Gifts, jobs and lunches: new rules for old sins in Hyzler’s code of ethics

A new code of ethics proposed by Malta’s standards czar is set to change the way ministers and MPs conduct their affairs from business lunches with businessmen proposing big projects, to email and Whatsapp messages. But how prepared is the Maltese political class for this upgrade in standards, JAMES DEBONO asks?

Meeting the lobbyists: a transparency register

It is a well-known secret that big businesses often test the waters by sounding their grandiose ideas in private meetings with ministers and government officials.

DB group CEO Arthur Gauci had revealed in an interview that a decade ago, the idea of a mega-project involving public land at the ITS site “had been floated in a meeting with (former Prime Minister) Gonzi but the then prime minister was only interested if the project would be developed at the Marsa Menqa.”

Speculation has been rife on the proximity of the Labour government and its officials to big groups like Henley, Electrogas and the Malta Developers Association even if it remains unclear whether mere lunches and parties spiced the relationship. In a clear indication of how close Yorgen Fenech was to government, the Security Service felt that not inviting him to Joseph Muscat’s birthday party at Girgenti would have alerted him to being under the radar of the Caruana Galizia murder investigation. It was Fenech’s eventual arrest that finally did lift the lid on this proximity between big magnates and politicians.

To address this growing concern, the new environment minister Aaron Farrugia had anticipated the new code of ethics upon his appointment in January by announcing that he will start publishing a register of all meetings he has with stakeholders, in a move aimed at promoting transparency and good governance. But so far none of his cabinet colleagues have taken his cue.

The new code of ethics would not only make this practice the norm, but lays one important rule: that precludes unofficial meetings like informal lunch meetings: “Meetings with persons who have an interest in obtaining permits, authorizations, concessions or other benefits from the state should be held in an official setting in the presence of officials”.

Moreover, simply registering the meeting in the transparency register will not be enough, as “minutes of such meetings should also be kept for record and audit purposes”.

Muscat and Henley: passport chums discussed SLAPP action against pesky journalists
Muscat and Henley: passport chums discussed SLAPP action against pesky journalists

The new code also regulates the grey area of “informal meetings, correspondence using unofficial email accounts, and messages by SMS, WhatsApp, and similar applications” deeming any such communication as relevant and obligatory inclusion in the transparency register.

And, significantly, ministers will no longer be allowed to conduct official business through unofficial email accounts, as former PM Joseph Muscat regularly did through his own email account.

But the new rules, which apply to MPs and ministers, do not cover the dealings between lobbyists and political parties, which do not fall under the remit of the standards commissioner. This may create a new avenue for trading in influence, which may make party officials more exposed to pressure from lobbyists. Former PN general secretary Paul Borg Olivier (who back then enjoyed some R&R aboard a magnate’s yacht) recently told an inquiry looking into the murder of Daphne Caruana Galizia that entrepreneur Paul Apap Bologna, who was pitching plans to build a gas-fired power station in a meeting held in May 2009, told him “we will do our bit if you do yours”. “I asked him what he meant. He replied with a cryptic smile,” Borg Olivier said, saying the phrase had “troubled” him.

Curiously, the proposed new rules on lobbying exempt ministers from having to record meetings with religious groups and political parties if these do not deal with planning permits, zoning or the allocation of money, land or other resources. This means that ministers will not have to record a meeting with a religious group lobbying for harsher laws against abortion.

Gonzi: former PM drifted into corporate world, giving legitimacy to company boards
Gonzi: former PM drifted into corporate world, giving legitimacy to company boards

In, out and in again: revolving doors rules

Malta has an abundance of cases of former ministers taking up jobs and directorships in the private sector immediately after leaving office. This raises questions on whether their inside knowledge was a factor in their employment and whether by employing businesses and lobbyists are also trading in influence, by using the clout of ex-politicians to further their influence.

The new rules proposed by the standards czar clearly prevent ministers from lobbying for the private sector for three years after leaving office. Yet defining what constitutes lobbying may prove elusive.

When MaltaToday revealed how Muscat accompanied Steward Healthcare International’s president Armin Ernst for a meeting with new Prime Minister Abela and Deputy Prime Minister Chris Fearne, Abela insisted that Muscat had not represented Steward in any way but had simply facilitated the meeting with his successor and the healthcare giant. “It’s not true that Joseph Muscat was representing Steward because otherwise I would not have accepted to be present for that meeting… I don’t feel comfortable with someone who was prime minister and now a backbencher being present for a meeting of this kind… in fact, he wasn’t… his involvement was simply as a way of introducing me.”

