Profit on Fairmount could have equalled six months' dockyard output

If the projected profit on the conversion of the Fairmount Fjord and the Fairmount Fjell had materialised, it could have taken care of half a year's output at the Malta Shipyards. It could also have meant that the shipyards would have lost €21 million instead of €28 million.

Senior officials of PriceWaterhouseCoopers (PWC) said this at the third sitting of the House Public Affairs Committee on the losses made by Malta Shipyards on the Fairmount job.

Asked by opposition MP Alfred Sant why they had deemed fit to meet only the dockyard's senior management, rather than also including the board of directors, the ministry or the General Workers' Union, PWC said they had attached no importance to this because it had not been indicated in the circumstances. They had gone mostly by MSL records.

They agreed with Dr Sant that it was the duty of any accountant to report any trace of crime or fraud according to international law, but they had found no such traces. They had found a number of information gaps in their investigation, but this had been reduced through the recovery of some 1,800 e-mails.

When Dr Sant queried why the PWC report made no mention of who had signed the contract for Fairmount, government members Austin Gatt, Tonio Fenech and Robert Arrigo questioned the relevance of this and other questions put by Dr Sant, with Finance Minister Tonio Fenech even saying Dr Sant was ridiculing the whole process.

On a request by Infrastructure Minister Austin Gatt that PAC chairman Charles Mangion give a ruling on such relevance, Dr Mangion said the committee was seeking to fix the parameters of the PWC report. No mention of the Fairmount signatory could mean that the contract had remained unsigned or was otherwise invalid.

Dr Sant asked why PWC had stopped making use of international tracking in 2008 instead of summer 2009. PWC said there had been no perceived relevance in this. Asked by Dr Sant why they had not considered the shipyards' cash-flow, they said they had not been asked to investigate this aspect.

Similarly, when minister Fenech asked PWC if they thought success on the Fairmount project would have given MSL a future while failure could have closed it down, they said they had not been briefed to go into that.

Dr Sant, who did most of the questioning during the meeting, observed that the dockyard's first costings for the contract showed a total production cost of €29.3 million, while the second set of costings showed €15.3 million.

It was also his opinion that the management had not sought top legal advice with experience in shipping.

He said Fairmount was a shell company as a specific purpose vehicle, with two barges that had then recently been bought for $45 million. It had then made a public placement for $81 million. One part of Fairmount was responsible for the purchase of the barges, while another part was responsible for the conversion.

It was obvious that there had been corruption in the purchase of the barges, with one shareholder getting secret commissions. Was there any truth in the suspicion that the conversion job had actually cost much more than the PWC report quoted? Lloyds List had reported that Fairmount had contracted Malta Shipyards for an $80 million conversion of the two vessels.

PWC said that $80 million was the total cost of the conversion.

Dr Sant said Fairmount's annual report put the cost of the two barges at $179 million, and that MSL had been paid $40 million. The holders of 93 per cent of Fairmount had made a claim of $46 million against Fairmount Meridian, the party responsible for the conversion. He held out the hypothesis that the Fairmount books showed a figure that had not been paid to Malta Shipyards.

Dr Gatt said that the Fairmount shareholders' internal arguments were irrelevant to MSL and the PAC. If Dr Sant stood by his hypothesis he would ask the Commissioner of Police to investigate, because such matters did not fall within the PAC's terms of reference.

Mr Fenech said the shipyards' underbilling had been made fully consciously in order to obtain the contract. But Dr Sant countered that PWC themselves had shown that it was a seller's market, and there had therefore been no reason to undercut the contract price.

When the meeting came to adjourn to a fourth sitting, Dr Gatt said the government side had no problem with this, even though the number of sittings originally planned had been three. He also insisted that the PAC should not meet more frequently than once a fortnight, as had been common practice to date.

Adjourning the sitting to May 5, Dr Mangion said he would have no compunction in adjourning to any further sittings without regard to the fortnightly practice.