Looking back at 2018 | The light at the end of 17 Black

For most of the year, 17 Black and its mysterious ownership was part of a complicated storyline that had been first broken by the last Daphne Caruana Galizia, but seemingly kept out of the news cycle.

Until, news of what the company was being used for was finally revealed by a consortium of newspapers and journalists working on the Daphne Project, which took up Caruana Galizia’s work and dug deeper than ever before. Until then, 17 Black was a cryptic post on Caruana Galiza’s Running Commentary blog, named first inside the Financial Intelligence Analysis Unit and leaked to the journalist. In early 2018, it was revealed that it was a Dubai company, with ties to an Azeri national and other offshore companies – including the Panama companies set up by former energy minister Konrad Mizzi and the PM’s chief of staff Keith Schembri.

The connection finally made sense.

The offshore companies set up by the Prime Minister’s unofficial second-in-command, and his energy minister – a star candidate who was driving Labour’s key policy plank in 2013 – were connected to another offshore company owned by an Azeri national. 17 Black was somewhere in the middle, a Dubai company that seemed to be channelling transactions from one offshore company to the next. That Malta’s gas plant was being procured by fuel from one its owner’s key shareholders, Azeri state national energy company SOCAR, made the 17 Black set-up all the more suspicious.

But all came to a head with yet another key revelation: the alleged owner of 17 Black, nobody but Electrogas shareholder Yorgen Fenech, of the Tumas business group. Now the link had become even stronger: the Panama companies, revealed in 2016 by the ICIJ and becoming the be-all-and-end-all of the Nationalist Party’s political campaign from April 2016 right up to the 2017 election, were actually connected to Labour’s key policy plank itself: the gas plant.

Irrespective of whether funds were transferred from 17 Black to the Panama companies (and funds transferred could not in fact be traced by Reuters), the connection was enough light at the end of a long, dark tunnel. Keith Schembri and Konrad Mizzi were certainly not above suspicion, with their offshore companies now linked to the mysterious 17 Black.

All the key players have denied wrongdoing - Konrad Mizzi insisted that his Panama company and New Zealand trust were set up for family purposes; but Keith Schembri did admit that 17 Black was listed as a target client for his Panama company but again denied knowledge of the company’s ownership and involvement in the power station deal.

All the main names have admitted to the set-ups in place and yet, both Mizzi and Schembri retain their offices as the Prime Minister insisted on what had manifestly worked so well for him - wait for the investigations to either exonerate or convict the persons involved. Although Joseph Muscat had already stated that Keith Schembri would resign if subject to a criminal investigation, Muscat, now tottering on legalism, has insisted that Schembri is not under investigation by the police, but that the police are independently investigating the alleged ownership of 17 Black.

The only inquiry on the Panama Papers related to the 17 Black allegations is not the result of an investigation carried out by the police force but is the result of a report filed by former Opposition leader Simon Busuttil after the 2017 general election.

Schembri is facing two separate money-laundering inquiries unrelated to 17 Black, which pre-date the election. In July 2017 Magistrate Ian Farrugia decided there are enough grounds for a magisterial inquiry to determine whether money laundering allegations against tourism minister Konrad Mizzi and the Prime Minister’s chief of staff Keith Schembri warrant a criminal investigation. And in May 2018 Magistrate Franco Depasquale concluded that it made no sense to open a separate investigation on the $1.6 million transfer allegation to the “target clients” in Panama belonging to Mizzi and Schembri but ordered that this information should be investigated in the inquiry presided by Magistrate Ian Farrugia.

Magistrate Ian Farrugia’s decision to launch an inquiry into whether chief of staff Keith Schembri and minister Konrad Mizzi breached money-laundering laws can only start after the conclusion of seven appeals, one of which was presented by the Prime Minister. Other appeals were presented by Konrad Mizzi, Keith Schembri, Brian Tonna, Karl Cini, Malcolm Scerri and Adrian Hillman.

This means that if the PM wins his appeal, even on procedural or technical grounds, Mizzi and Schembri won’t ever be investigated for money laundering.  But all this raises the question: why is the PM obstructing a formal inquiry on Mizzi and Schembri to await the outcome of an investigation, which he is objecting to?

Muscat is clinging to the last possible line of defence before his chief of staff has to face any formal charge of wrongdoing, something that is not even necessarily so with the set-up of an offshore company alone; in the process, such legalism in the typical Maltese climate of rarely shouldering responsibility unless a court forces one to do so via a verdict, lowers the bar of resignation further down.

