Lifting the lid on party financing

In 1995, a commission chaired by the late former Central Bank governor Anthony Galdes proposed that political parties should declare every individual contribution above Lm5,000 (€11,500).

Labour agreed to the proposals but the PN objected, insisting that only donations over Lm20,000 (€46,000) should be declared. Alternattiva Demokratika, in contrast, had proposed that any donation over Lm500 (€1,150) should be declared.

Both AD and the only independent member of the Galdes Commission (Dolores Cristina, before she became an MP) had agreed at the time with the proposed Lm5,000 (€11500) benchmark.

But since no consensus was reached regarding the allowable limit of donations, or on the amounts which should be declared, this spelled an end to discussion on this sensitive topic until 2007.

Saliba reignites debate

It was Nationalist Party general secretary Joe Saliba’s holiday on the Princess Charlene – a yacht owned by construction magnate (as well as former PN mayor and declared party donor) Zaren Vassallo – which triggered the debate once again on the eve of the 2008 elections.

Viewers of One News were regaled with a stormy sequence, as Labour’s intrepid ambush journalist Charlon Gouder greeted the visibly enraged PN secretary as he stepped off the luxury yacht at the Msida marina.

Saliba frankly admitted in a MaltaToday interview that Vassallo was a financial contributor to the PN, and that his two-week holiday had been his “fifth or sixth” holiday on the same boat.

Even Prime Minister Lawrence Gonzi was aware of his Mediterranean cruise. “Of course he knew. Half the party must have known,” Saliba added,

Days later, MaltaToday revealed that Charles Polidano – the leading developer occasionally reviled by the Labour - had built Super One’s roof for free, while sister paper Illum revealed that a company owned by Zaren Vassallo had also issued a Lm5,000 donation to the PL.

PM’s action fizzles out

Amidst the controversy and months before the election, the Cabinet approved a proposal by Prime Minister Lawrence Gonzi for the government to enter discussions over the funding of political parties.

Gonzi’s declaration was prompted by a letter from Saliba, asking him to set up a parliamentary committee to draw up regulations. The PN, Saliba wrote, believed the time had come for more transparency in the matter.

Dr Gonzi said that more transparency in party financing would strengthen confidence in the political system.

Separately, Labour’s two deputy leaders both said on record that they agree with the need for legislation to regulate party funding.

Speaking on TV programme Reporter, Gonzi justified State funding for political parties, insisting that this would release more funds for civil society, as parties would not have to rely on fund raising marathons directly competing with charity fund raising. But nothing materialised all the same.

Majority against state funding

A MaltaToday survey published in October 2007 showed that the majority of the Maltese did not want to fund political parties from their taxes, with only 32% agreeing with a system of State funding.

The vast majority (70%) of respondents believe that political parties are susceptible to influence from big donors. Only 11% believe that there was no undue influence on the part of undeclared party donors.

The survey also confirmed the general perception that the PN is the main beneficiary of donations from big business. Just over half the respondents – 52% – perceive the the PN as the largest recipient of donations from businessmen.

By way of contrast, only 0.7% believe that the PL enjoys the larger slice of the pie, while 8% believe that both big parties receive donations on an equal basis.

State financing apart, an overall majority of 47% thinks that political parties should declare donations over a certain amount.

Although political parties pride themselves on receiving donations from the masses, the vast majority of respondents – 70% – do not give any donations to political parties.

Parliamentary committee appointed

After the election, the newly elected PN government promised to address this issue, a commitment outlined by President Fenech Adami in the programmatic speech read by the President in the first session of parliament.

In July, following the election of Joseph Muscat as PL leader, Lawrence Gonzi proposed setting up a Parliamentary Select Committee to seek common ground between government and opposition on legislative amendments to strengthen democracy.

Gonzi said the committee, made up of three MPs from each side, will discuss the points raised in the recent exchange of correspondence between PL leader Joseph Muscat and himself.

Labour leader Joseph Muscat immediately agreed with the setting up of this committee, while insisting that discussion should not be limited to Parliament but also include civil society.

But discussion stalled after the Labour Party withdrew from the committee a year later, in protest against the government’s parliamentary antics during a debate on the Delimara power station.

Electoral limits flaunted

The issue took a whole new twist during the 2008 elections to the European Parliament, when candidates’ adherence to spending limits was openly questioned by the media. 

For the first time in history, two candidates declared having overshot the limit of €18,635: Labour hopeful Sharon Ellul Bonici spent more than three times that amount (€57,000), while the PN’s Edward Demicoli was almost as extravagant (€52,000).  But despite their frank admission, no legal action was taken against them.

Ellul Bonici also listed by name the people and companies who financed her campaign. These included the Polidano Group, entertainment entrepreneur Frank Grima, and Paceville nightclub Hugo’s.

But this revelation failed to trigger any decisive action on the party financing front. Even Opposition leader Muscat was dismissive when asked whether he would present a private members’ bill on the issue. And government officials blamed Labour for the stalemate after it withdrew from the committee.

But consensus for these reforms continued to grow in civil society, even among building contractors – a category often accused of holding both parties to ransom with secret donations.

Malta Developers’ Association president Michael Falzon, a former Nationalist minister, said the lobby group wanted to change the negative perception associated with developers.

“While the issue of party funding has not yet been discussed by the association, the general view of the members is that they are in favour of having a system where donations are made public,” Falzon said when asked by The Times about the perception that developers had the major parties ‘in their pockets’.

“In most cases, businesses give donations to both parties. I have personally gone on record arguing for a law to regulate party financing,” Falzon said.

Council of Europe calls for reform

A report by the Council of Europe’s Group of States against Corruption (Greco) also called on Malta to introduce a law which would make it mandatory for political parties to declare donations above certain amounts, and also to discolse the identity of donors.

Moreover Greco called on the Maltese government to ensure that donations from unknown sources should be banned, and that political parties should keep proper accounting and auditing systems.

The report also expressed concern that minor parties were not represented in Malta’s Select Committee dealing with such matters.

An evaluation of party financing laws in 22 European states, undertaken separately by the same COE agency, revealed that Malta is one of three states which allow anonymous donations to political parties, and the only country apart from Ireland in which parties are not required to submit audited accounts.  

Apart from Malta, the only other two countries allowing anonymous donations were Albania and Denmark.

Malta is the only country to be singled out for not requiring parties to have their accounts certified by an independent auditor. And alongside Albania, only Malta does not provide for legal sanctions related to  political party funding.

JPM report urges PM to act

It was only after MaltaToday revealed that a former aide to Finance Minister Tonio Fenech had been questioned by police over donations from Montebello brothers, that the Prime Minister took a commitment to regulate party finances before the next election.

Fenech’s former private secretary was last week called in for questioning by the police, reportedly over ‘kickbacks’ he may have received from developers JPM Brothers, allegedly in exchange for intervention with governmental departments to have fines on under-declared property sales either waived or reduced.

Noel Borg Hedley initially said that he collected money from the Montebellos as donations to the minister’s political campaign, but later admitted that he had pocketed some cheques from the Montebellos in return for his intervention with departments that fall under the finance ministry.

While accepting Tonio Fenech’s denial of any wrongdoing, Gonzi declared his commitment to enact legislation regulating party finances prior to the next general election.

Subsequently, Nationalist MP Franco Debono, whose doctoral thesis was on party financing, was entrusted to forge ahead with a report for the Prime Minister on financing reform.

The MP said that he will be using the 15 year-old Galdes Report as a basis for his own proposals, and will recommend the inclusion of the Green Party in the talks.