Keith Schembri, the Prime Minister’s top aide, ought to have placed his private shareholding in a blind trust to avoid conflicts of interest, a financial services practitioner said.
Paul Bonello, managing director of the Finco Group, said the same applied to whoever had business interests and was appointed to public office.
“A blind trust that is properly executed and managed by a detached and professional manager would largely address concerns linked to real or perceived conflicts of interest by whoever occupies a public role and holds company shares,” Mr Bonello said.
A blind trust ensures the company is run independently of its owner, even if s/he remains the ultimate beneficiary.
Mr Bonello said Mr Schembri’s failure to use a properly-managed blind trust to manage his private interests detracted from the substance of his public work.
“Unfortunately, as a result of this failure, an investment like Crane’s that is good for the country gets caught up in controversy,” Mr Bonello said.
He was reacting to the latest controversy concerning Mr Schembri, the Prime Minister’s chief of staff, and the $100 million investment by American money-printing company Crane Currency.
Mr Schembri was described by Prime Minister Joseph Muscat as having played the role of “catalyst” during talks to get the company to invest in Malta.
It later transpired that Mr Schembri’s company, Kasco Technical Services, part of the Kasco Group, is the Malta agent for Komori, the company that supplies Crane’s printing machines.
The Opposition has cried foul, accusing Mr Schembri of a blatant conflict of interest as a result of his business interest in the deal.
The country does have a problem because of its small size
Conflict of interest is regulated by the Public Service Management Code but law expert Kevin Aquilina said this applied to public officers and not persons of trust.
“Keith Schembri is appointed on basis of trust; it is a political appointment and so conflicts of interest are regulated according to the parameters of his contract of service, if at all,” Prof. Aquilina said.
He noted that the contract entered into between the government and Mr Schembri could have made reference to the Public Service Management Code, in which case the provisions for public officials would also apply to him.
A request made to the Office of the Prime Minister to obtain a copy of Mr Schembri’s contract of service has not been met yet.
Determining what constitutes a conflict of interest is always a very fine line, according to columnist Martin Scicluna.
“It becomes even finer in Malta where everyone knows each other and people wear many hats as a result of the country’s small size,” he said.
Mr Scicluna acknowledged that the issue was all the more sensitive when somebody with widespread business interests, like Mr Schembri, was promoted to one of the highest public positions.
“It is very difficult to say whether there was a conflict of interest while the negotiations with Crane were under way but there could be in the future because of Mr Schembri’s family business interests,” Mr Scicluna said.
Mr Schembri publicly admitted that Kasco could eventually benefit indirectly from the investment since it could be roped in to service Crane’s equipment.
Mr Scicluna said the country lacked proper oversight measures to ensure conflicts of interest were managed well but was not too sure Chinese walls would be impenetrable.
“The country does have a problem because of its small size and I find it difficult to believe people will not slip through the net simply because of the nature of things,” he said.
Mr Schembri had resigned from all directorships of his companies, which operate in different sectors of the economy, soon after his appointment to public office in 2013. However, he retained his majority shareholding.
He has constantly argued that he was not involved in the running of his companies but Panama Papers showed that Mr Schembri furthered his commercial interests after the election by setting up a company in Panama.
kurt.sansone@timesofmalta.com