued the so-called prima facie decree at the end of today’s sitting as the compilation of evidence against the disgraced former Prime Minister, former minister Mizzi and former OPM Chief of Staff Keith Schembri, who form part of the group of 14 persons and nine companies facing criminal charges, amongst them corruption, fraud, conspiracy and money laundering,  in connection with the sale of three State hospitals to Vitals Global Healthcare. 

The sale had been declared fraudulent by the courts and struck down in 2023, Earlier this year, the conclusions of a magisterial inquiry that had been launched in 2019 following an application by Repubblika, had recommended that they be prosecuted. 

All of the defendants are pleading not guilty to the charges.  

Sciacca Grill, one of the companies, was discharged although this does not preclude the possibility of further investigations leading to criminal charges in the future.  

According to prosecutor Francescao Refalo, Sciacca Grill – once owned by former chief of staff Keith Schembri – had received a number of contracts to supply another catering company that had been supplying the hospitals in the PPP. “We are saying that these companies were taking a percentage of the money coming from the concession. They were skimming money off the concession,” Refalo said. 

His argument was rebutted by Sciacca’s defence lawyer Franco Debono. “God forbid we reduce prima facie to this methodology. I did not hear a single mention of a page number, or a piece of evidence. Is this the examination that must be carried out to establish prima facie?” 

Veronique Dalli, defence lawyer for Taumac – the company which had sold its shares in MTrace to the Vitals concession via Vitals Procurement Ltd in Jersey – submitted to the magistrate that the prosecution’s suspicion in her client was insufficiently based on one witness only. “Between April and today, someone had investigated and decided there were sufficient grounds to press charges... The prosecution is saying that Taumac should have suspected that someone recommended by the Maltese state [was committing criminal offences].” 

Dalli said the court was right in saying that at this stage it was only empowered to establish whether there is a case to answer. “But is it not possible or probable for Taumac to sell its shares at no profit, so as not to lose its investment... is there anything extraordinary or out of the ordinary that a company tries to recoup its investment, especially when the government is telling it to leave the deal to be replaced by another company recommended by the government?” 

Lawyer Chris Cilia, for MTrace, added that the inquiry experts who assisted the magisterial inquiry “had arrived at a certain narrative”, accusing them of ‘creating’ the storyline. 

“Completely gratuitous assertions which make no sense... and had they taken the initiative of hearing what Dr Josie Muscat had to say, they would have realised that this narrative is nothing but a fairytale,” the lawyer said with respect to accusations levied against MTrace on its acquisition of a cyclotron machine, through money loaned by VGH. 

The company was sold off to government investment arm Malta Enterprise in 2020. 

Cilia queried where the crime of money laundering against MTrace arose from. “The conclusion seems to be that from day one, VGH was the actual owner of MTrace and the cyclotron. This could have easily been dispelled had they sent for Josie Muscat. In four years, they had not and so this leads to some doubts taking root.” 

Arthur Azzopardi took to task the way the inquiry experts had worded their suspicions on defendant Brian Bondin. “On Brian Bondin, there is no appendix in the inquiry. All that is mentioned in the conclusions, the experts only say it is in the realm of possibility... ‘potential fraud.’” 

He derided the experts’ stated definition of legal terms, such as fraud, as being ‘Wikipedia’-type definitions. “The use of the word ‘potential’ with regards to MTrace, is always less than probable, which is required for prima facie... what the experts aren’t doing is that, apart from the concession agreement itself, there is a number of other specific agreements.” 

He attacked the expert’s contention that the government funds paid to the private concession companies, were somehow the State’s. “When it was paid, it no longer remained public funds. The moment the money became theirs, it is theirs to decide how to use it.”  

“I want to be clear. The problem is not the fault of the inquiring magistrate. The problem is how the experts worked it out and then reported to the magistrate.” 

By way of example, Azzopardi said that the experts claimed MTrace’s expenditure was €1.2 million one year, the next €2.5 million, and then extrapolated a €600,000 sum for Brian Bondin. He said there was nothing else in the inquiry to buttress this argument. “If what the experts are saying is true, the question arises as to why the person involved in the raising of fraudulent invoices, was not charged.” 

Another defence lawyer, Jason Grima, made submissions on behalf of Crossbow audit employee, Jonathan Vella, who is also accused of money laundering, fraud, and falsification of documents. “Who is this Jonathan Vella? He is a simple accounts clerk working for auditor Christopher Spiteri.” 

