The Daphne Project: Five new things we have learned

Long read • 1,725 words | MaltaToday delves into the implications of five new things we have learnt thanks to the Daphne Project – an international collaboration of 45 journalists and 18 news organisations

Daphne Caruana Galizia was murdered on 16 October 2017
Daphne Caruana Galizia was murdered on 16 October 2017

Prime Minister Joseph Muscat has dismissed the Daphne Project revelations as a series of “recycled stories”. Probably he is banking on the information overload prior to the 2017 general election.

Since all these ingredients had featured in last year’s news cycle, any further revelations linked to 17 Black, Keith Schembri’s and Konrad Mizzi’s Panama companies, Azeri interests in Malta and suspicious activities involving PEPs in Pilatus Bank can easily be perceived by Maltese readers as yesterday’s news.

However, the Daphne Project’s stories had to be packaged, contextualised and explained to an international audience, which is not familiar with the Maltese news cycle. Many Maltese tend to forget that these stories are being written for a global and not for a Maltese audience. In the absence of background information these stories would be incomprehensible for the international reader.

This explains why most stories include a great deal of “recycled” information. Even for the Maltese reader any new information, especially that related to offshore companies, only makes sense when put into a context of previously published stories.

Yet there have been five significant new facts which we did not know before and which have emerged thanks to this international project.

Fact 1: 17 Black was a target client of Schembri and Mizzi

17 Black – a Dubai-registered company – was named as a “target client” of the Panama companies set up for Keith Schembri and Konrad Mizzi. Leaked extracts from a Financial Intelligence Analysis Unit (FIAU) report had previously established the transfer of money from a company connected to Armada Floating Gas Services Malta, owners of the LNG tanker berthed in Marsaxlokk, to 17 Black.

Konrad Mizzi and Keith Schembri
Konrad Mizzi and Keith Schembri

The implications

This latest revelation from the Daphne Project was not a simple rehash of the stories regarding the mysterious Dubai company 17 Black, whose existence was first revealed in one of Caruana Galizia’s most cryptic posts and which was mentioned again days before the 2017 election campaign when extracts of the FIAU report were leaked. The latest story amounts to a confirmation, in black on white, that the company was going to be a client of Konrad Mizzi and Keith Schembri’s Panama companies. But more revealing was Schembri’s reaction to the story. His immediate confirmation that 17 Black had been included in “a draft business plan” for his Panama company contrasted with the impression previously given that he knew nothing about 17 Black. Back in 2017, while denying the kickback allegations, Schembri had not acknowledged the existence of 17 Black describing the whole matter as a “fabrication” which “is nothing short of criminal.”

The new information on 17 Black establishes a link between the company engaged in suspicious payments involving the owners of the LNG tanker and Konrad Mizzi and Keith Schembri.

The PM’s line of defence so far has been that he does not comment on 17 Black not to prejudice pending magisterial inquiries, which were only commenced following reports by former PN leader Simon Busuttil.

Muscat was far less concerned with prejudicing the only inquiry called by himself, the one investigating Egrant allegations, which he has described as the “greatest political lie in history”. This suggests a two weight, two measures approach in the PM’s reaction.

Fact 2: Brian Tonna was on LNG selection board

A freedom of information request by the Times of Malta on behalf of the Daphne Project, revealed that Nexia BT managing partner Brian Tonna sat on the Enemalta selection committee handling the new project, along with three other staff members from the same financial services firm.

Brian Tonna, the managing partner of Nexia BT
Brian Tonna, the managing partner of Nexia BT

The government had previously refused to reveal the names of the selection board.

The implications

Brian Tonna’s role in adjudicating an international call for the selection of a power plant confirms the clout this company enjoys in government circles. The fact that a firm engaged by Mizzi and Schembri on a personal level to set up their Panama companies also had a say in major public decisions is indicative of how blurred the lines between public and personal interests have become under Muscat’s government. Nexia BT literally had a finger in the pie in too many projects ranging from a direct order for a study on public conveniences and its role in assessing the social impact of Sadeen Group’s American University of Malta. The fact that it had a role in choosing the preferred energy bidder suggests that this role was not merely advisory but also one which impinged directly on decision making.

Fact 3: Malta is buying electricity from Socar at €9.40 per unit

The Daphne Project, which has access to over 680,000 leaked documents, also established that the price at which Enemalta and Electrogas buy gas from Socar is fixed at €9.40 per unit for five years, until April 2022. This information had been blacked out when the contract was tabled in parliament.

Malta is buying electricity from Socar at €9.40 per unit
Malta is buying electricity from Socar at €9.40 per unit

The implications

The story suggests that Azeri owned SOCAR made a €40 million profit by buying gas from Shell and selling to government at a higher price did raise concern of international energy experts.

