[ANALYSIS] Rise and fall of Keith Schembri, the hand that rocked the throne

Joseph Muscat’s ascent to the leadership of the Labour Party in 2008 brought with it a radical transformation of the party structures and strategy. Muscat inherited a broken and dysfunctional party and changed it into a modern, slick corporate structure with a campaigning machine that outsmarted the opposition in every way.

Muscat delivered a mean machine, which, coupled with his push towards the centre, delivered Labour’s first big victory a year later in the 2009 European Parliament election.

Behind that radical transformation were various people that Muscat roped in the moment he stepped into his office at Labour HQ. One of those people was Keith Schembri, a relatively unknown businessman, who had supported Muscat’s personal election campaign when he contested the first EP election in 2004.

The look-and-feel of Muscat’s 2004 campaign was to become the precursor of the PL’s modern outlook when he eventually became leader four years later, to become the brains behind the corporate shift in the PL’s outlook. And then he pocketed two major electoral Labour wins in 2013 and 2017, with never-seen-before majorities of well above 36,000 votes. Politically, the man climbed to the crest of the wave occupying Malta’s second most powerful job in politics.

A bridge to business

With no official post within the party, Schembri acted as a consultant at large for Muscat. He even accompanied Muscat, then Opposition leader, on official overseas trips to Libya and Dubai.

Schembri, with others, had been a key person in Muscat’s strategy to turn the PL into a “pro-business” party. With his contacts in the business community, Schembri was an ideal bridge.

Being pro-business became Muscat’s mantra as he moved the party towards the centre and captured the electorate’s imagination to secure a historic win in 2013.

From Bormla, Schembri started off in the family business at his father’s printing press. He eventually branched out and formed the Kasco Group that became the largest paper supplier on the island.

Eventually, his group grew and expanded its business interests and today includes food imports, engineering services, recycling and high-end furniture supplies.

Schembri resigned from the directorships of his companies when he was appointed chief of staff in the Office of the Prime Minister after the 2013 general election. He entrusted the running of his companies to his managers but retained the shareholding in the company.

The resignation was meant to distance Schembri from his business interests and quash any potential conflicts of interest, given his new high profile job in the government’s boiler room. Schembri was Muscat’s person of trust.

But for people close to the Prime Minister, Schembri was much more than that.
“Keith Schembri is the brother Joseph Muscat never had and their personal friendship goes back in time,” is how the relationship between the two was described.

Many close to Muscat believe that it was this personal friendship that prevented Muscat from asking Schembri to resign in 2016 when Daphne Caruana Galizia and later the Panama Papers uncovered the chief of staff’s plan to create an offshore company.

When questioned after the 2013 general election about the judiciousness of appointing a businessman as chief of staff, Muscat said Schembri would bring with him the private sector’s mentality to get things done.

Indeed Schembri would hound ministers on deadlines, chase them on pending issues, and make sure the government’s message was coherent.

He would also be involved in many meetings with potential investors and have a hand in ensuring that major government projects are delivered.

In his public role Schembri was privy to all government workings, projects, contracts, and now it transpires even sensitive national security information shared by the Security Service.

One insider who worked inside the Auberge de Castille up until 2017, gives a Janus-like depiction of Keith Schembri – a formidable political player who does not however seem inclined to recognise his own faults.

“He leads with his heart, he is jovial, and has a tremendous ability to mobilize people. He has a ruthless streak but I have only ever seen him at it when the situation demanded it. He never shirked from being at the forefront in tough times.”

But one insight hints at a darker side to Schembri’s way of doing things. “On the other hand he is quick to offence, though forgiving after a while, and can ghost people over small things. That said he was never mean hearted or actively harmed anyone. He is very loyal and will always get a job done, no matter the cost. He has a sense of vision and reads people very well, and can quickly see the next steps anticipating reactions and consequences. He does however at time struggle to see his own faults.”

