Fenech Adami’s defence on CapitalOne: ‘I was not involved, I was not paid for my role’

An inquiry by the government into a MaltaToday story that police did not actively pursue a money laundering investigation connected to clients of a Maltese fiduciary, is likely to focus on whether law enforcement agencies were careless about the fact that a politically exposed person (PEP) was a director of the fiduciary.

But in the financial services sector, questions will be raised as to what type of fiduciary role Nationalist MP Beppe Fenech Adami was providing, when claiming he was unconnected to the operations of Baltimore Fiduciary Services.

Fenech Adami was one of two co-directors when Baltimore’s client, CapitalOne Investment Group, was suspected of money laundering in connection with a drug raid in the Netherlands in January 2013.

Fenech Adami, who was parliamentary assistant for home affairs at that time, was flagged as a PEP in the police investigation, but top brass did not give guidance for further investigation, and the file was marked ‘bring up – three months’, and later ‘put away’ in December 2013. Fenech Adami, who resigned his directorship in January 2014, is adamant he was unaware of all Baltimore’s operations or the police investigation.

“My role was that of a lawyer but I was not involved in Baltimore’s day-to-day operations,” he told MaltaToday this week in a telephone interview. “I stayed on as director with Richard Abdilla Castillo when the Hili Group, where I was a lawyer, sold its shares in Baltimore to Abdilla Castillo in 2008.”

Fenech Adami insisted he was not paid a single cent for his directorship, and that he was never consulted on Baltimore’s management of CapitalOne’s affairs. “If there was a problem I was not consulted.”

However, Beppe Fenech Adami as director signed off the last set of annual accounts submitted by Baltimore to the MFSA, for the year 2011.

Likewise, Abdilla Castillo – whose signature appears on all CapitalOne instructions to deposits large sums of cash from Greek companies into a Valletta Fund Management account – last Sunday said he was unaware of any police investigation.

“I was not informed by Bank of Valletta of any police investigation, and I’m not sure Abdilla Castillo was. He did not tell me anything.”

Fenech Adami also defended himself from statements he made in 2013 about another fiduciary company that handled the affairs of the pardoned oil trader George Farrugia. “In that case Intershore had been warned of Farrugia’s illegal actions by the lawyer of the John’s Group. In this case, I knew of nothing criminal that was taking place. I would have been responsible had I known of something wrong, but did not take any action.”

Of a different opinion to Fenech Adami’s ‘light-touch’ responsibility to fiduciary affairs, is stockbroker Paul Bonello, a man who in the past took on Bank of Valletta for its own egregious maladministration of clients’ monies.

“Whilst I am unable to express myself on the specifics of the Fenech Adami case for the simple reason that I am not in possession of the documents involved, I can explain the principles involved where the director of a company is acting in a professional capacity of a fiduciary company.” 

As a fiduciary company Baltimore acted as a nominee shareholder and provided director services, which means it appears as CapitalOne’s shareholder in the public records as a name-lender so that the real beneficial owner remains unknown to the world at large.

“A nominee shareholder and director will in ordinary circumstances act in accordance with the expressed wishes and in the best interest of the underlying client; however a nominee is acting legally in his own name and cannot shift any responsibility for what he himself has done, or has failed to do, on his client.”

That means Baltimore’s directors had to exercise due diligence on the owners of CapitalOne, whom Dutch police suspected of having been involved in drug trafficking; as well as monitoring the transactions passing through.

“The duties of fiduciary companies are nowadays ultra complex and onerous especially in the post-September 11 scenario... many years ago ‘money laundering’ referred to the core crime of drug trafficking; today it’s been extended to anything constituting a serious crime. Also, what may appear as legitimate tax planning and legal tax avoidance in one country, can be illegal and criminal tax evasion in another.

“Hence the importance of making available such fiduciary facilities to clients in a most sparing manner and only after intensive and substantive due diligence at inception stage and effective monitoring and institution of controls throughout thereafter.”

That means, Bonello added, that directors should always be aware before approving transactions, or else they risk being used for illegitimate or illegal activities under the cloak of secrecy.

“Not being remunerated for the said post of director does not in any way reduce the responsibility attached to the post of director,” Bonello said when asked about the responsibility of a director who is not remunerated.

“Nor does a claim that one is not an executive director, unless the proper controls have been put in place. Similarly, not being aware of any untoward activity on a company account of which company one is a director, is not excusable as it is a director’s duty to be aware of what is taking place and to act as a gatekeeper.”