After Fenech’s arrest: businessman-gone-rogue or the Mafia stamp?

That a nexus exists between politics and big business has been amply clear for years under different administrations. But does Yorgen Fenech’s arrest as a person of interest in the Daphne Caruana Galizia assassination suggest that organised crime is also part of the equation?

Yorgen Fenech: the tycoon has requested a presidential pardon after his arrest as a person of interest in the Daphne Caruana Galizia murder investigation
Yorgen Fenech: the tycoon has requested a presidential pardon after his arrest as a person of interest in the Daphne Caruana Galizia murder investigation

The tinkering of policies to accommodate the interests of magnates and big players in Malta’s business world has always fuelled the perception that big business groups also trade in political influence.

The sheer proximity and easy access businessmen have to politicians in a small island makes these connections even more immediate, but even harder to decipher. For it is hard to distinguish between trading of influence, and politicians listening to concerns. Still, when access to power translates in policy tinkering, this proximity does give the impression that big business is omnipotent.

While corruption, party donations and trading of influence are probably a major factor, it may also be the case of what sociologist Michael Briguglio referred to in his study on the approval of the Hilton development in the mid-1990s: a “symbiotic” relationship between the State and big developers with “developers providing economic growth and other incentives while the State providing policy and operational support”.

The rise of the Fenechs

Take the Tumas Group as an example.

The group has interests in various sectors, namely gaming, hospitality and leisure, management, and property development. It runs the Hilton Malta, Portomaso Casino, Portomaso Business Tower, the Dolmen Resort Hotel and Ta’ Monita in Marsaskala. Together with the Gasan Group, Tumas Group is also behind the Quad Business tower in Mrieħel, and along with Singapore-based Portek Group, was awarded a 30-year concession to operate and manage the Grand Harbour Terminals. It also owns a 30% stake in the Electro Gas, the consortium chosen in 2013 to build the LNG-fired power plant.

While the group is known for business acumen, in their rise they often found themselves benefitting from changes in policies under different governments. For although known for Labour sympathies, even at a time when the Maltese business community shunned Labour, the empire’s crown jewel Portomaso was planned, approved and developed under a PN administration.

The entire area – public land – was leased by the State to the developers for €445,000 a year until 2114, arguably the price of one of the apartments today. However, the lease was eventually sold to the developers for just €1.8 million in 2006, an amount that pales into insignificance when considering the going rate for the luxury apartments the developers were allowed to build.

Despite vocal opposition in the Qaliet neighbourhood among working-class Labour-leaning residents, the party’s representative on the planning board (George Vella, today President of the Republic) still voted for the project.

The lasting symbol of the Tumas dynasty: the Portomaso tower, built in the 1990s and for years on end the only high-rise in Malta
The lasting symbol of the Tumas dynasty: the Portomaso tower, built in the 1990s and for years on end the only high-rise in Malta

Ombudsman Joe Sammut, who commenced an investigation triggered by a hunger strike by left-wing activists (which included yours truly), reprimanded the government’s failure “to use its negotiating powers to maximise the benefits to be derived from the deal”.

One of the first planning decisions of the newly-elected Labour government in 2013 was to reverse a decision not to issue a permit for a lagoon development for 46 villas, originally identified as an “ecological zone” in the original permits. The site was originally designated to protect an endemic flower, which subsequently disappeared.

More recently, the PA approved 71 apartments instead of the existing Halland hotel development on the basis of an ad hoc policy to circumvent policies limiting development to 40% of the site curtilage. It did so by inventing the unprecedented formula of calculating the “maximum developable gross floor area” by multiplying the 40% site coverage permitted by policy – 1,474sq.m – by 7.75 floors, to award a maximum of 11,423sq.m of development.

The Quad Business towers in Mriehel, owned by the Tumas and Gasan groups, would not have been approved had the government not included Mriehel among the localities that can be considered for high-rise buildings of over 10 storeys. This was not the case when a draft policy was first issued for public consultation in November 2013. This meant that the public never had any chance to comment on the choice of this site. “An opportunity came and we took it,” Ray Fenech told MaltaToday, while outlining ambitious plans to turn Mriehel into a business hub.

