[ANALYSIS] How the DB group opened a Pandora’s box over party financing

On Sunday, reacting to MaltaToday’s story that PN deputy leader Mario de Marco had represented the DB Group in negotiations with the government over the transfer of the ITS land in St Julian’s, Simon Busuttil announced that he had asked his deputy leader to stop representing the developers as he announced that he was asking the Auditor General to investigate the Seabank deal.

Subsequently Busuttil received a text message from the CEO of DB Group, Arthur Gauci, “requesting an urgent meeting”, so “that the party pays back what our group was asked to give all this time,” and Busuttil reacted by describing it as a “threat” asking whether “the developers donated money in order to bribe it (the PN), or to buy its silence?”

In so doing Busuttil triggered a reaction from the developers who revealed that they were paying the monthly salaries of PN secretary-general Rosette Thake and CEO Brian St John.

18 hours later the party issued a statement in which it denied that its officials were paid by the DB Group owned by Silvio Debono, but confirmed receiving €3,500 in donations from the group throughout 2016, while its media arm Media.Link Communications had “commercial relations” worth €70,800 with two companies linked to Silvio Debono.

Subsequently the DB Group confirmed the €70,800 donation to Media Link while challenging the PN to state what “commercial services” the group had received from Media Link in 2016. How does this sequence of events impact on the protagonists?

Simon Busuttil – Good governance dented?

Overall the political funding revelations have robbed Busuttil of the momentum he was gaining in the past weeks in the wake of the Pana Committee visit to Malta, which served as a reminder to the government that the Panama issue was not dying away.

For Busuttil the text message sent by Gauci represented a Hobson’s choice, for while by revealing its contents publicly he triggered the damning reply by Gauci, had he kept it hush he risked being further conditioned by the DB Group, whom Busuttil now suspects of collusion with Labour.

But by expressing his outrage at the attempt to condition his party through donations, Busuttil inadvertently prompted a reply, which confirmed that his party was receiving money from the group involved in the controversial deal, which he was criticising. In so doing he seemed determined to walk into an ambush, which he may well have anticipated. Still, had he chosen to keep mum, he may well have landed himself in even more dangerous territory, giving DB Group more leverage over him.

Faced with the revelations of funding from the DB group, Busuttil now justifies accepting donations from the group by highlighting the reality that political parties presently rely on donations for their existence, which is partly true. Yet he seems to suggest that businesses that donate money from political parties do not normally do so to condition their actions in opposition or when they are elected to government. What is sure is that had Busuttil had the foresight to refuse donations from Debono’s group he would have spared his party the damaging embarrassment.

Ultimately Busuttil’s gamble to present this case, as one proving his independence from donors, was not entirely convincing. In fact the sequence of events suggests that Busuttil was torn between pressures to oppose the deal coming from civil society and the media and pressures to keep the peace with a major business group, which was financing his own party.

For while it is true that the party has now spoken out against the ITS deal, it only upped the ante following revelations that the party deputy leader was representing the developers in negotiations with government. While party spokespersons Marthese Portelli and Ryan Callus did object to the agreement in parliament, this was overshadowed by a show of force against Minister Konrad Mizzi. In this case the party was always one step behind public opinion. It was only on Sunday that Busuttil decided to take the case to the Auditor General, two full weeks after the media revealed that the developers would have to pay only €15 million for the highly prized piece of land.

Overall the case illustrates the pitfalls of Busuttil’s choice to turn good governance into one of his major issues.

Simon Busuttil has made good governance his central political plank and by doing so he has put the government on the defensive in a number of occasions. In so doing he is also tapping into anger over the Labour’s government main shortcoming and on the issue on which there is genuine political anger.

But he did so fully knowing the past heavy baggage of his party, which was in government for 25 years almost continuously, and in view of the daily reality of running a bankrupt party which cannot survive without donors. The party is also led by two deputy leaders who not only come from two powerful dynasties but who each run a legal business which necessarily puts them in contact with big enterprise.

Moreover having inherited a bankrupt party, can Busuttil afford to ignore the harsh reality of his party’s liquidity? And in his new role as an anti corruption crusader, Busuttil, whose image as a lawyer turned politician and MEP was built on moderation, has found himself taking the posture of an insurgent.

This may have enabled Busuttil to grow in stature as a leader but he may still lack the gravitas to convince the electorate when he says that he really means it when he says he wants to drain the swamp. Moreover Busuttil has also tried to change the expectations of his party’s electorate, to make it less tolerant towards party officials who fall short of ethical standards. But this may put party officials and Busuttil himself in trouble when they themselves fall short of these expectations. In some ways this may contribute in raising the bar for all politicians.

But Busuttil’s greatest liability may well be the aura of sanctimonious rectitude he has built around himself, simply because this may be irreconcilable with leading a mass party which depends on donors and is led by people who earn a living from deals involving fat cats. Still at this stage Busuttil has no choice but to carry on the same path.

The silver lining for Busuttil is that this incident has prompted him to appoint an independent commission chaired by judge Giovanni Bonello to draft proposals on party donations, which he promised will be included in his party’s manifesto, something that may give Busuttil more clout in advancing the good governance cause. The debacle may prompt the party to clean its act and vigorously assert its independence from big business even if this contradicts his party’s historical ties to business lobbies.

Still so far Busuttil seems to suffer from the Sisyphus predicament which often sees him rolling a heavy boulder up a mountain but which always rolls back after finding some new obstacle. The latest sequence of events may be one of many obstacles he will be facing in the run up to the election.

Mario de Marco’s Achilles heel

As one of the most effective and popular elements in the Gonzi administration who retains a moderate appeal to voters, de Marco was an asset for the party. But business relationships already exposed in the aftermath of Panamagate have always been de Marco’s Achilles heel.

