Local businessman acquitted of tax fraud after 19 years in court

The court declared that there had been some clear tampering with the some consignment invoices which undervalued the air-conditioning units but the court couldn't prove that this was the work of the defendant

The Maltese businessman was acquitted because the prosecution couldn't prove without a reasonable doubt that he was responsible for undervaluing a consignment
The Maltese businessman was acquitted because the prosecution couldn't prove without a reasonable doubt that he was responsible for undervaluing a consignment

A Maltese businessman has been cleared of fraud and tax evasion in a 19-year case which highlighted the differences between Maltese and German law.

Joseph Farrugia had been accused in 2000 of falsifying invoices issued to Ceiling Systems Limited from Fujitsu General (Euro) Gmbh in Germany and Brooker Air Sales of England in order to evade tax. He was also accused of knowingly undervaluing goods in his customs declaration and defrauding the government of VAT. He faced a never-ending list of fraud counts against VAT and fiscal authorities

Magistrate Monica Vella observed that between February and August 2008, Farrugia had imported 8 consignments of air-conditioning units. Maltese authorities had become suspicious when they noted a low declared value on one of the consignments of air-conditioners and had contacted the German authorities. Farrugia had declared a total of Lm60,908 whilst the invoices from Germany showed Lm143,273 as being the value.

Police had searched the showroom and other properties connected to the accused in 2003 but had not found any documents pertaining to the year 2000.

Farrugia had told the police that he might have been defrauded by one of his employees and the police had investigated his accounting system, finding that the value inputted in the system was correct and matched that sent by German customs.

On VAT he had claimed to have used the values mentioned in the original invoices and not those declared to the Customs department. This was also found to be true.

The court noted that no searches had been carried out in the residence of the accused’s employees. This despite one of them having been embroiled in litigation with him and who later briefly worked with a competitor of his.

Representatives from a German customs investigation unit had presented documents and explained that from their evaluation, it appeared that the Maltese Customs department had been presented with false declarations of value. But a court-appointed translator later pointed out that the documents they presented were not attested to under oath., explaining that in his experience the German jurisdiction does not administer oaths to witnesses as happens in Malta.

The court, presided by Magistrate Monica Vella said that after going through all the documents, it was of the opinion that there had been tampering of the invoices to declare a lower value to customs, but that this was not enough to find the accused guilty. For that to happen, the prosecution would have to prove the link between the invoices and the accused beyond reasonable doubt.

This was not the case, however, because the original invoices issued by Fujitsu had never been exhibited and the prosecution had not requested the appointment of a court expert to examine the company’s computers. The German witnesses’ evidence was also inadmissible as they had not been given the oath or made a solemn declaration as required by Maltese law.

The man’s statement to the police, aside from containing his denial of the allegations, had been released without a lawyer being present, noted the court.

Magistrate Vella finally, also pointed out that the charges against the accused were no longer crimes because Malta is a member state of the EU customs union. Applying the law most favourable to the accused, as is required, the court said that without a crime there can be no punishment.

Therefore, despite it emerging as a fact that a number of invoices had been tampered with, the court said it could not find the accused guilty and acquitted him.

Lawyer Kathleen Grima was defence counsel.

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