Grima said Vella was merely a company secretary for the Vitals holding company Bluestone. “I don’t think that merits him being charged... Vella did not choose to be a company secretary. His job is to do secretarial work and had done this job for decades, even with a previous employer.” 

Grima also said the inquiring magistrate had not explained on what grounds he was being accused. “Nobody sent for him. Not the police, not the magistrate and not the experts. So Jonathan Vella’s testimony was not heard by anyone. It appears that they charged him without speaking to him first.” 

An error was made in our 10:33am liveblog entry, where the name Pierre Sladden was mistakenly inputted as Ray Sladden. This has been amended.

13:38 The magistrate emerges from chambers and reads out the final part of a decree, which she described as “voluminous.”

From an analysis of the evidence without evaluating the witnesses and evidence in the proces verbal, this points to a probability of guilt on the part of every defendant, with the exception of Sciacca Grill Ltd.

She rattles off a list of evidence the court wants to see, to show transactions both internal and internal which were required for the case.

The magistrate decrees that there was sufficient evidence to justify that all the defendants, with the exception of Sciacca Grill, be placed under indictment.

Sciacca Grill is therefore discharged. This, however, does not preclude the possibility of further investigations leading to criminal charges in the future.

The sitting is adjourned to 1 August at 10:00. Matthew Vella

12:04 Azzopardi: one of the inquiry’s experts says there had been false invoicing. Technoline’s contract with Vitals stated that it had to purchase every piece of equipment, from a “floorcloth to an MRI machine,” argues the lawyer. “The inquiry experts are in agreement that the payment happened. But what crime does this payment constitute?”

The court would have to look at all the charges and see whether the requirements for at least one of them subsisted. “I was paid on contract. Where are the elements of placement, clearing and conversion as Technoline?”

“Had there been some form of evidence to show that one of the directors of Technoline committed a crime, he should answer for it, not the company, adds the lawyer. The director was not contesting prima facie, but Technoline, which employs 27 people, on what grounds are you requesting prima facie? At least one ground, but they cannot because there is none.”

The court adjourned the sitting for 45 minutes, in order to consider the submissions and give a decree on prima facie. Matthew Vella

11:59 The agreement for share transfer was still a draft because the other company did not have any directors at that point. The prosecution cannot do more, because there is nothing more than that in the inquiry, Azzopardi submits. One would expect that at least, if the experts were going to accuse a person of wrongdoing they would agree on what it is, but they describe two different events. “Which one is it?” He acknowledges the AG had since clarified this point and asked to focus on the MTrace issue. Matthew Vella

11:58 Azzopardi begins his submissions. “There is no doubt that at one point Gateway Solutions was loaned money to acquire the shareholding of Technoline, which has been in business since 1978.” While it could be argued that there was a breach of the law, the experts would have to prove, not that its directors acted incorrectly, but that the company did so.

Gateway had already been operating in a limited capacity before the 2013 election, “before anyone in Malta ever heard the name of Vitals, Shaukat Ali or Ram Tumuluri.”

A single email from Gateway by Armin Ernst says they had two choices. Nowhere did anyone find any evidence of wrongdoing. The loan was paid, with the approval of three large firms.

Auditor Malcolm Mifsud would show the court that the payment was conducted with the approval of one of the largest law firms on the island, where over 60 lawyers worked. Azzopardi asks where the evidence of Gateway’s illegality was. Matthew Vella

11:49 The court directed Eurybates and Gateway Solutions to, if they so wish, to file requests themselves for the payment of costs and fees for their defence. It dictates a note stating that at this stage, Azzopardi was resuming his patronage of the three companies and would make submissions on Technoline and Gateway’s contestations of prima facie. Matthew Vella

11:45 Francesco Refalo now addresses the issue of lawyer Arthur Azzopardi’s renunciation application. “At 8:30am he was representing the company and at 9:00am he informed us that he is renouncing the brief.”

With regards to the request for Azzopardi’s payment from Technoline, Refalo, made no objection “in recognition of the sensitivity of the case... We say that there had been no change in circumstances since the court issued the decree...”

Magistrate asks Azzopardi whether he was also requesting payment from Eurybates and Gateway and whether this was the status quo. The lawyer replies that Technoline’s reply indicated that it was in a position to do so.