The aborted Paceville masterplan also included plans for land reclamation near Portomaso in an area which includes protected sea grasses. A leaked report by the Environment and Resources Authority also included the entire stretch of coastline between Portomaso and Xghajra among the potential sites.

From property to energy magnates

Tumas Group also broadened its horizons beyond property development, hospitality and gaming.

Under a PN government it initially formed part of the winning consortium for the operation of the privatised public transport system. But in 2012 Tumas Group sold its 33.3% share to Arriva, whose head office and bus depot were located on Tumas Group-owned property.

But the greatest leap taken by the group was that of joining an international consortium, which gave life to Labour’s election promise to privatise energy supply to enable its conversion to more environmentally-friendly natural gas and reduce bills by 25%. It was Yorgen Fenech, now associated with Daphne Caruana Galizia’s elimination, who represented the group in the company’s board.

In this ambitious venture the Tumas Group teamed up with Gasan Group and CP Holdings to form the Maltese leg of a consortium, which also brought together the Azeri national energy company SOCAR, the German multinational Siemens and initially GASOL, together. Although the contract was awarded after an international call, speculation was rife on whether the consortium predated Labour’s election victory.

The participation of Nexia BT, the accounting firm responsible for the registration of Keith Schembri and Konrad Mizzi’s secret companies, in the adjudication process further fuelled this perception. Paul Apap Bologna, a director in GEM Holdings, the Maltese company holding Tumas and Gasan’s interests, had also been appointed on the Planning Authority board by the newly-elected Labour government – even if he had to abstain on all permits connected to the power station.

The Maltese way of doing business?

But the greatest shadow was cast by revelations that Schembri and Mizzi’s secret Panama companies set up after the 2013 elections, had listed Yorgen Fenech’s 17 Black – a secret company registered in Dubai – along with Macbridge, another secret company whose owners are still unknown, as “target clients” for their Panama companies.

This, in itself, raised questions of an inappropriate relationship, possibly criminal, between one of the owners of the power station, the energy minister and the PM’s chief of staff. The fact that the 17 Black owner is now facing more serious charges related to the murder of a journalist makes this relationship more toxic than ever. For, inevitably, the decision to retain Schembri as chief-of-staff and Mizzi in his Cabinet has now returned to haunt Muscat.

Yet while the rise of the Tumas Group from hoteliers and property developers to energy magnates is impressive, it is not alone in taking opportunities presented to them by shifting policies.

Under previous PN governments, the surname Polidano was synonymous with impunity in the planning sector. Meanwhile under Labour, other players like Joe Portelli of Mercury House reached new heights, and others like Gaffarena burned themselves after being exposed for being too greedy.

One may well argue that these businessmen are doing what businessmen are meant to do – make money whenever an opportunity arises and creating more economic growth and jobs in the process of doing so. The problem arises when policies are tailor-made to fit their exigencies sometimes at the cost of the common good.

Yorgen Fenech’s alleged involvement in the Caruana Galizia murder case does not in any way incriminate his family’s legitimate business operations. It may well have been an aberration which goes against the code of honour of Maltese business. But it does raise the question whether the nexus between business and politics, which is an integral part of doing business in Malta, gives certain players the impression that they are above the law. Was this sense of impunity, which gave the impression to those who commissioned the assassination the impression that they could literally get away with murder?

Fenech’s alleged links with the criminal underworld casts a dark shadow on the relationship between organised crime and legitimate businesses, a relationship not unique to Malta and which increasingly characterises international capitalism in its bid to skirt national regulations and taxation by relying on offshore companies.

But the alleged involvement of a powerful businessman in the murder by commission of a journalist who was investigating his business relationship with politicians raises the spectre of a Maltese mafia. Whether this was an ad hoc reaction to an isolated threat or a more systematic approach reminiscent of the Sicilian and Eastern European mafias remains to be seen.

The only reassuring aspect of this story is that despite any pretentions of impunity and any political connections he might have had, Fenech has been arrested and brought to justice after his yacht was intercepted after leaving Portomaso. This, in itself, does suggest that state institutions have not been captured by any mafia even if the fact that those behind the murder felt bold enough to blow up a journalist suggests that they may have thought that they carried enough clout to get away with it.

Was this a delusion or a belief grounded in the Maltese way of doing business?