Friends in Vital places: Saint James hospital, the botched sale and the middleman

He built up the Saint James hospital brand over almost four decades but three years ago Josie Muscat was on the brink of selling out to the Vitals investors that went on to take over three public hospitals. He tells his story to MaltaToday

Business minds: Josie Muscat and Pakistani enterprenuer Chaudry Shaukat Ali who set up Privot Holdings in Malta back in 2010.
Business minds: Josie Muscat and Pakistani enterprenuer Chaudry Shaukat Ali who set up Privot Holdings in Malta back in 2010.

It was not an easy time for Josie Muscat, three years ago when he was on the brink of selling Capua hospital in Sliema.

Muscat had single-handedly decided to negotiate the sale of the hospital and the Saint James brand name he and his family had painstakingly built up over the years.

“It was a decision that caused me big personal problems,” Muscat tells me when I meet him at a Sliema café.

It was 4 March 2015 when news broke that Muscat had reached a deal with American investors for the sale of the 60-bed hospital and the brand ‘Saint James’. The development had come as a big surprise.

Muscat, a doctor and former Nationalist Party MP, founded the Saint James Group in 1984. It started with a clinic in Zabbar and gradually became the largest private healthcare provider, having also pioneered in vitro fertilisation, MRI and PET/CT scans in Malta.

The negotiations involving Saint James were happening at the same time that a group of foreign investors were eyeing the takeover of three State hospitals.

But these two seemingly unrelated events did have a common factor: Chaudry Shaukat Ali, a Pakistani businessperson resident in Malta, who is now a Maltese citizen.

Josie Muscat: the former Nationalist MP and candidate was one of the first to get in touch with Chaudry Shaukat Ali, who was interested in negotiating the sale of Muscat’s Saint James Hospital group to other entrepreneurs. Muscat says he quickly learnt of plans for the privatisation of parts of the Maltese hospitals system
Josie Muscat: the former Nationalist MP and candidate was one of the first to get in touch with Chaudry Shaukat Ali, who was interested in negotiating the sale of Muscat’s Saint James Hospital group to other entrepreneurs. Muscat says he quickly learnt of plans for the privatisation of parts of the Maltese hospitals system

The middleman

“Shaukat was well-connected to Castille,” Muscat says of the middleman who put him in touch with American doctor Irfan Iqbal at the start of 2015.

In the preceding months, Shaukat Ali, through his company Pivot Holdings, had set up a joint company with Mark Pawley’s Bluestone Investments, to propose to the government a public-private partnership for the running of the Gozo hospital.

Unknown to many was the fact that Shaukat Ali and his partners had signed a memorandum of understanding with Malta Enterprise back in October 2014 for the take-over of the Gozo hospital and possibly St Luke’s and Karin Grech.

Back to the Saint James deal and Muscat recounts how one evening he attended a meeting with Shaukat Ali, Iqbal, some other investors and their Maltese lawyer.

“On my side, I had my lawyer and two advisors,” Muscat says, adding the parties agreed on the price and subsequently concluded the preliminaries.

Iqbal had to make a down-payment to secure the deal but months passed and the American doctor “never coughed up one cent”, Muscat says.

By the end of March 2015, the government had signed an agreement with Barts Medical School to open a campus in Gozo and several days later issued a tender for the part-privatisation of St Luke’s, Karin Grech and Gozo hospitals.

Three companies submitted bids for the multi-million euro project, including Vitals Global Healthcare that had as its shareholders the Bluestone partners and Canadian Ram Tumuluri.

Tumuluri’s boasting

With the Saint James deal now in limbo, Muscat tells me that Shaukat Ali arranged another meeting at an office in Kappara.

“I thought Irfan would be there to wrap up the deal but instead I found Shaukat Ali, his lawyer, Ram Tumuluri and doctor Ambrish Gupta opposite me,” Muscat says.

Tumuluri was by then the face of VGH, the company involved in the privatisation process of the public hospitals. Gupta was one of the investors in the Vitals project.

Muscat describes the enthusiasm with which Tumuluri and Gupta spoke of their vision for healthcare in Malta. “What they said was music to my ears since I always dreamt of the way the health system in Malta should be and we signed a promise of sale agreement,” he says.

But Muscat also recalls how Tumuluri was always boasting of being close to then health minister Konrad Mizzi and how he had long meetings with him “at Auberge de Castille and at his home”.

“Ram [Tumuluri] boasted in front of me that apart from the concession to run the public hospitals, he also wanted to manage the private sector and this is why he was interested in Capua,” Muscat says. This was at a time when the government tender was still being adjudicated.

And while the government was saying that the public hospitals concession was going to be for 30 years, Muscat insists that Tumuluri always spoke of a 99-year concession.

“It did not make sense to have a concession for just 30 years, Ram used to tell me while boasting on the progress in talks between VGH and Konrad Mizzi. He [Tumuluri] used to say that he knew about the situation at Mater Dei hospital more than anyone else,” Muscat says.

But weeks passed and procrastination became the order of the day. Tumuluri never came forward with the down payment on the Saint James deal and the promise of sale agreement kept being extended.

On 4 August 2015, The Malta Independent reported that Muscat was engaged in fresh talks with new investors for the sale of Saint James hospital. But just a month later, the Muscat family issued a press statement announcing that the sale of Capua hospital and the Saint James brand were called off.

