The “investment” into Keith Schembri’s secret New Zealand trust would come from his personal businesses, according to his financial advisers, Nexia BT.
Kasco Holdings, the umbrella company owned by Mr Schembri, the Prime Minister’s chief of staff, declared losses of nearly €700,000 between 2012 and 2014. Mr Schembri has stepped down from the directorships of the businesses but owns 99.9 per cent of the shares in the umbrella company.
Leaked e-mails from the Panama Papers show the trustees in New Zealand were wary of dealing with Mr Schembri and Minister without Portfolio Konrad Mizzi due to their status as politically exposed persons.
The Panama Papers were made available to the Times of Malta through an investigative partnership with the International Consortium of Investigative Journalists and German newspaper Süddeutsche Zeitung.
Nexia BT were initially vague about the type of business Mr Schembri and Dr Mizzi’s secret Panama companies, held by New Zealand trusts, would be engaging in. A due diligence questionnaire submitted to the New Zealand trustees said the underlying companies would be engaging in “management consultancy and brokerage”. The New Zealand trustees found this explanation vague and requested more information.
“As both settlors are PEP, our NZ colleagues need to be comfortable that sufficient due diligence has been carried out to ascertain that funds being settled are not subject to any corruption risk and ideally that they come from income generated prior to the settlors’ political appointment.
“When meeting with the client next week, could you be so kind to get more detailed information about the source of the funds to be settled on each trust,” Mossack Fonseca told Nexia BT partner Karl Cini in an e-mail.
Mossack Fonseca were told Mr Schembri and Dr Mizzi’s Panama companies would serve as holding companies for operations in the recycling and remote gaming sectors.
By last November, contacts were still being made with Mossack Fonseca to persuade them about the “business plans” for the trusts. The plans included the “trading of plastic, paper and aluminium recycling”.
“Most of the material is collected, processed and compacted in Europe and then sold in India and China.
“We also trade in used tyres. Collected tyres throughout Europe and North Africa are shredded and then resold to tarmac plants across southern Europe and North Africa.
“Waste trading is one of the fastest growing commodity trading globally. Our main trading agreements are with locally-based waste collectors, waste separating companies and processing companies, haulage companies, shipping companies and waste buyers in India and China,” one leaked e-mail says.
Mr Cini sent an e-mail to Mossack Fonseca in New Zealand the previous month explaining the source of Mr Schembri’s funds lined up for the trust.
“I write in relation to your request for comfort on the source of funds of Mr Keith Schembri… We are confident that the funds generated by Mr Schembri’s business and reflected in all tax declarations over the years are more than sufficient to substantiate the investment that is being purported to be made in the various activities indicated in our correspondence,” Mr Cini told Mossack Fonseca in a signed document attached to the e-mail.
Nexia BT carries out independent audits on Mr Schembri’s local Kasco companies.
In one signed document sent to Mossack Fonseca, Nexia BT’s managing partner, Brian Tonna – who signs off on Kasco’s accounts - described Mr Schembri as a “personal friend” he had known for the past 20 years.
The Panama Papers show Mr Schembri had $725,091 in cash assets in 2014 through a company set up in the British Virgin Islands (BVI).
Mr Schembri said these “various investments” had been held in Malta and taxed locally.
The company was set up in 2011. Kasco’s managing director, Malcolm Scerri, and Allied Group’s former managing director, Adrian Hillman, also set up BVI companies in 2011.
In 2014, Mr Scerri held $1.1 million in his BVI company while Mr Hillman had $647,420.