But as the Guardian report confirms at the time when signing the agreement, Malta could not have foreseen the sustained oil and gas price crash that has made its deal with Socar look like poor value.

What may have been most awkward in this case is the failure on the government’s part to seek a price cut from its supplier in the same way as Lithuania did with its LNG provider Statoil.

Moreover the €9.4 cents per unit price was not entirely surprising. Before the general election Labour had already announced that its energy plan hinged on a plan to reduce the price of electricity from 18 cents per unit to €9.6 cents.

The fact that opinion surveys show that energy tariffs are no longer a major concern as was the case before 2013, also makes it difficult for the revelations to trigger popular anger.

While pre-2013 corruption revelations related to Enemalta came in a context of rising prices, the “convoluted chain” which sees Socar profiting as an intermediary came in the context of decreased tariffs.

Fact 4: Leyla Aliyeva is probably a client of Pilatus Bank

By 2016 more than 50 accounts at Pilatus, holding the majority of the bank’s more than 250 million euros ($307 million) of deposits, were operated for the ultimate benefit of Azeris with close ties to Azerbaijan’s leadership. The biggest clients were companies ultimately controlled by two children of Ilham Aliyev.

Leyla Aliyeva is probably a client of Pilatus Bank
Leyla Aliyeva is probably a client of Pilatus Bank

The implications

The Daphne Project has largely confirmed claims made by whistle-blower Maria Efimova and Daphne Caruana Galizia that the bank served companies linked to Azeri oligarchs including Leyla and Arzu Aliyeva, daughters of President Ilham Aliyev.

This case is best summed up by a report by Reuters news agency which notes that although many of Caruana Galizia’s claims, including the one about corrupt payments, remain unproven “one of her key findings has held up: The bank, called Pilatus Bank, did depend for much of its business on the Azeri elite”.

The international implications are that the ruling elite in the central Asian republic is hiving off its wealth abroad by using secretive offshore companies.

The local implication is that a bank was specifically created for this purpose. Pilatus’ profitability depended to a large extent on a few select PEPs, the majority of whom were Azeris. Moreover, this happened in a context of closer relationship between the government of Azerbaijan and Malta, underlined in energy deals between the two countries. The fact that Keith Schembri also had an account at Pilatus Bank, which received suspicious payments currently under investigation, also raises questions.

Yet, so far, the Daphne Project has shed no light on Caruana Galizia’s claim that Egrant belonged to Michelle Muscat and had received a payment from Leyla Aliyeva. The seriousness of this claim, which prompted Muscat to call an early election and is still subject to a magisterial inquiry, had eclipsed other serious allegations made in the past two years.

A year later Egrant still provides Muscat with the opportunity to divert the focus from questions on more substantiated allegations by citing lack of proof on what he calls “the biggest lie in Maltese political history”.

Fact 5: No politicians interviewed in Caruana Galizia murder probe

No politicians have been interviewed in Caruana Galizia’s murder probe

According to two witnesses, approached separately by journalists and interviewed by members of the ‘Daphne Project’, Economy Minister Chris Cardona was seen drinking with one of the murder suspects at the bar. One of the witnesses saw the suspect Alfred Degiorgio and Cardona at the bar one day in November, some time between 4.30pm and 6.15pm.

This witness said Cardona and Degiorgio spoke for some time and, at one point, he claimed he spotted them walking outside together. The Daphne Project confirmed that no politicians had been interviewed in the police investigations. The international press also specified that a high-ranking official of the Nationalist Party introduced one of the eye witnesses to them.

The implications

The information related to Caruana Galizia’s murder was relevant in the context of the reluctance of the police force to interrogate political actors which had an axe to grind with Caruana Galizia.

Yet Cardona’s presence in a popular bar also frequented by criminals is not so shocking in a small country like Malta where a number of politicians on both sides have regular contact with criminals due to their role as criminal lawyers.

While eyewitness accounts of Cardona talking to the accused before and after Caruana Galizia’s death are newsworthy, it is difficult to assess the veracity of these accounts.

What is remarkable is the drastic change in Cardona’s reaction to the story; from a prudent “I do not recall” reply to a more belligerent allegation of an international frame-up, which is being orchestrated against him.

“Like most seasoned criminal lawyers in Malta, I know who some of the suspects in the case are. The particular pub you mention welcomes patrons from all walks of life, including other politicians… I do not, however, recall having any discussions with any of these individuals, and have definitely never had any meetings with them. Anything else is baseless rumour and speculation,” Cardona said in his first reaction.

But speaking on Dissett a week later, he accused the journalists’ consortium working on ‘The Daphne Project’ of conducting what he described as a frame-up on him.