Photos show Shaukat Ali (top, clockwise from left) with General Pervez Musharraf, former president of Pakistan, receiving the Star of Excellence for ‘meritorious contributions’, and with President George Abela in 2012, where he was accompanied by shipyards owner Anthony Cassar and his son Asad Ali Shaukat
Photos show Shaukat Ali (top, clockwise from left) with General Pervez Musharraf, former president of Pakistan, receiving the Star of Excellence for ‘meritorious contributions’, and with President George Abela in 2012, where he was accompanied by shipyards owner Anthony Cassar and his son Asad Ali Shaukat

An eye-opener

Muscat revisits the day when he decided to stop the sale.

“I was approached by a person [he does not mention his name] who wanted to meet me. This person was close to Shaukat and Tumuluri but appears to have had second thoughts. He informed me that my advisors had been meeting Shaukat and Tumuluri behind my back. I was shocked but it was an eye-opener.”

This person also cautioned Muscat about Tumuluri’s brush with the law in Canada. The case refers to a law suit filed in 2010 against Tumuluri’s management company by the owners of a Canadian hotel. Among other things, he was accused of running the hotel into insolvency.

“This person also told me that VGH was negotiating a contract with the government that would see it rake in around €72 million per year from taxpayer funds,” Muscat says.

The figure tallies with what the VGH investors were telling banks and financial institutions as far back as February 2015 when the government’s request for proposals had not yet been published.

“This equates to some €6 million per month, which the government has been paying VGH for nothing. Don’t forget that over and above this sum, the government is paying for the wages of employees at the three hospitals. This is daylight robbery and super unfair on taxpayers,” Muscat says, as he questions what VGH has been doing with the money.

One last attempt

Back to 2015 and the botched sale of Capua hospital, Muscat recounts how after pulling the plug, Tumuluri had approached him to rent out a whole floor to service cardiac patients.

“We prepared a detailed proposal for the lease of the fifth floor at Capua but Tumuluri never came back with an answer,” Muscat says, in what was now a typical pattern adopted by these investors.

As for Shaukat Ali, Muscat says the businessman had offered to find him new investors interested in buying Saint James Capua hospital, a proposition that was rejected.

“With VGH taking over three State hospitals that contain hundreds of beds, I remain perplexed as to why Tumuluri was interested in a 60-bed hospital like Capua,” Muscat reminisces.

The question is likely to remain unanswered but with the major criticism directed at VGH being its lack of medical background, it is not implausible to conclude that the Saint James brand name could have given the company leverage in its search for finances and legitimacy.

Muscat believes the government should abandon the hospitals concession deal and argues it is not Health Minister Chris Fearne’s doing.

“This was concocted by Projects Malta under Konrad Mizzi and it is unfair that fingers are pointed at Fearne. I know the Health Minister on a professional basis and he is not motivated by financial gain,” Muscat says.

He asks the Prime Minister to intervene, insisting that VGH have not invested the promised €200 million but rather raked in some €140 million over the past two years with very little to show for it.

“And now VGH are trying to sell the concession after just 21 months. I passionately ask the Prime Minister to stop this project because I strongly believe that we Maltese are capable of setting up and managing state-of-the-art hospitals. Nobody can understand the Maltese way of doing things better than Maltese investors,” Muscat says.

Muscat recalls how Tumuluri was always boasting of being close to then health minister Konrad Mizzi and how he had long meetings with him ‘at Auberge de Castille and at his home’

Timeline

10 October 2014 The investors behind Vitals Global Healthcare sign a memorandum of understanding with Malta Enterprise for a public-private partnership in the health sector.

23 November 2014 The Vitals investors sign a memorandum of understanding between them detailing a project that involves the Gozo hospital and possibly the acquisition of St Luke’s (State-owned) or St Philip’s hospitals (owned by Frank Portelli).

February 2015 A presentation drawn up by Vitals refers to their project as the Gozo and Malta medical complex. The presentation is used to attract finance to their project that includes St Luke’s, Karin Grech and Gozo hospitals. It also indicates that government would pay a minimum yearly sum of €70 million for beds that would be used in the public health service. The presentation also speaks of a concession period spanning 99 years.

4 March 2015 News breaks that Josie Muscat is selling off Capua hospital and the Saint James brand to American and Palestinian businessmen.

18 March 2015 The government signs an agreement with Barts Medical School for the opening of a campus in Gozo. The med school will be part of the Gozo hospital to be built anew.

27 March 2015 Projects Malta under Konrad Mizzi’s wing publishes a request for proposals seeking private investors to operate St Luke’s, Karin Grech and the Gozo hospitals. The winning company would have to invest €200 million to refurbish the hospitals and in Gozo’s case build a new general hospital.

27 June 2015 Vitalis Global Healthcare (the name of the group is subsequently changed to Vitals Global Healthcare) is chosen.  from among three bidders. Mizzi says the concession will be for 30 years and Vitalis will have to invest €200 million.

2 September 2015 The Muscat family announce that the sale of Capua hospital has been called off and the facility will continue being managed by the Saint James Group.

30 November 2015 The concession agreement between the government and Vitals is signed but not published.

22 March 2016 Vitals and Malta Industrial Parks enter into a public deed for the transfer of the hospials, and Vitals are given sole discretion to extend the lease agreement for a further 69 years through a simple judicial letter.

21 December 2017 News breaks that Vitals are selling the Malta hospitals concession to American company Steward Healthcare that runs 36 hospitals in the US.

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