“It is the trading company, your honour.” He tells the court that he was informed that Eurybates and Gateway had no funds. “That is the situation. Everyone must be paid for their work.”

Court: Technoline is being asked to pay debts for the two other companies. She suggests that the other companies file separate applications on their own behalf. The magistrate says she will issue a decree in chambers on the request for Technoline, and await the other applications. “The court has the duty of ensuring that the assets of the business are not spent to pay debts which it had not incurred itself.” Matthew Vella

11:36 The accounts were backdated and so he could have only been able to find out about them in 2018 when he was not the company secretary. Grima sits back down. Matthew Vella

11:34 The lawyer points out that although the inquiry contains a number of emails and correspondence sent to and from Vella in the course of his duties, none of them deal with any negotiations. Neither was he listed in the inquiry as having access to Bluestone’s accounts. He reels off a list of names, some of them familiar, others not. Vella is not one of them. “Għal ġieħna, some of those people have not been charged.” Matthew Vella

11:34 Vella would just do secretarial work for Spiteri. “Just because he was the secretary for Bluestone, I don’t think that merits him being charged... Jonathan Vella did not choose to be a company secretary. His job is to do secretarial work and had done this job for decades, even with a previous employer.”

“Besides this, neither Vella nor Spiteri are mentioned in the inquiry as receiving some form of renumeration.”

He is also being accused in his personal capacity, adds the lawyer. None of the prosecutors or inquiring magistrate have explained on what grounds. “Nobody sent for him. Not the police, not the magistrate and not the experts. So Jonathan Vella’s testimony was not heard by anyone. It appears that they charged him without speaking to him first.”

He contrasts this to the usual treatment afforded to people accused of relatively minor offences, who are allowed legal representation and given a letter of rights. Had his bank accounts been exhibited, it would have shown that his only income was his salary and the alleged €30 million proceeds of crime would be seen to be absent, says the lawyer.

As an accounts clerk, he did not even have a legal obligation to report any possible illegalities that come to his attention, Grima says. The lawyer also highlights that Vella had resigned from his job with Bluestone on 14 November 2016 and was replaced by Ram Tumuluri, “who for some reason has also not been charged.” Matthew Vella

11:24 Lawyer Jason Grima makes submissions on behalf of his client, Jonathan Vella. The prosecution at this stage must not only establish that the law was breached, but also the intention on the part of the defendant to break the law. No evidence of either had been brought with regards to his client, submits the lawyer. “He is being accused of money laundering, fraud, falsification of documents. There is nothing to show this in the proces verbal.”

“Who is this Jonathan Vella? It was reported in the media that he is a lawyer. Not true. That he is an accountant, not true. A simple check with Jobsplus would have established that he is a simple accounts clerk working for auditor Christopher Spiteri.” Matthew Vella

11:23 Azzopardi argues that the law itself specifies that even if there is a proces verbal, the compiling court must still evaluate the evidence for itself. Had it not been so, there would be no need for a compilation of evidence The figures relating to Bondin did not emerge from documents or emails, bar 92,000 which are not even his, but belong to Actif Ltd, a separate company.

“There is no other evidence. Brian Bondin was an employee,” Azzopardi says, referring to Jobsplus documents gathered during the inquiry.

The court ordered the AG to reply to Technoline’s application. He asks for some time to carry out some checks. Matthew Vella

11:23 “One of the experts says that MTrace’s expenditure was €1.2 million one year, the next €2.5m, and gratuitously said that this expenditure of €600,000 was for Brian Bondin.” There was nothing else in the inquiry to buttress this argument, he says. The experts had focused on MTrace, not Bondin. “If what the experts are saying is true and if they believe what they said, the question arises whether the person who was involved in the raising of fraudulent invoices, why was she not charged?” Matthew Vella

11:22 Azzopardi:

“The moment the money became theirs, it is theirs to decide how to use them.” During this case it will emerge that the defendants are charged with breaches of the VAT and income tax acts...Had that money remained public funds, it would not have been subject to taxation.”

“I want to be clear. The problem is not the fault of the inquiring magistrate. The problem is how the experts worked it out and then reported to the magistrate.”

Matthew Vella

11:06 In the meantime, the Magistrate asks Azzopardi to make submissions for his remaining client/s.