Fenech: former finance minister got back on the finance bandwagon with directorships and other forays in the financial world
Fenech: former finance minister got back on the finance bandwagon with directorships and other forays in the financial world

It also remains unclear whether the term lobbying applies to think-tanks and foundations funded by foreign governments. Muscat, under whose watch Malta’s gas provision was awarded to a company which includes the Azeri government’s SOCAR, has now joined the Nizami Ganjavi International Center, an Azerbaijani government-funded think tank which describes itself as a “cultural, non-profit, non-political organization dedicated to the memory of great Azerbaijani poet, Nizami Ganjavi” and to “build a dialogue and understanding between cultures and peoples for building functional and inclusive societies”. Azerbaijan is notorious for its caviar diplomacy, which often involves trading in influence through sports and charitable activities.

One major radical change envisaged in the new code of ethics is that for the first three years following their resignation or termination, ministers will be precluded from “having a relationship of profit with any private enterprise or non- government body with which they would have dealt while serving as Ministers.”

This rule would have effectively prevented former Prime Minister Lawrence Gonzi from becoming one of the directors of Nemea. The online-only bank had its licence suspended by the European Central Bank following a suspicious €10 million deposit from an Azerbaijani-owned company.

Former Finance Minister Tonio Fenech, who left PricewaterhouseCoopers in 2004 to take up the job of parliamentary secretary for finance under Lawrence Gonzi, had also declared a long list of directorships in parliament after the 2013 election. These included his chairmanship of Abalone Asset Management, and as director of Credorax where he joined Tonio Depasquale, the former Bank of Valletta chief executive. He was also director of Falcon Funds, which was facing a criminal investigation in Sweden for its inability to pay back Swedish savers their monies.

Former finance minister and disgraced EU commissioner John Dalli also made forays in the private sector in between terms in office. Following his party’s 1996 defeat, Dalli worked for a very short period as a financial consultant with Daewoo but then left to work with the Corinthia Group. When back in government, Dalli found himself on the receiving end of criticism on the bankruptcy of the Daewoo franchise in Malta, following the sanctioning of heavy loans to the company from Bank of Valletta.

Dalli was not the only politician to be recruited by business giant Corinthia. After having served as Sant’s tourism minister till 1998, Karmenu Vella was appointed executive chairman of Corinthia Hotels International from 2001 until 2007. Subsequently he was appointed executive chairman of Corinthia’s Mediterranean Construction Co Ltd until 2010. Vella’s appointment at Corinthia would have still been permissible under the new code of ethics as this only restricts the employment of former ministers in the first three years after their resignation.

One issue which needs to be tackled in the next years is whether the State should give ministers a transitional allowances to prevent ‘revolving doors’ conflicts. This already exists but does not preclude them from finding immediate employment.

Vella: former tourism minister got a Corinthia job before becoming minister again in 2013
Vella: former tourism minister got a Corinthia job before becoming minister again in 2013

Pressies and obligations: a gift register

The Labour Party made a killing on the eve of the 2013 election when it had emerged that former minister Tonio Fenech had been gifted a traditional Maltese clock, known as an Arlogg tal-Lira (estimated to cost €500) made by Ines Farrugia, the sister-in-law of oil trader George Farrugia, who had been granted a presidential pardon by the PN administration in exchange for his evidence in the oil procurement scandal.

But the past returned to haunt Muscat when it emerged that he was gifted a €20,000 Bulgari watch and three vintage Petrus wine bottles by Yorgen Fenech, the alleged mastermind in the assassination of Daphne Caruana Galizia.

Although the gifts were numbered and left to the State, the Petrus gift (valued at €5,800) was deemed to constitute a breach of the existing code of ethics, which already bans ministers from accepting any gifts, or benefits, which may give the impression that they are compromising their judgement. “Muscat accepted this gift as an individual, and not as the head of government, and as a result he became personally obliged to Yorgen Fenech,” standards commissioner George Hyzler wrote in his damning report on the matter.

But in his proposed code of ethics Hyzler goes a step forward, not just precluding any gifts which place ministers and MPs “under an obligation”, but also proposing a transparent system through which other legitimate gifts are registered.

According to the proposed code, MPs will have have to register gifts with a value of over €250, which they receive from donors in Malta and abroad. They must also register multiple benefits from the same source if taken together these have a value of more than €250 in a period of twelve months. They also have to register any gifts of the same value, which they bestow to others.

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