Update 2 | Pilatus owner created construction company in Malta for social housing purposes

Updated at 12.25pm with Adrian Delia and Roderick Galdes - the debate is over

Pilatus Bank owner Ali Sadr Hasheminejad opened a company in Malta four years ago to build social and mass housing projects, Opposition MP Karol Aquilina has revealed.

The company, Malta International Construction Ltd, was set up in January 2014, at the same time that Hasheminejad got a banking licence for Pilatus.

Aquilina was speaking in Parliament on Thursday morning in a debate on the rule of law report compiled by MEPs, who visited Malta last year.

An excerpt from the company documents tabled in Parliament by Karol Aquilina

Aquilina said the construction of social and mass housing projects was listed as one the aims in the memorandum and articles of association of the Hasheminejad’s company.

The company was owned by the same firm registered in Hong Kong that owns Pilatus Bank.

Aquilina questioned the reason why Hasheminejad would want his company to build social housing in a country where this had always been the government’s remit.

“Was the government going to reach an agreement with this company to build the €50 million social housing project announced in the previous legislature?”

Aquilina asked what bank accounts MIC had at Pilatus Bank and other banks and whether the Malta Financial Services Authority and the Financial Intelligence Analysis Unit knew about its existence.

“Answers are required,” Aquilina insisted.

Hasheminejad stands charged in the US with sanctions busting against Iran, after his family company got involved in a Venezuela housing project. American prosecutors are insisting that Hasheminejad used the illicit money gained from the Venezuela project to set up Pilatus Bank in Malta.

The bank is currently under administration by “a competent person” after the MFSA stepped in when Hasheminejad was arrested in the US last March.

Social Housing Parliamentary Secretary Roderick Galdes

Government brands accusation 'a lie'

Speaking later, Home Affairs Minister Michael Farrugia said it was a lie to argue that the €50 million housing project agreed on during the last legislature was going to be financed by Pilatus Bank.

Farrugia had at the time been family minister responsible for social housing. He said talks for funding of the project were carried out with the European Investment Bank, denying any involvement whatsoever of Pilatus Bank.

In an adjournment speech after the debate, Social Housing Parliamentary Secretary Roderick Galdes insisted that MIC had never been involved in talks with the government and never tendered for the project that was financed by European institutions.

Galdes accused Aquilina of wanting to undermine the project, pointing out that the PN MP had been opposed to the construction of social housing in Siġġiewi.

The debate involved various MPs from both sides of the House.

Opposition leader Adrian Delia

Opposition wants investment with clean money

Opposition leader Adrian Delia accused the government of persisting in giving the country a bad image by refusing to take concrete action on accusations of money laundering.

Delia said Pilatus Bank's licence had not yet been withdrawn despite the latest revelations from the US that the bank was set up with money from criminal activity.

"When the bank owner was arrested in March, the Opposition asked Maltese institutions to withdraw the Pilatus licence. Some action was taken back then but now we learn that US authorities found that Pilatus was set up through criminal money, and until today this bank’s licence has not been withdrawn," Delia charged.

He said a government that took no action against wrongdoing became an accomplice to criminality.

Tackling the sale of citizenship, Delia insisted the Opposition wanted more investment to come the country's way, including in the financial services sector, but insisted this had to be done with "clean money".

Finance Minister Edward Scicluna

Finance Minister tears into MEP committee

Finance Minister Edward Scicluna reserved harsh words for the MEP mission, accusing the members of being “hijacked by the Nationalist Party MEPs with the sole of intention of bringing down the government”.

The Finance Minister accused the MEPs of acting like investigators, judge and jury on selected individual cases.

“I never witnessed this in my career as an MEP. These four people in an ad hoc committee decided in their omnipotence that Malta should withdraw the licence of a bank, ignoring the regulatory institutions at EU and national level that deal with these things,” Scicluna insisted.

Describing the report as “highly political”, Scicluna said it only focussed on Pilatus Bank, ignoring completely the actions taken by the MFSA against Nemea Bank and Falcon Funds, institutions that included former members of the Opposition.

“This is hypocrisy… targeting one individual case but ignoring those involving people who had been part of the PN,” he said.

Scicluna said the due diligence carried out by the MFSA on Pilatus Bank had been conducted by the same board appointed by the previous Nationalist administration.

“These are highly competent people and which we confirmed so as to ensure continuity,” Scicluna said.

PN MP Simon Busuttil

Muscat an accomplice

Former Opposition leader Simon Busuttil insisted that the lack of action against Konrad Mizzi and Keith Schembri in the wake of Panama Papers created the impression that people in high places acted with impunity.

Busuttil said government was burying its head in the sand when it treated the recommendations made by MEPs as if they were based on pure invention.

He said the Prime Minister failed to remove Mizzi and Schembri, and his continued lack of action two years later made him an accomplice.

“Joseph Muscat is now part of the problem,” Busuttil said.