Azzopardi: “On Brian Bondin, there is no appendix in the inquiry. All that is mentioned in the conclusions, the experts only say it is in the realm of possibility... ‘potential fraud.’”

The experts’ stated definition of legal terms, fraud one of them, ‘was Wikipedia’, he says. “The use of the word ‘potential’ with regards to MTrace, is always less than probable, which is required for prima facie... What the experts aren’t doing is that, apart from the concession agreement itself, there is a number of other specific agreements.”

The experts said that the money became the government’s the moment Steward and Vitals became involved. This conclusion is wrong because when it was paid, it no longer remained public funds, argued the lawyer. Matthew Vella

11:05 Magistrate returns and angrily tells Azzopardi that just this morning, he had filed an application asking for a revocation of a decree on behalf of Technoline.

Azzopardi explains his application for this morning was in terms of the payment for the criminal case. “If the court wants to deny the defendants the right to be represented by a lawyer of their choosing, the court can carry that responsibility.” He says the court cannot expect him not to be paid for the work he is doing in the criminal case. “I have no choice.”

Court: “So you are blackmailing the court.”

Azzopardi explains that the application filed this morning asks the court to revoke contrario imperio a decree it had handed down on 21 June, which would allow him to be paid.

Magistrate dictates a decree, noting Azzopardi’s application signed together with a representative of the company. She orders the application be served on the prosecution for their reply. Matthew Vella

10:54 Matthew Agius:

"The court is correct to point this out, as it appears to be a straightforward violation of Rule 5 of the Code of Ethics and Conduct for Advocates.

"It is a strange thing for a lawyer to do, which could be down to the lawyer finding out something his client had failed to tell him about. Given the importance and prominence of this case, however, some are already speculating that this could be a defence tactic, aimed at further delaying the proceedings or creating grounds to appeal or file a human rights claim, further down the line.

"At this stage, we simply can’t say for sure." Matthew Vella

10:33 Arthur Azzopardi asks to make submissions on behalf of Brian Bondin (Bondin, Pierre Sladden and Ivan Vassallo together with three companies are all facing money laundering charges in connection with the recently concluded inquiry which looked into the Vitals Global Healthcare hospitals concession).

The magistrate asks about his other clients, but Azzopardi replies he had filed a note renouncing his patronage of them, earlier this morning.

Magistrate Montebello points out that they had told the court this morning that they had not been aware of this and tells the lawyer that he is ethically required to give Vassallo a reason and “not drop him like a hot rock at the start of the sitting.”

She suspends the sitting to give the lawyer time to do so. Matthew Vella

10:31 The experts said the company structure had been created for the deal. “When the negotiations had concluded, Muscat was dropped,” reads the lawyer. But on the witness stand, Dr Josie Muscat said he had withdrawn voluntarily and that he had never spoken to Shaukat Ali, Cilia points out.

“Completely gratuitous assertions which make no sense and had they taken the initiative of hearing what Dr. Muscat had to say, they would have realised that this narrative is nothing but a fairytale.”

He repeats his questions about how they had arrived at this conclusion about MTrace and why they had never sent for Muscat or Mtrace. He suggests the reason was that it would have led to their conclusions being disproven.

“So you are saying that the experts had ulterior motives?” asks the magistrate, dryly.

By the date of the final sale to ME in 2020, over 2.3 million had been invested. “In what? A cyclotron that is there, that is built and only needs to be commissioned.” He asks where the conclusion of money laundering about MTrace arises from.

“The conclusion from day one is that VGH was the actual owner of MTrace and the cyclotron. This could have easily been dispelled had they sent for Josie Muscat. In four years, they had not and so this leads to some doubts taking root.” Matthew Vella

10:21 More background on the Shaukat Ali meetings with the doctor Josie Muscat here. Matthew Vella

10:20 Chris Cilia for MTrace adds that the experts who assisted the magisterial inquiry “had arrived at a certain narrative.” The lawyer accuses them of “creating” that narrative.

With regards to Dr. Josie Muscat – the owner of the Capua Hospital - he was sent for and testified in the space of two days, he says, contrasting this with the claim that the experts had never sent for or spoken to him. “They were working for 4 years, spent €1.5 million, but they didn’t speak to Josie Muscat.” Matthew Vella

10:17 Franco Debono replies. “God forbid we reduce prima facie to this methodology. I did not hear a single mention of a page number, or a piece of evidence. Is this the examination that must be carried out to establish prima facie?”