Another source however also noted how Schembri does not enjoy working with structure. “He prefers fluid organisations… he is very enterprising and a workaholic... that’s the Keith I know and worked with. The one we are seeing and reading about today is alien to me. The truth most probably lies somewhere in between.”

In September 2016, even after Panamagate, Schembri would be hailed as “the catalyst in making sure that things get done” by the Prime Minister during a visit to Boston to close the deal with Crane Currency.

It later transpired that Schembri’s company held the Malta franchise of the currency printing machines used by Crane in what was a clear conflict of interest.

The Panama storm

The watershed moment came in March 2016 when Daphne Caruana Galizia outed the fact that Schembri and Konrad Mizzi opened a company in Panama after the general election and created trusts in New Zealand.

The companies, Tillgate Inc. and Hearnville Inc., were formally acquired by Schembri and Mizzi in the summer of 2015. The two Panama-based companies were acquired by Maltese financial services firm Nexia BT in the summer of 2013 through Mossack Fonseca, the Panama firm from where the Panama Papers leak originated.

Email exchanges from the Panama Papers showed how Schembri’s financial advisor, Nexia, went to great pains to keep his client’s name hidden when trying to open bank accounts for Tillgate.

When explaining the source of prospective funds for Tillgate and Hearnville, Nexia told its counterparts at Mossack Fonseca the companies would receive profits from recycling and remote gaming activities. “The companies will act as a vehicle of [for] extracting the profits from this venture [recycling and gaming], since from commercially sensitive perspective they cannot appear as direct shareholders, either personally or via holding entities,” Nexia wrote, confirming the utmost secrecy that was required.

The Nexia advisor also told Mossack Fonseca the activities were not linked to Schembri’s current line of work. This was presumably a reference to Schembri’s public role as chief of staff.

Yet Schembri managed to survive the Panama Papers storm, having been shielded from the fallout by his Prime Minister friend. The Labour Party went on to win the 2017 general election with an even bigger majority in the wake of an increasingly vocal Opposition that accused government of corruption.

Murder and 17 Black

But Daphne Caruana Galizia’s assassination in October 2017, shook the system.

The aftermath saw a consortium of journalists from around the world team up into what was to be known as the Daphne Project.

Multiple investigations would later reveal that Schembri’s Panama company was not as innocent as he made it out to be.

Tillgate had to have two target clients: 17 Black and Macbridge. These were companies based in Dubai, which Schembri publicly admitted having the intention of doing business with.

In a public statement in April 2018, Schembri said he had drawn up business plans with both companies but nothing came of them.

However, in November 2018, a shocking revelation made by Reuters showed that 17 Black’s sole owner was none other than Tumas Group CEO Yorgen Fenech.

The discovery gave the whole Panama affair a sinister twist. Fenech was a shareholder and director in Electrogas, the consortium that was awarded the lucrative multi-million-euro power station contract by government.

Moreover, Reuters also discovered that 17 Black had received two payments in its bank account – one from a Seychelles-based company fronted by an Azerbaijani national and another from the Malta agent of the gas tanker.

Despite this clamorous discovery, Schembri was retained. Muscat kept him in office, postponing any decision on Schembri’s future pending the outcome of magisterial inquiries.

The end

But all hell broke loose, two weeks ago when Fenech was arrested and now stands charged with complicity in the murder of Caruana Galizia.

The already toxic link between Schembri and Fenech through 17 Black had now become politically catastrophic but again Muscat would not budge.

It was Fenech’s shocking statement to the police that implicated Schembri in the murder that eventually pushed the chief of staff to step down.

Schembri was arrested and questioned at length by the police but released because of insufficient evidence linking him to the murder. But the two-line statement released by the police failed to clarify shocking revelations that indicated how Schembri may have passed on sensitive security information to Fenech, among others.

Schembri was the man with his hand on the steering wheel in Muscat’s indomitable façade. But now, the man who helped deliver the glory days, risks plunging the Labour Party into its darkest time ever.