A year of politics… and Panama

It is indeed a remarkable year when the axing of a Cabinet member is reduced to a mere footnote in the year’s notable political events. Malta’s 2016 political headlines were dominated by the Panama Papers scandal, which rocked the government to its very foundation. Jacob Borg reviews the politics of 2016.

The year got off to a shaky start quite early for Joseph Muscat’s government, with the publication of a damning report by the Auditor General in January.

According to the report, the former parliamentary secretary for land, Michael Falzon, failed to safeguard the government’s interests in the expropriation of part of a property bought only weeks before by speculator Mark Gaffarena.

Mr Gaffarena made €1.65 million from the deal, as was revealed by The Sunday Times of Malta in May 2015.

Dr Falzon initially resisted calls for his resignation, but the axe finally fell following the publication of the report. Although presented as a resignation, his letter to the Prime Minister said he would “place himself at the disposition” of any decision taken by Dr Muscat.

Following his departure from Cabinet, Dr Falzon went on a sustained campaign against the Auditor General, claiming the report was a “disgusting” political hatchet job – a claim denied by the Auditor General’s office.

The controversy proved to be just a taste of more trouble to come for the government: the following month, the first few details of the Panama affair began to emerge before the scandal exploded on the political scene.

Konrad Mizzi and Keith Schembri (bottom). Photos: Darrin Zammit Lupi

It started when online journalist Daphne Caruana Galizia dropped hints on her website that she knew of Konrad Mizzi’s dealings in Panama. This was followed by a seemingly innocuous interview during which the former health and energy minister told MaltaToday he would be declaring a recently set-up trust in New Zealand, together with a shell company.

But eyebrows were raised over Dr Mizzi’s sudden zeal for pre-emptively announcing a change in his declaration of assets, particularly because the declarations are normally presented to Parliament by the Prime Minister in the summer.

What Dr Mizzi failed to mention in the interview was that the shell company was domiciled in Panama – a jurisdiction synonymous with money laundering and tax evasion. The next day, as more details began to emerge about the Panama company, Dr Mizzi was elected as the PL’s deputy leader, having run uncontested.

In comments to journalists straight after his election, he defiantly claimed he had nothing to apologise for, although an apology of sorts would eventually come in May, when he told Parliament he was sorry the controversy had overshadowed the government’s good work.

Nor could he remember what his company in Panama was called, despite claiming to have listed it in his declaration of assets just days before.

In multiple interviews to all the main Sunday papers, Dr Mizzi announced he would be closing down his Panama company and submitting himself to a tax audit.

Hours later, Ms Caruana Galizia revealed that the Prime Minister’s chief of staff, Keith Schembri, had an identical financial setup to Dr Mizzi’s.

The controversy proved to be just a taste of more trouble to come: the following month, the first few details of the Panama affair began to emerge

Both men downplayed the revelations and doggedly refused to resign, claiming their financial structures had been established to provide for their families and protect their interests.

The International Consortium of Investigative Journalists (ICIJ) formally named Dr Mizzi in the leak in April with the launch of what were to become known as the Panama Papers. He was the only sitting EU minister implicated in the scandal.

Pressure for Dr Mizzi and Mr Schembri to resign continued to mount. The Opposition organised two national protests against corruption, with PN leader Simon Busuttil calling on the police to take action against the two men and investigate all public contracts they were involved in.

Meanwhile, more details continued to emerge about the difficulties the two men’s financial advisers Nexia BT faced in trying to open bank accounts for their Panama companies due to the corruption risks inherent in dealing with politically exposed persons.

Attempts were made to open up accounts all over the globe, including Dubai, Miami and Panama. In one e-mail, Nexia BT’s Karl Cini said he had spoken to his clients about opening up an account with BSI Bank in Panama which would have required a deposit of $1 million. Dr Mizzi’s declared income for 2015 was €70,000, with a loan of €320,000.

The two men failed to register their New Zealand trusts with the Inland Revenue Department, and e-mails from the Panama Papers showed they wanted to avoid alerting local banks about their secret set-up.