Muscat also blindsided the electorate with a reference to the Egrant exoneration in his own case, tainting all the allegations against his men with an issue of credibility to suggest that they are absurd in the light of the Egrant inquiry’s conclusions, which exonerated him from Daphne Caruana Galizia’s accusations and those of the absconded whistleblower Maria Efimova.

The Auditor General’s report on the Electrogas tender was a further intensification of the debate surrounding the LNG plant at Delimara. The report said that Electrogas had benefitted from a last-minute addition of a Security of Supply agreement that “significantly reduced” its bidding risk. While commending the structured tendering process adopted, it expressed “significant concern” at the lack of appropriate due diligence at the final evaluation stage. Ultimately, the government had provided a massive bank guarantee of €432 million to help Electrogas secure financing until the Security of Supply agreement was cleared by the European Commission.

Konrad Mizzi, who had already used the Egrant conclusions to cry victory, was once again using the NAO report to whitewash all accusations made against him. “I invite you to go anywhere in the world and question any bank. You will not find a single penny. I don’t know who the owner of 17 Black is. I am convinced the truth will emerge from the ongoing inquiry and that there was no form of corruption. I never took any money,” Mizzi told the press.

But if Mizzi is looking forward to the truth that could emanate from the ongoing inquiry, then he would not be one to stall it.  

17 Black is not Egrant. And Caruana Galizia was also the author of rash canards, with Egrant being probably based on forged documents and a faux whistleblower. But it’s clear that 17 Black is no flight of fancy. There is now enough light for the key players to shoulder political responsibility.

Keith Schembri

Back story

It started from a cryptic message on Daphne Caruana Galizia’s blog in February 2017 and reached a climax in April this year when Keith Schembri confirmed that 17 Black had been included in a business plan for his Panama company.

But the unanswered question was always who owned the mysterious Dubai company going by a name linked to the gaming world: most probably, a lucky number played on the Roulette table. The answer came in a Reuters report that named Tumas Group shareholder and CEO Yorgen Fenech as the owner of 17 Black, allegedly identified by Malta’s anti-money laundering watchdog, the FIAU, and communicated to the police in a report.

But Reuters also quoted a source in the United Arab Emirates, who said account records at Noor Bank in Dubai identified Fenech as the owner of 17 Black.  

Fenech was the man from the Tumas Group who fronted the Electrogas consortium that included the Azeri company Socar and Siemens, which won the gas power project that was the brainchild of then Energy Minister Konrad Mizzi, who contested the election with the Labour Party for the first time in 2013.

Already in May 2017, right on the eve of the snap election called by Joseph Muscat soon after the Egrant scandal – since then debunked in a magisterial inquiry - the Malta Independent leaked excerpts from a Financial Intelligence Analysis Unit report that indicated that 17 Black had received funds from the Maltese agent of the gas tanker supplying fuel to the new power station.  

But most crucially, 17 Black had been identified as a target client of the Panama companies set up by Konrad Mizzi and Keith Schembri, suggesting that Mizzi’s and Schembri’s companies had to receive money from a Dubai-based firm owned by one of the shareholders in the gas power station consortium.  

Schembri had then denied any knowledge of 17 Black. It was only with the Daphne Project at the start of 2018, that he confirmed that 17 Black had been included as part of a business plan for his Panama company but that nothing ever came of the plans. Schembri never clarified what the nature of the business with 17 Black was and who its owners were.

While no fund transfers between 17 Black and the companies owned by Mizzi and Schembri have so far been revealed, the connection on its own raises serious question marks over the intention behind the whole arrangement. Fenech has not denied ownership of 17 Black. What he did was deny any wrongdoing or link to any politically exposed persons.

Reuters said 17 Black was registered in Ajman, an emirate part of the UAE. The company opened an account at Noor Bank in Dubai in June 2015. Banking correspondence from the UAE reviewed by Reuters stated that the company declared it was 100% owned by Yorgen Fenech.

The correspondence also said Fenech was the account’s sole signatory. A source in the UAE told Reuters that around €9 million to €10 million went through 17 Black’s account at Noor in 2015, after which the account became dormant. Reuters could not confirm the figures.
The source told Reuters that most of the money paid into the 17 Black account had “swiftly moved on to other entities”, while retaining a balance of about €2 million. The bank appears to have frozen the account in the absence of evidence for the business purpose of these in-out transactions.

The Maltese FIAU had traced two payments to 17 Black, one from a Seychelles-based company fronted by an Azeri national and one from the Malta agent of the gas tanker at Delimara.