‘Oil trader George Farrugia should have been charged with bribery’

Saviour Balzan, who broke the story of the Trafigura kickback to MOBC director Frank Sammut, testified in the PAC on Enemalta's fuel procurement investigation

Oil trader George Farrugia
Oil trader George Farrugia

MaltaToday managing editor Saviour Balzan testified before the Public Accounts Committee into the NAO’s audit of Enemalta’s fuel procurement, in which he claimed that State’s evidence George Farrugia did not deserve a presidential pardon for his role in a system of bribes he devised in the procurement of fuel oil.

Balzan said that Farrugia had nurtured good contacts with particular officials inside Enemalta and the Malta Resources Authority, who crucially kept him informed of existing stock levels of fuel oil inside Enemalta’s tanks and in offshore bunkering spots, to give him a competitive edge on fuel procurement.

He said that police investigations had so far failed to identify conclusive evidence that bribes were paid to key Enemalta officers like former chairman Tancred Tabone; and also said that Farrugia unjustly accused people like Ray Ferris, who was subsequently acquitted.

That much, he said, was a sign that Farrugia should have been charged with bribery of certain officials, as well as money laundering.

Balzan started off by recounting how a “water-tight” system of procurement established by the fuel procurement committee, meant that there must have been a loophole somewhere in the process for George Farrugia to clinch lucrative deals for his clients Totsa and Trafigura.

During the 2000s, Farrugia had been running his family business John’s Group subsidiary Powerplan, an agent for commodities and an importer of lubricants. He would later be revealed, in court action by his brothers, of running a secret operation for himself, Aikon Limited, for Totsa and Trafigura.

“Under Tancred Tabone, the FPC would meet for two hours on a designated day when it publishes a call for tenders for the procurement of oil to Enemalta. During these two hours, the FPC would shut itself in a room and receive tenders based on price, specifications, and stocks available for provision.

“The FPC would meet at a precise hour, and the tender would be issued and publicized; tenderers had to be provide oil specifications, price of oil and how much stock of oil they could provide. They could only provide these specs at a specific time during which the FPC meet, between 12pm and 2pm. The board secretary and another secretary, receiving the offers, would come in to the FPC boardroom as the offers come in.”

 “At this point, Pippo Pandolfino as chief financial officer would read out the offers and work out the maths for the offers. They would rank the two most favourable offers, and in a telephone call before all FPC members, the chairman would ask the tenderer whether this was their best offer – they would concede a 20 minute chance to get a better price, and the FPC would chose the best tenderer thereafter. All members would then sign the paper where the CFO’s calculations had been jotted down.”

Balzan said that he was also convinced that all decisions by Enemalta would be communicated to then investments minister Austin Gatt, a man he described as having a knack for being precise and on the ball when it came to the micro affairs of his ministry. “Even his chief aide Claudio Grech was known to be particularly arrogant with state corporation chairman,” Balzan said in describing Grech’s role as Austin Gatt’s enforcer. Grech is today a Nationalist MP who recently also testified in the PAC.

Balzan said that upon revisiting the cache of emails that MaltaToday used to reveal the scale of corruption in the provision of fuel to Enemalta, he understood that technical officers would communicate stock levels to Farrugia, keeping the businessman in the know on this crucial aspect of tendering.

 “I am sure there was the involvement of other technical people at Enemalta, considering the way the Excel sheets were being passed on to Farrugia detailed the stocks of fuel on the island.”

 “The person that was passing this information on to George Farrugia was a person who would receive minor gifts from Farrugia, freebies. The person, Emanuel Mizzi, is being investigated by police. What I know is that in his PAC testimony, Farrugia mentioned none of this information he would receive secretly from Mizzi.”

Balzan accused George Farrugia of himself having been economical with the truth in his PAC hearing, having said nothing of the role of the Malta Resources Authority official Godwin Sant – now charged in court with bribery – who would provide him with confidential information related to tenders from Transport Malta. “It’s no coincidence that at TM, today there is the CFO – Ray Stafarace – who acted as accountant for Farrugia’s personal company Aikon, which he used to hide away oil profits from family company Powerplan.”

It was the discovery of Farrugia’s illegal activities in Aikon, that led to the rupture with the rest of his brothers in John’s Group, who started taking legal action against him to recover millions in oil profits he siphoned off and deposited through another fiduciary firm in a Swiss bank.

 “George Farrugia’s wife Cathy mislaid a letter which was found out by the other brothers, and they found out in the other emails that oil profits were being siphoned off to Aikon.”

Balzan said that in the course of their legal action, George Farrugia warned his brothers that if his activities were disclosed “the government would fall”.

In the same time that the Farrugia brothers took court action – where they deposited the entire cache of Aikon emails that detailed the corruption inside Enemalta – one of the Farrugia family passed on the incriminating cache of emails in 2010 to a security service officer detailed with then Prime Minister Lawrence Gonzi.

