Steward sought government protection from liabilities above €3m even before it took over

Steward Health Care sought government protection from liabilities exceeding €3 million during discussions to take over the hospitals concession from Vitals Global Healthcare.

The detail is found in an email Steward attached to its 100-page appeal from a court judgment that cancelled the hospitals deal.

Sent towards the end of January 2018 by Steward CEO Armin Ernst, the email was addressed to investors Asad Ali and Shaukat Ali, and the gmail account of the prime minister’s chief of staff Keith Schembri.

Ernst complained of VGH’s lack of cooperation to secure the share transfer and proposed a short way out of the impasse to secure the arrangement as quickly as possible.

“We (Steward) will assume a black hole of ‘corporate’ liabilities and are assuming that they will likely be around 3M Euro, but have no real way of ascertaining it due to a lack of supporting documents and we are running the risk of other liabilities coming out of the woods,” Ernst wrote.

He then added that if the deal is closed anyway, “we (Steward) are asking GOM (government of Malta) to protect us from liabilities exceeding 3M”.

Ernst also suggested withholding “part of the initial €2.5 million payment” to Ram Tumuluri, the VGH CEO until all issues were settled.

Significantly and paradoxically, Ernst described the hospitals concession as “probably the messiest situation” he had seen in his professional lifetime.

Ernst was Steward CEO at that point in time but he was no stranger to VGH having been appointed their top officer in November 2016 when the company announced senior management appointments.

Ernst remained VGH CEO until August 2017 before resigning and moving back to Steward, where he had originally worked.

In a telling sign off to the email, Ernst made it clear who was calling the real shots on the hospitals concession from the government side. He ended the email with a specific reference to Keith Schembri, informing him that Health Minister Chris Fearne was running after him for an update.

“Keith: Chris has called me asking for an update. Haven’t said anything, but need to get back to him,” Ernst wrote.

Fearne had testified in the court case that despite being health minister, he was kept in the dark on all contractual arrangements between government and VGH, later Steward, since these were tasked specifically to Konrad Mizzi.

Just a month after Ernst sent this email, Steward officially took over the running of St Luke’s, Gozo General and Karin Grech hospitals after becoming the major shareholder in Vitals Global Healthcare (VGH). The company name was eventually changed to reflect the new owners.