MFSA publishes report that found its CEO breached ethical guidelines over Las Vegas trip with Yorgen Fenech

The financial services watchdog releases 2020 report, which concluded that former CEO Joseph Cuschieri breached ethics when he went on a business trip with Yorgen Fenech

Former MFSA CEO Joseph Cuschieri
Former MFSA CEO Joseph Cuschieri

Former MFSA CEO Joseph Cuschieri breached ethical guidelines when he went on an all-expenses paid trip to Las Vegas with Yorgen Fenech, a review board concluded.

The board was appointed in 2020 by the financial services watchdog after the media reported on the Las Vegas trip that happened in 2018. Cuschieri had also resigned from the MFSA as a result of the revelations.

At the time of the Las Vegas trip, Cuschieri had just been appointed CEO at the MFSA after stepping down from the Malta Gaming Authority.

When news of the trip emerged two years later, Cuschieri denied having had a conflict of interest, insisting he was no longer CEO at the MGA, which regulated, among others, casinos in which Fenech had a direct interest.

However, the board of review, composed of former chief justice Joseph Azzopardi and lawyer Mark Simiana, disagreed with Cuschieri’s assessment. The eight-page report, written in poor English, was only published today by the MFSA despite having been completed on 23 November 2020. The MFSA was ordered to release the report by the Information and Data Protection Commissioner (IDPC) in relation to a Freedom of Information request submitted to the authority, which had asked for a copy of the Board of Review’s report.

In a statement the MFSA said it will not be appealing the IDPC decision and published a redacted version of the report in line with the IDPC’s notice.

In its findings, the board said it was “abundantly clear” Cuschieri infringed the MFSA’s guidelines on hospitality and the European Central Bank’s code of conduct when he accepted hospitality which was both expensive and exclusive.

The board said that Fenech’s many interests in companies, which although not engaged directly in financial services, operate in different areas and it was “very probable that in one way or another, the MFSA may have to be engaged with one or more of these companies”.

The board noted that this was confirmed by the MFSA’s general counsel Edwina Licari, who was subjected to a separate but parallel review given that she had also been on the Las Vegas trip. Licari had abstained from her MFSA duties on at least three occasions in which Fenech was involved.

“A person of Mr Cuschieri’s undoubted intelligence ought to have realised this… The Board therefore does not agree with Mr Cuschieri that there was no possible conflict of interest in accompanying Mr Fenech and advising him,” the board said. It added: “In any case it is abundantly clear to the Board that Mr Cuschieri infringed both the [MFSA] guidelines on hospitality and the ECB code of conduct even if no future conflict of interest would have occurred in that he accepted hospitality which was both expensive and exclusive.”

The board cleared Cuschieri of any wrongdoing or unethical behaviour on several other issues that were raised at the time, including the expression of interest for the relocation of the MFSA offices to a different office block in Mrieħel, the number of trips abroad he took as CEO, and the recruitment of Licari with the MFSA.

At the time of the Las Vegas trip, Licari was not yet an employee of the MFSA but still general counsel at the MGA. The review board’s remit was limited to Licari’s behaviour as an employee of the MFSA and thus the trip fell outside the scope of review.

On whether she was employed at the behest of the MFSA’s CEO, the board noted that this allegation would not suggest wrongdoing on her part anyways.

The board also found that Licari’s appointment to the FIAU Board was not irregular, and that she always declared any conflicts of interest when needed, including with Yorgen Fenech. Her trips abroad with the CEO as part of her duties as General Counsel for the MFSA were not irregular.

Cuschieri has reservations on board’s findings regarding ethics breach

Meanwhile, in a reaction to the report findings, Cuschieri reiterated his disagreement with the conclusion he breached the MFSA’s and ECB’s ethical frameworks.

“While I respect the Board’s conclusions, I have my reservations as to whether I was in breach of the ethics framework referred to in the report. As far as I was aware at the time, the Tumas Group and/or its subsidiaries did not fall within the scope of the MFSA’s supervisory oversight,” Cuschieri said.

He insisted that key decisions at the MFSA were always taken by groups of people and collectively by management at various layers and statutory committees within the organisation. “Rarely [were these taken] unilaterally by the CEO except for ordinary day-to-day business.”

Cuschieri said that while the board’s statement that the Tumas Group’s vast commercial interests may make it possible for a conflict to arise, was “broadly true”, he insisted that conflicts could be managed and declared.

“There are policies and procedures in place to that effect. In a small country like Malta, it is not uncommon for conflicts to arise when you are in public office. In this respect, I would like to make it clear that at no point in time (throughout my tenure) I felt conflicted or prejudiced where I had to formally declare a conflict. Having said that, if I ever felt conflicted, I would have immediately declared the conflict in line with the MFSA’s accepted procedures,” Cuschieri said.

He also underlined the fact that he had resigned his position at the MFSA on his “own free will, solely to protect the institution from unnecessary media scrutiny and criticism”.