“Gonzi was told that the Farrugia brothers wanted to pass on the information to him but the prime minister told the security detail to pass the information to his superior – head of the Security Service Godwin Scicluna – who passed on the files and documents [later published by the newspapers] to Bernard Pace of the Investments Ministry.”

Cathy Farrugia (left) and her husband George meet former prime minister Lawrence Gonzi at Safi a few years ago. Cathy Farrugia spent 10 years as Gonzi's secretary when he was legal head at the Mizzi organisation.
Cathy Farrugia (left) and her husband George meet former prime minister Lawrence Gonzi at Safi a few years ago. Cathy Farrugia spent 10 years as Gonzi's secretary when he was legal head at the Mizzi organisation.
The photo of the Gonzis and Farrugias as it appeared in In-Nazzjon.
The photo of the Gonzis and Farrugias as it appeared in In-Nazzjon.

Balzan says that no investigation ever took place, save for a mere tax compliance investigation into the activities of Powerplan.

 “I’m informed that Pace showed the documents to then minister Austin Gatt. What happened next was what I only could describe the malaise of the Gonzi years… the whistleblower became the prey. Instead of even pursuing money laundering charges against George Farrugia, they ran a tax compliance investigation against the Farrguia brothers.”

Balzan said that when MaltaToday broke the first story in January 2013, it was an invoice from Trafigura showing it had paid a kickback to Frank Sammut, then director of the Enemalta subsidiary Mediterranean Oil Bunkering Corporation – an official who had direct control on fuel stocks, so important to Farrugia’s operation.

Balzan says that Farrugia would later provide a regular stream of extravagant gifts to Enemalta officials during the time in which TOTSA and Trafigura took most of their contracts from Enemalta, mainly under the chairmanship of Alex Tranter; and that Farrugia spoke in his emails of having had regular meetings or conversations with ministry officials from Austin Gatt’s ministry.

Frank Sammut, former MOBC director and later consultant to Tancred Tabone at Enemalta
Frank Sammut, former MOBC director and later consultant to Tancred Tabone at Enemalta
Pippo Pandolfino, former CFO at Enemalta
Pippo Pandolfino, former CFO at Enemalta
Tancred Tabone, former chairman at Enemalta
Tancred Tabone, former chairman at Enemalta

Balzan said that George Farrugia offered MPs the John’s Group property Valentine’s Hall in Hamrun for election events, as well as BMWs, or else allowed MPs to garage their personal cars in John’s Group property.

Balzan then said that people like Ray Stafrace had not been investigated, while others had been destroyed by over-zealous investigations.

“Ray Ferris was destroyed, emotionally and physically, by Farrugia’s allegations. And he was acquitted,” Balzan said, showing that George Farrugia had lied and did not deserve his pardon.

“Gafà broke people like Ray Ferris, who went through martyrdom because a liar like George Farrugia fabricated lies about him. And today George Farrugia is still trading as if nothing has happened, travelling as he sees fit while so many other people accused by Farrugia have their assets frozen. And all this because one person, Lawrence Gonzi, saw fit to believe only George Farrugia. And to add insult to injury, the people who are whistleblowers, the Farrugia brothers, were charged.”

Balzan said he had doubts over why Farrugia was given a presidential pardon, and said that it was clear that there was a certain familiarity between the Gonzi family and the Farrugia family – Cathy Farrugia was in fact a secretary of Lawrence Gonzi’s when he was a Mizzi Group chairman.

Balzan also said that police inspector Angelo Gafà spoke to the Farrugia brothers from the John’s Group to supply the police with information on George Farrugia; but still, after Farrugia was given a presidential pardon, the police instead charged the Farrugia brothers with bribery. The charge sheet had been prepared on 9 March 2013 by former police chief John Rizzo but never issued; and then only issued on the eve of the resignation of former acting police chief Ray Zammit.

“The person who was the real mastermind behind this whole affair, who has still retained his oil trading business, is still out there with his presidential pardon” – Balzan said, referring to George Farrugia.

Shell settlement

Balzan also said that the Nationalist Cabinet of ministers in 2013 was aware of problems with fuel procurement and access to the fuel market.

He referred to the decision to award a tax-free €5 million settlement to the Shell group in Malta, after the Malta Resources Authority concluded that the group had been barred from accessing the aviation fuel market in Malta. The claim was related to a €30 million claim that Shell filed in the European Court of Justice against Malta

“If at that point in time, the administration knew that something was remiss in fuel procurement, why are we amazed that we are in this situation. At that time, the firm in question was being legally represented by Simon Busuttil. So what I’m saying is that the Cabinet accepted the MRA’s reasoning that Shell did not have a fair deal… and they decided that a €5 million compensation was forthcoming. I think that certainly enough there was a feeling in the government that something was wrong. And this out-of-court-settlement was made so as not to go to court – and at the time had Simon Busuttil as legal consultant.”

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