Red-letter day for Muscat and Falzon as Gaffarena inquiry nears publication

A new political chapter could be in the offing tonight for both Prime Minister Joseph Muscat and his parliamentary secretary for planning, Michael Falzon, a former party deputy leader who in 2008 ran unsuccessfully for party leader.

The National Audit Office will present the Speaker of the House of Representatives with an investigative audit over a ‘fast-tracked’ expropriation of just one-half of a building housing government offices. The lucky beneficiary was Marco Gaffarena, whose father Joe enjoyed close relations with various Nationalist MPs. The unlucky patron turned out to be Michael Falzon, who knows Marco Gaffarena (he went on a hunting trip with him years before), and whose aide, Clint Scerri, accompanied Gaffarena to the GPD to settle the business.

Not much landed gentry but simply land-rich, the Gaffarenas’ myriad business interests – a private clinic and old people’s home with former Labour minister Louis Buhagiar among them – made the news back in 2008 when a petrol station replete with planning irregularities was shuttered by the Malta Environment and Planning Authority in a show of force. For years, the lucrative Qormi petrol pump was prevented from operating because of the illegally built second floor. 

The J Gaff petrol station: for years it was shut down due to planning irregularities, until Labour was elected.

So the Gaffarenas started supporting Labour candidates’ campaigns. In 2014, their petrol pump finally reopened under a change of MEPA policy that granted the Gaffarenas a three-year “temporary clearance”.

Then in 2015, news broke that Marco Gaffarena was compensated the total sum of €1.65 million – half in cash, half in lands he personally selected from the Lands Department – for the expropriation of his 50% ownership of the Valletta palazzo on Old Mint Street, which housed the Building Industry Consultative Council. He had purchased the two quarter-ownerships for just €150,000.

Suspiciously, Gaffarena had bought a 25% stake years before the Government Property Department agreed to the expropriation in January 2015. But confidently, he proceeded to buy another 25% stake from the palazzo’s unwitting owners – a sparse group of cousins who were earning a pittance from the rent-controlled building – in February 2015, and then got his expropriation money in May 2015.

The Old Mint Street palazzo houses the BICC offices, whose chairman is Charles Buhagiar, a Labour MP and architect who once rendered his professional services to the Gaffarenas.

Michael Falzon first dismissed the case, saying Gaffarena’s name made him an easy target. But questions arose on how expropriation money was paid out in so timely a manner, for a piecemeal ownership of an unimportant building (the BICC can function out of any rented building), and whether the valuation itself had been too generous, given that Gaffarena was granted lands that were soon to appreciate fast in value. Some of them were lands close to where he already owned property; others included a convenient ground-floor shop lying beneath a Sliema property he wanted to develop into an apartment complex.

Two investigations

Joseph Muscat was quick to acquiesce to an investigation. He tasked his internal audit investigations department, the IAID, to investigate the expropriations. The IAID results were passed on to the NAO, an independent office that was requested to investigate by the Opposition.

By putting up his junior minister for inquiry, Muscat was evidently aware of the public’s discomfort at news that Gaffarena had made a killing with the expropriation.

If the NAO and IAID inquiries provide conclusive evidence of irregularities, the scale of which would imply Falzon assuming some form of political responsibility, Muscat could be obliged to demand his resignation. But in a similar outing with his former home affairs minister, Manuel Mallia refused to consent, forcing the prime minister to sack him from the Cabinet.

If Falzon loses his Cabinet role, Muscat could choose to simply take direct control of lands and the new planning authority himself – portfolios which already fall under the Office of the Prime Minister – without promoting anyone out of the backbench. The chances of a reshuffle at this point beyond the mid-term, are scant.

If more serious allegations emerge, maybe meriting a criminal investigation, the consequences would be more serious for Falzon, who would find his MP’s seat under attack.

All throughout 2015 as time went by, Muscat’s position also became more difficult: having to wait for the NAO to conclude its inquiry, the more time passed the harder it was to nip his problem in the bud. The Gaffarenas became part and parcel of the news cycle, more notoriously when their business relationship with the former Commissioner of Police Ray Zammit and his two police officer sons was revealed; and Michael Falzon was once again in the limelight for having negotiated a €260,000 early retirement scheme from Bank of Valletta, the partly state-owned bank, that he could repay pro-rata should he be back in the bank before the next election.