Surely he made a gross political misjudgment in accepting legal work related to what was bound to be a controversial deal done on the watch of the Muscat government. Still de Marco may well have been misled by Busuttil’s previous acceptance of his legal work for the DB Group. In fact Busuttil now states that de Marco’s role only became untenable when the opposition asked the auditor to investigate the deal. But even if this was the case de Marco could well have smelled the rat. 

His position in the party has been surely weakened, not just because like many others before him he was making a buck through professional work for a major developer, but because the writing was already on the wall when he accepted a commission from a company perceived to be close to the Labour government. Still by expecting De Marco to choose between the party and his professional career Busuttil may be opening another Pandora’s box, as other Nationalist MPs may have similar conflict of interests. This may create further tension in the party which cannot afford any signs of disunity on the eve of an election.

For judging from the government’s track record on land deals this particular deal was bound to be the subject of political controversy. In many ways de Marco confirmed his reputation as a reluctant politician who cannot choose between politics and his professional career.

Ultimately the only solution to such conflicts of interests is a parliament where MPs are paid decently as full timers on condition that they make a choice between professional and political work. But that is only part of the story. In the current conjuncture where the opposition is constantly harping on good governance, de Marco may well have chosen to keep a distance from a developer keen on a favourable deal from a Labour government.

Silvio Debono’s unorthodox intervention

In the eye of the storm – Simon Busuttil (left) and deputy leader Mario de Marco

By allowing his group to take on the opposition leader, the flamboyant developer, an ex-Nationalist who benefitted from permits granted for his ODZ hotel in Ghadira under a Nationalist government, seems to have decided to put all his eggs in one basket: that of the Labour party.

In many ways Debono’s behaviour has been unorthodox in not showing the same reluctance of other businessmen to enter the political fray. It may well suggest that Debono feels financially strong enough to take the flak. But it may also suggest that he expected the opposition not to take a stance, simply because he was giving them money. While Debono is surely not unique in the business world to have such expectations, his frankness about it is remarkable.

Moreover Debono has implicated his own group in a shady affair involving the transfer of funds from the business to the political world. In so doing Debono has cast a dark shadow on his own company’s dealings with all political parties and with the Labour government. Inadvertently the revelation may turn Debono in to a toxic liability even for the Labour Party.

The announcement by the DB Group that it wanted its donations back from the PN after Busuttil’s decision to report the deal to the Auditor General was a blatant confirmation that donations are meant to condition political debate in the country.

The DB Group’s readiness to take on the opposition leader may well suggest that it is currying favour with the government, on which it depends for the issue of permits for the mega project. Surely the current controversy on the dealing between the PN and DB Group takes away the spotlight from the deal sealed with the government, which is favourable to the company.

This is because the government had been deceiving the public when it announced a €60 million price tag when the deal was first announced. 

In fact the DB San Gorg Property company, which is owned by hotelier Debono, will pay a €5 million premium and €10 million in seven annual instalments. The rest will be paid for the redemption of ground rent on individual residences included in the project.

Effectively, this creates a major conflict of interest for the state; for while as a regulator it has a duty to control the over development of the site, the state stands financially to gain from the sale of apartments. This is because the more apartments are sold, the greater the revenue for both the developer and the state.

The Labour Party’s diversionary game

It is Labour which stands to benefit from having the spotlight diverted from its own dealings with Silvio Debono to his dealings with the PN. But Labour also risks big time if it is seen to be colluding with Silvio Debono, a former Nationalist businessmen distrusted by the party’s rank and file and a bete noire of environmentalists. Moreover the ITS deal with Debono is also unpopular among business lobbies like the Malta Developers Association which were strategic to Labour’s electoral coalition.

Still despite this risk the revelations came at a providential time for Joseph Muscat, who was on the receiving end of questions on Panama following a visit by the EU parliament’s Pana committee.

In the zero sum game of Maltese politics, revelations on funding to the PN from the DB Group will be used to dispel criticism on the deal itself. 

Asked by MaltaToday whether this incident cast a black cloud over Silvio Debono and the way he dealt with politicians, Muscat replied by saying that it definitely put Busuttil in a bad light. 

“The Labour Party has always been open to scrutiny and we do not have – and will never have – similar arrangements with Debono or anyone else.” Still there is more than a pinch of irony in Labour attacking the PN for its dealings with the DB Group when the advantageous land deal in St Julian’s was concocted and sealed on this administration’s watch.

Moreover, by opening Pandora’s box of party financing, the DB Group may have inadvertently also raised questions on Labour’s own financial relations with big financial groups, which may well have sponsored it in the run up to the 2013 campaign, prompting the former deputy leader and present parliamentary speaker to denounce that “big contractors and businessmen have been getting too close to the Labour Party.”

The cause of reform

The case vindicated claims made by Alternatttiva Demokratika for the past decades that the party funding system was a way through which big business conditions political parties. It also reinforces the argument in favour of state funding, a solution advocated by both AD and more recently by the Nationalist Party after returning to the opposition.

The 70K payment by the DB Group to the Nationalist Party has also spurred calls by the newly set up Democratic Party to widen the scope of the party financing law to include commercial companies owned by political parties. Moreover de Marco’s involvement as a lawyer in the deal comes in the wake of similar involvements in other companies by other politicians like Beppe Fenech Adami, whose directorship in Baltimore Fiduciary was the subject of an inquiry set up to investigate why the police did not pursue a money laundering investigation on the eve of the 2013 election.

This also strengthened the argument for a full time parliament, where MPs are paid decently to avoid possible conflicts of interests. The latest events have also led to Simon Busuttil committing himself to appoint the commission to draft proposals on party funding. But it remains doubtful whether the pre-electoral climate is conducive to such a rational debate and it appears more likely that this incident will simply be used as political ammunition.