He cites the cases against Alphonse Abela and Joseph Lebrun, who were both acquitted at the prima facie stage. “I don’t even have anything to reply to, because the AG gave us nothing. No reference to evidence.” Matthew Vella

10:16 “We are saying that these companies were taking a percentage of the money coming from the concession. They were skimming money off the concession.”

The inquiry experts had examined this tripartate agreement, which was being frequently used by primary stakeholders for this illicit purpose. There had been no need for their involvement.

Refalo anticipates the defence argument that Keith Schembri was not a director of the companies at the time, pointing out that this did not necessarily mean that they were not under his control. “If this does not satisfy the requirement of prima facie, I don’t know what will.” Matthew Vella

10:11 Prosecutor Francesco Refalo tells the court that he would be resting on the submissions he had made on these points during the last sitting.

He begins making his submissions about Sciacca Grill, pointing out that it was previously named Kasco Foods and under the control of Keith Schembri. “This company was being given a number of contracts, together with another of Schembri’s companies, to supply another catering company which, in truth, before Schembri’s companies entered the scene, had already been supplying the hospitals.” Matthew Vella

10:10 Dalli makes her final point: the court is rightly saying that at this stage it is only empowered to establish whether there is a case to answer. “Is it not possible or probable for Taumac to sell its shares at no profit, so as not to lose its investment... Is there anything extraordinary or out of the ordinary that a company tries to recoup its investment, especially when the government is telling it to leave the deal to be replaced by another company recommended by the government?” Matthew Vella

10:10 Magistrate says she cannot pass judgment on this issue. Dalli replies that this is relevant to prima facie. “There were no grounds for Taumac to have suspicions, nor would it have been logical for it to.” Matthew Vella

10:10 Taumac had the choice of either losing the €62,500 investment or try and recoup that investment. “There were no other options... What could Taumac have plausibly suspected at the time about a government agency...” Matthew Vella

10:03 Veronique Dalli (defence lawyer for Taumac, which had sold its shares in MTrace to the Vitals concession via Vitals Procurement Ltd in Jersey) quotes from caselaw. “For prima facie, the prosecution only needs to prove knowledge or mere suspicion on the art of the defendant that the money received was somehow illicit.”

In Taumac’s case, this suspicion was based on one witness. “Between April and today, someone had investigated and decided there were sufficient grounds to press charges... The prosecution is saying that Taumac should have suspected that someone recommended by the Maltese state [was committing criminal offences].” Matthew Vella

09:59 Lawyer Chris Cilia raises a point before the court begins hearing submissions. He says the defence is faced with a situation where they cannot reply to a post on social media by the Repubblika lawyer Jason Azzopardi, where he said that Malta Enterprise representatives “lied under oath when he said the cyclotron was working.”

Cilia says everyone had clearly heard it being said that it was in place but not that it was function. He asks the court to release him from the order, preventing him from speaking publicly about the proceedings.

The court directs him to file an application. Matthew Vella

09:58 Azzopardi says they cannot, but the magistrate has called for one, regardless. Matthew Vella

09:55 It is unclear whether the companies can be assisted by a legal aid lawyer. Matthew Vella

09:55 The first unexpected development of the day: Arthur Azzopardi renounces his brief for Gateway, Technoline and Eurybates.

The magistrate asks whether they have appointed different counsel. Azzopardi replies that they have not. It seems that the fact that they are unable to pay due to the freezing order is the reason.

She asks the defendants whether they have other counsel lined up. Technoline director Ivan Vassallo replies that this came as a surprise to him. Matthew Vella

09:53 Magistrate Rachel Montebello emerges from chambers and the sitting begins. Matthew Vella

09:53 As the other defence lawyers talk amongst themselves, lawyer Shazoo Ghaznavi has walked over to the prosecutors’ desk and appears to be discussing something with the prosecution team. Matthew Vella

09:52 Matthew Agius, senior court reporter, is reporting from Hall 22.
The lawyers and members of the press have just been allowed into the courtroom. “We have taken our usual seats in the public gallery on the first mezzanine floor of Hall 22, where we have a birds’ eye view of the goings-on, below.” Matthew Vella

09:50 Good morning and welcome to our live blog. Matthew Vella