Konrad Mizzi misled Cabinet when negotiating hospitals deal with Steward - NAO

National Audit Office publishes its third damning report on the hospitals concession deal that cost public coffers €456 million until 2021

The transfer of the hospitals concession from VGH to Steward was characterised by haste that raised the NAO's concerns on the actions taken by those representing government, especially Konrad Mizzi
The transfer of the hospitals concession from VGH to Steward was characterised by haste that raised the NAO's concerns on the actions taken by those representing government, especially Konrad Mizzi

Updated at 4:49pm with request for urgent debate in parliament

Former minister Konrad Mizzi had granted VGH authorisation to transfer the hospitals concession to Steward Healthcare before seeking Cabinet’s endorsement, a new audit shows.

This was symbolic of the haste that characterised the actions of those representing the government in this controversial deal, the National Audit Office concluded in its third instalment of a lengthy investigation of the hospitals concession.

Mizzi is also accused of “misleading” Cabinet on the side agreement he concluded with Steward by which government would be liable to pay the company €100 million if a court annulled the contract.

The latest report was tabled in parliament on Monday afternoon. It covers the transfer of the hospitals concession to Steward Healthcare in 2018 and the American company’s subsequent management of the contract. The first report was published in July 2020 and the second in December 2021.

First NAO report: Damning report finds collusion between Vitals and government on hospitals deal

Second NAO report: Mizzi could not face NAO as damning report details extent of Vitals fiasco

The new report has nothing to do with Prime Minister Robert Abela's call earlier this year for the NAO to investigate how Steward spent the millions given to it by the government, which is subject of a separate audit.

Once again, the NAO used harsh words to describe the actions of people in government, particularly Konrad Mizzi who was tasked with handling the contractual aspects of the hospitals concession despite no longer being health minister after 2017.

“The unorthodox dynamic that persisted between the prime minister [Joseph Muscat] and the Minister for Tourism [Konrad Mizzi], to the detriment of the Minister for Health [Chris Fearne], remained a matter of grave concern to the NAO,” the report states.

The NAO said the government allowed itself to be exploited when the health concession was delegated to the tourism minister since it created a weakness that was leveraged by Steward.

“The most evident exploitation was that secured by the SHC [Steward] in terms of government’s liability to pay €100 million and the lender’s debt… in the case of a court-declared nullity of the concession agreements, irrespective of the defaulting party, a situation precipitated by the minister for tourism and engineered through his misleading of Cabinet,” the NAO said.

The NAO further noted that Cabinet’s authorisation was not sought by Mizzi in instances when government acted as guarantor in several financing agreements entered into by Steward and Bank of Valletta.

The NAO said “the false sense of urgency” by the government at the time to close the deal with Steward raised concerns about whether “government’s interests were served”.

“Such was the haste of those representing government, that Cabinet was only requested to endorse the transfer of the concession after authorisation had already been granted by the Minister for Tourism [Konrad Mizzi] and Malta Industrial Parks (MIP) Ltd to the VGH,” the NAO said.

The NAO's description of how the Cabinet was treated puts a critical spotlight on what former prime minister Joseph Muscat tsaid when he claimed that all decisions relating to the hospitals concession were endorsed by the Cabinet.

The hospitals concession contract was struck down by the courts last February and Steward has appealed the judgment.

Milestones not achieved

The NAO's report noted that after Steward obtained control over the concession, subsequent negotiations with the government proved useless since the objectives of the parties remained “diametrically opposed and the resulting differences were irreconcilable from the outset”.

The NAO also gave a damning assessment of Steward’s inability to fulfil concession milestones as laid down in the Services Concession Agreement.

“This agreement set several concession milestones yet, aside from the completion of the Barts Medical School and other pockets of progress, all other milestones were not achieved by Steward,” the NAO said.

Another agreement - the Health Services Delivery Agreement - regulated the delivery of services as outlined in the concession. However, it was not possible for the NAO to establish whether progress was registered in terms of level and quality of service following the concession of the hospitals.

The NAO also raised question marks on the manner by which the transfer of control was handled by Malta Industrial Parks Ltd that considered the transfer between VGH and Steward as an intra-group transfer and thus not liable to the payment of a laudemium.

“This Office [NAO] deemed the treatment of this transfer by MIP Ltd as an intra-group transfer as incongruent with the fact that the ultimate beneficial owner had changed and therefore the payment of a laudemium to the government was warranted. Nevertheless, this charge was not raised by the government,” the NAO said.

Furthermore, when control of the concession shifted from SHC International LLC to SHC Systems LLC, INDIS Malta Ltd (previously MIP Ltd) was not notified of the transfer, despite the change in ownership.

“The NAO contends that this too did not qualify as an intra-group transfer and therefore a laudemium could be charged. However, the deed did not specify any consequence for failure to obtain consent for the transfer of the sites yet indicated that the non-payment of a laudemium would result in the nullity of the transfer,” the NAO said.

What did the concession cost public coffers?

Between 2016 and 2021, the government paid the Concessionaire €268,600,000, with €52,700,000 paid to the VGH and €214,900,000 to the SHC. Salaries of resources made available to the Concessionaire by the Government during this period accounted for a further disbursement of €188,500,000. The total cost incurred by the Government with respect to the Hospitals between June 2016 and end 2021 was €456 million.

READ ALSO: NAO report slams Konrad Mizzi’s failure to cooperate during hospitals concession audit

Request for urgent discussion

Government Whip Andy Ellul
Government Whip Andy Ellul

In an unorthodox twist during Monday's parliamentary session, government Whip Andy Ellul requested that parliament suspend its agenda and hold an urgent debate on the voluminous report published by the NAO.

He also proposed an hour's suspension to give members the chance to leaf through the abridged version of the report, which has more than 100 pages (the full report has more than 400 pages), and no time limit on the debate.

The Opposition disagreed, suggesting instead holding the debate over two special sessions on Tuesday. Opposition Whip Robert Cutajar said if the government was serious about having a proper discussion MPs should be given time to digest the NAO's findings.

Ellul did not commit the government to holding the urgent debate tomorrow. Since no agreement was reached, this evening's session continued as usual.