In the meantime, the IAID could have given the OPM a strong legal position to recoup lands granted to Gaffarena, because its investigations revealed that the lands were valued in excess of a legal 30% ceiling which such valuations cannot exceed. The ceiling is set in the Disposal of Government Land Act: that in land exchanges, the value of the government land to be given cannot exceed 30% of the value of the expropriated land.

Sources privy to the investigation told MaltaToday that the Attorney General was consulted on the findings, and that the AG surmised that the lack of compliance with the 30% ceiling was “the only basis” for which the land deal could be considered to be null and void. 

The IAID in fact engaged auditors PricewaterhouseCoopers to confirm the valuation of the Old Mint Street building and the other lands granted to Gaffarena.

Falzon mounts a defence

Falzon however did move in to assume some form of responsibility for granting the expropriation, although he denied any wrongdoing had taken place.

He told MaltaToday that he had signed the valuation, carried out on the GPD’s orders by a departmental head from the University of Malta’s faculty of architecture.

Falzon insisted that it was usual practice for the minister responsible for the GPD to sign such valuations by the GPD. But he failed to explain how the lands in question were selected for the compensation, especially since some of the lands abut on property already owned by Gaffarena. 

Additionally, his own aide, Clint Scerri, personally accompanied Gaffarena to the GPD so that he could finalise the business on the expropriation and select the lands that would be passed on to him by way of compensation. Falzon said Scerri’s job is to assist people seeking the GPD’s services.

“I spoke to Scerri and frankly I feel the reports against him are unfair. I’m not defending him if he did something wrong.”

In an interview with MaltaToday, Falzon revealed that Gaffarena personally petitioned the GPD to have his share of the Valletta palazzo on Old Mint Street expropriated during the summer of 2014. But he also challenged anyone to say that he had committed anything illegal.

“I could have gone to the GPD and rummaged through the documents. But I am here to work. I am man enough to shoulder my responsibility if I did anything irresponsible; I have no problem in obeying the Prime Minister if he asks me to suspend myself. But I challenge anyone to say that I did something illegal.”

He also denied having accepted any political donations from Gaffarena despite his friendship. “Gaffarena came to speak to me on several issues, much like others such as [construction magnates] Nazzareno Vassallo and Charles Polidano do,” Falzon said. “I receive people on a daily basis. On this particular case I made it clear to him that the matter should only be discussed with the GPD.”

Falzon even claimed there was nothing suspicious about the fact that Gaffarena had acquired a 25% share in the building in February, just two months before the second compensation. “Under the previous administration, contracts were signed in just six days… I am comforted by the fact that all laws, procedures and regulations were followed.”

He defended the GPD’s decision to first expropriate Gaffarena’s 25% share, and then proceed on the second 25% share of Old Mint Street. “Yes, it is something that happens… it doesn’t happen every day but there were instances where it occurred. You cannot ignore the importance of the building in question, a palace in Valletta that had housed a school and an examination centre. The government risked losing the property by 2028,” he said.

Falzon has reiterated that there was “no political involvement in the valuation of the properties or the choice of lands”.

“There are a number of parameters to follow when an exchange takes place, including that the value can’t vary more than 30%. The choice of the site is something that GPD discusses with the individual and independent architects value the property. I reiterate that I didn’t interfere in the choice of lands.”

Falzon neither confirmed, nor denied Gaffarena’s personal role in choosing the land parcels. “I’d imagine there were discussions on the land choice but I didn’t interfere at any point. I’m not saying ‘yes he was accommodated’ or ‘no he wasn’t’. I’m saying that in no way did I indicate which lands should be passed on,” he said. 

Speaker rules not enough evidence to prove NAO report leak to press 

Speaker of the House Anglu Farrugia yesterday ruled that not enough evidence exists to lend credence to Falzon’s claims that information from the National Audit Office report was leaked to the press. 

Delivering his ruling, Farrugia said that he had held a meeting with the Auditor General and the deputy Auditor General earlier yesterday – during which they insisted that they had no information that any NAO officials leaked the report to the media or that any journalists had approached them for such information. 

The Times of Malta reported on Saturday that the NAO report into the expropriation deal will be tabled in Parliament on Wednesday and will spark a Cabinet reshuffle. 

The paper reported that the findings’ main focus is on Falzon, who as planning parliamentary secretary signed the controversial deal. 

In a letter to the Speaker on Monday, Falzon urged for the leaks to be investigated before the tabling of the report. 

However, Farrugia in his brief ruling said that not enough evidence exists to prove unauthorised leakage of information, noting that the article itself didn’t refer to any leakages.