Justice Minister Owen Bonnici

Call on judiciary to speed up investigations

Justice Minister Owen Bonnici refuted the argument that investigations were not happening, admitting though they were taking their time.

He appealed for the magisterial inquiries to be speeded up because the length of time for their conclusion contributed to the impression that nothing was being done when this was not the case.

Bonnici said the government had implemented various laws since 2013 that had been left pending for long, including the removal of time-bar against politicians on corruption cases.

Background

The rule of law mission came in the wake of Daphne Caruana Galizia's murder and its recommendations were published in a report last January. The recommendations in full are being produced below.

PN MP Jason Azzopardi

The debate was prompted by a private member's motion filed by Opposition MP Jason Azzopardi last March. In his motion, Azzopardi argued that the key findings related to the failings of Maltese regulators in the financial services sector in relation to the licencing of Pilatus Bank, the conclusions calling for the removal of politically exposed persons who were caught with companies in Panama and implicated in money laundering, and the lack of police action on money laundering accusations by PEPs were damning to Malta's reputation.

Azzopardi is calling for the recommendations to be implemented without delay.

Read Jason Azzopardi's motion here:

The government is proposing an amendment to the motion by highlighting the legal changes government has made to various laws, including the manner by which the judiciary are appointed, the removal of time-bar on corruption cases by politicians and the revamped media law, and insisting that investigations are underway on the various allegations flagged by the MEPs.

The proposed amendment calls on Parliament to give its support to the government and allow the judiciary to continue with their investigations.

What MEPS had recommended

European level:

• The European Commission should assess whether Maltese authorities are fully compliant with the European Anti-Money Laundering directive and the Capital Requirements Directive, especially regarding the application of customer due diligence provisions;
• The European Banking Authority should assess whether the MFSA is fully equipped and free from conflicts of interest to perform its supervisory duties;
• The European Banking Authority should assess whether the MFSA has fulfilled its obligations as national supervisory authority in view of the apparent lack of action against Pilatus Bank and Nexia BT that continue to hold a license to provide services in the EU;
• The European Central Bank and the European Banking Authority should investigate whether the fact that Pilatus Bank continues to hold a license to operate in the EU warrants ECB/EBA intervention;
• The European Commission should take note of the recent report made by Mapping Media Freedom with regard to SLAPP practices currently being used by Pilatus Bank and Henley & Partners and actively ensure the protection of media freedom and journalism across the EU by proposing legislation that would curtail these abusive practices;
• The European Commission should assess the implications of the IIP (Individual Investors Programme) through which Malta sells European citizenship and Schengen Residence permits, for distortion of the Internal Market and attempt against the security of the European Union, fomenting corruption, importation of organized crime and money laundering. The Commission should also assess fiscalincentives which treat local income of individuals or corporations differently than international income.”

National level:

• Persons perceived to be implicated in serious acts of corruption and money laundering, as a result of Panama Papers revelations and FIAU reports, should not be kept in public office and must be swiftly and formally investigated and brought to justice. Keeping them in office affects the credibility of the Government, fuels the perception of impunity and may result in further damage to State interests by enabling the continuation of criminal activity.
• Work is needed to ensure stronger checks and balances in the Maltese legislative framework to better separate powers and to limit possible interference of the Prime Minister in the judiciary and the media; an assessment of media pluralism and independence from political power should be conducted.
• The functions of Chairman of the MFSA and the function of promoting investments into Malta should be decoupled;
• Reform the Attorney General functions, to decouple the role of advisory to the government from the role of prosecution;
• Reform the Judiciary, namely on the basis of recommendations made in 2013, in order to reinforce the separation of powers and the independence of the Judiciary;
• The Police Commissioner should no longer be appointed by the Prime Minister but by an appropriate independent body. Similarly, the veto power of the Prime Minister should no longer exist regarding the nomination of the Maltese Chief Justice;
• The Whistleblower Protection Act should be revised to cover workers in the public sector. Mr Ferris should be granted police protection and serious consideration should be given to his application for protection under the Whistleblower Protection Act;
• The Maltese Government should separately publish the list of persons being granted Maltese Citizenship under the Individual Investment Programme and should start an independent assessment of this programme and of the anti- money laundering procedures applied to it;
• The Maltese Government should start an action programme against corruption and financial crime and increase the number of investigations and prosecutions. This should include special units in police and judiciary with sufficient and highly qualified staff;
• Civil society organisations and any Maltese citizens should be encouraged to provide evidence and bring formal complaints to the Police forces, FIAU and MFSA, regarding white collar crimes and money laundering in Malta, in order to trigger criminal investigations.
• An investigation is needed over the alleged influence of elections through increased hirings in the public sector, issuance of construction permits and regularisations of irregular constructions, as well as pay increases and promotions in the military
• An investigation is needed on allegations of the smuggling of Libyan petrol;
• Reassess the importance for Malta joining the EPPO in order to work together with participating MS against EU fraud and other crimes affecting the Union' financial interests.

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