Finally responding to intense public pressure the Prime Minister in April changed Dr Mizzi’s Cabinet status to Minister Without Portfolio at the OPM, with Chris Fearne taking over the health portfolio. Dr Mizzi also resigned as Labour deputy leader.

The move, coming soon after Police Commissioner Michael Cassar resigned for “health reasons”, did little to quell public anger and damaged Labour’s commanding lead over the PN in opinion polls.

With the economy going strong, however, Dr Muscat’s rating in the personal trust category continued to be stronger than Dr Busuttil’s.

As the PN gears up for the election, the Prime Minister has calmly declared it will take place in 2018 as scheduled.

The Panama Papers controversy saw a lull in the summer. But in August, the head of the government’s Financial Intelligence Analysis Unit, Manfred Galdes, quietly stepped down.

His resignation, which was put down to “personal reasons”, surprised many who were hoping the government’s anti-money-laundering agency would force concrete action to be taken against Dr Mizzi and Mr Schembri.

The summer was meant to see the new power station coming on stream in time to meet peak electricity demand after previous missed deadlines. The tanker that will provide liquid natural gas to the power station finally arrived in October to much fanfare but also to fears over safety raised by the Opposition.

Education Minister Evarist Bartolo. Photo: Darrin Zammit Lupi

Earlier this month, the Environment and Resources Authority (ERA) dismissed the safety concerns and granted a permit for the power station to operate, a move hailed by the government as a historic moment for Malta. It was a bad end of the year, however, for Education Minister Evarist Bartolo.

Mr Bartolo recently admitted he had been informed of corruption allegations involving his canvasser Edward Caruana in April, back when he was calling for Dr Mizzi’s resignation.

The former CEO of the Foundation for Tomorrow’s Schools, Philip Rizzo, accused Mr Bartolo of trying to dissuade him from formally reporting allegations of fraud and corruption.

Mr Rizzo said he had flagged alleged wrongdoing by Mr Caruana at the end of April but Mr Bartolo only took action in August. Mr Bartolo too has resisted calls for his resignation. On the other side of the political fence, both the PN’s deputy leaders found themselves embroiled in controversies this year.

Mr Bartolo recently admitted he had been informed of corruption allegations involving his canvasser Edward Caruana in April

Mario de Marco was accused of accepting construction works being done on his property as a gift from contractor Pierre Sladden, who was also implicated in the Panama Papers along with this newspaper’s former managing director Adrian Hillman.

Dr de Marco was revealed to have paid the bill for €34,000 worth of ongoing construction works from 2011 shortly after Mr Hillman’s resignation from his Allied Group directorships.

The Nationalist MP denied that these works were intended as a gift from Mr Sladden.

Deputy PN leader Beppe Fenech Adami

His co-deputy leader Beppe Fenech Adami was accused of having benefitted from a height extension to his Għargħur home after receiving preferential treatment approved by then Prime Minister Lawrence Gonzi. He denied the claim.

Further controversy ensued for Dr Fenech Adami in October. He was revealed to have been a non-executive director of a company that provided fiduciary services for a Maltese firm being investigated for money laundering.

MaltaToday claimed that the investigation was stopped in its tracks shortly before the March 2013 election when Dr Fenech Adami’s name cropped up. Dr Fenech Adami says he had no knowledge of the investigation. The Prime Minister immediately called for an inquiry to be held, and three former judges have been appointed.

Former minister Jason Azzopardi was also a late ‘casualty’ for the PN.

The Auditor General rapped the then minister for fair competition for failing to question the “grossly misrepresentative” value of a 2012 land transfer of the Löwenbräu site in Qormi to PN donor Zaren Vassallo.

The Auditor General also hit out at the lack of transparency in three government purchases of Valletta properties in 2011.

One notable absence from 2016 was the publication of audits supposedly being carried out – by a company that the government has refused to name – into Dr Mizzi and Mr Schembri’s financial affairs.

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