Keith Schembri ignored report that VGH chief misappropriated millions of public funds

Keith Schembri failed to act on a report in November 2017 that VGH’s Ram Tumuluri had among other claims, illicitly diverted money intended for Karin Grech Hospital salaries to other uses

Keith Schembri failed to act on information he received in November 2017 that suggested financial misappropriation of public funds by then VGH CEO, Ram Tumuluri
Keith Schembri failed to act on information he received in November 2017 that suggested financial misappropriation of public funds by then VGH CEO, Ram Tumuluri

Keith Schembri failed to act on information he received in November 2017 that suggested financial misappropriation of public funds by then VGH CEO, Ram Tumuluri.

It was Schembri who had asked a trusted senior VGH official to produce the report on Tumuluri’s actions, investigators probing the hospitals concession found.

This was at a time when government was in secret talks with Steward Health Care International to take over the floundering hospitals concession. Steward went on to formally acquire the three public hospitals in February 2018.

The report listed eleven separate instances of misappropriation of public funds running into millions of euros, including illicit withdrawals of money the government paid to Karin Grech Hospital for staff salaries.

However, despite being in possession of this damning information, which as a public official he was duty bound to act on, Schembri failed to share it within government structures and neither did he pass it on to the police for further investigation.

Investigators believe that the “only purpose intended for this report was its use as leverage” by Schembri to “hasten the exit of VGH and Tumuluri and introduce Steward as the new concessionaire”.

Investigators understand that Schembri played a key role in the transfer of the concession to Steward after VGH failed to live up to its contractual obligations.

The report that was delivered to Schembri noted that VGH had received €49.6 million between June 2016 and December 2017 from the Maltese government.

The objective of these public funds was to deliver improved healthcare services in Malta and Gozo but the report commissioned by Schembri showed that the major portion of funds received (€10.5 million or 21%) by VGH was used to acquire several companies during the first year of operations.

VGH diverted €5.7 million from the public funds it received to facilitate the acquisition of medical equipment supplier Technoline through a complex and obscure set up, which investigators believe was intended to benefit Keith Schembri and Konrad Mizzi.

VGH also spent €1.5 million and €3.3 million on the two companies Mtrace and OHUM respectively.

The report described these expenditures as a “huge drainage of money” that can “easily be perceived as embezzlement of public funds”.

Other instances of financial misappropriation included the payment of €5.5 million in “construction charges with no visible performance on the ground”.

Funds withdrawn from Karin Grech staff salaries

One of the more serious claims that reached Schembri was that whenever government funding to the concession was delayed, Tumuluri withdrew funds from the money government would have advanced directly to Karin Grech Rehabilitation Hospital for staff salaries. Under the terms of the concession the salaries of staff members who worked at Gozo General and Karin Grech hospitals when these were transferred would still be paid by the government.

The report in Schembri’s hands stated: “He (Tumuluri) meets the urgent commitments through these funds and then there is a very hard situation to meet the payroll deadlines of the hospitals. Playing with the hospital funds is a dangerous and risky move with serious crime implications.”

Nonetheless, with these allegations in hand, Schembri failed to fulfil his public duty to report the matter to the police, suggesting that the report was only intended as a form of blackmail to secure the transfer of the concession to Steward.

Eventually, when Steward moved in, the American company made several settlement payments worth millions of euros to VGH investors, including Tumuluri, who received €2.5 million and was claiming a further €2.5 million for the share purchase agreement.

Schembri, then minister Konrad Mizzi – responsible for negotiating all deals with VGH and then Steward – and former prime minister Joseph Muscat stand charged with fraudulent gain, bribery, corruption, money laundering and criminal conspiracy over their involvement in the hospitals deal.

Tumuluri is also being charged along with tens of other people and companies who may have profited in a corrupt way from the deal or enabled the illicit money transfers to happen.