In February 2013, Joe Cordina had a lot to smile about. His company, Joe Cordina and Associates, was thriving from its premises in Victoria. Another company he ran with Martin Fenech and Charles Scerri – Intershore Fiduciary Services Ltd – was also carving out a share of the financial services market. And with six years of success as the Xagħra mayor, he was feeling quite confident of his chances in the general election.

Everything changed when the news broke about the oil trading scandal and Intershore Fiduciary Services Ltd was linked to that of George Farrugia. It eventually emerged that Mr Farrugia has a company called Aikon Ltd, whose shares were held by Intershore on a fiduciary basis. Mr Cordina, one of the fiduciary directors, found himself at the centre of a media storm and withdrew his candidature just weeks before the general election. The disappointment is still clear on his face, and his challenging appointment as the Gozo Channel Co. Ltd chairman soon after the election did little to make up for the lost opportunity.

It was later clear that Intershore had nothing to do with it at all

“I felt that the whole fiduciary concept was too complicated for people to understand given all the media frenzy... With claims emerging that George Farrugia had made so many millions over the years, everyone just assumed that I had also made significant amounts but it was later clear that Intershore had nothing to do with it at all. In fact the police did not even question me,” he said.

As it happens, Mr Farrugia had routed money through a personal account in New York, not through Aikon Ltd, but it merely cast another shadow over the whole concept of a fiduciary company. Why would the real owners of a company want to hide behind a fiduciary, and why a fiduciary company would want to take on the responsibility of the actual owner’s actions – often for fees amounting to a few hundred euros?

A similar case recently made the headlines, when David Gonzi was listed as a suspect by Italian investigators after his name cropped up in several gaming companies allegedly run by the Mafia. His name emerged as a result of his one-third shareholding and directorship in GVM Holdings, a company that provides fiduciary services – with the gaming companies as clients.

This case highlights the problem with nominee companies: why would they want to camouflage their identity if they have nothing to hide? Mr Cordina strongly disputes this perception, however, drawing on his years of experience.

“There are a number of perfectly reasonable scenarios why people might want this set-up. They might not want their relatives or estranged spouses to know about their business dealings. They may want to buy a property without revealing their intentions for it, because otherwise the price would go up, for example. Foreigners might want to avoid – not evade – tax. In fact, some people allow time to pass and then change the shareholding back into their own name,” he said.

He stressed that the fiduciary relationship is built on trust – as the name implies – and that this goes both ways.

“They trust you to be the director and shareholder on their behalf. After all, with just a piece of paper appointing you as his nominee, he is giving you access to all the money in that company.

“On the other hand, we need to know who the client is, what his business is and so on.”

Joe Cordina

In the case of the oil trading scandal, this did not help. Dr Martin Fenech was his legal adviser, but as Mr Cordina lamented, “the unpleasant truth is that if someone wants to deceive you they will find a way”.

The amount of due diligence done on a client is quite rigorous – and in the case of directorship, it is even more as this brings with it considerably more onerous duties.

“If he is using the company to buy drugs, for example, you are the one signing the cheques. It is as though you are buying them!” he said.

He admitted that with fiduciary companies often taking on directorships of dozens of companies at a time, there is a huge workload monitoring all their accounts and attending board meetings.

“It can be done, although of course it depends on the individual and how seriously he takes his work. It also depends on how wary he is of the risk. If you are involved in trusts and fiduciary services, you should be aware and take precautions. The story of George Farrugia would not have been affected by any amount of due diligence, for example.

The amount of due diligence done on a client is quite rigorous – and in the case of directorship, it is even more as this brings with it considerably more onerous duties

“With foreign clients, you have to really do your work carefully and professionally. You need to look at their background, whether the money is with a reputable bank and what their line of business is. I very often visit them overseas before taking them on as clients. As I said, though, the risk of being deceived is always there,” he shrugged.

Finance Minister Edward Scicluna recently told the Times of Malta that a review of fiduciary and gaming legislation was under way, but Mr Cordina still believes there is a place for fiduciary services.

“Just because there might be one bad apple out of thousands, does not mean that you avoid all the rest.”

Mr Farrugia has long since then licked his wounds and moved on. Intershore Fiduciary Services Ltd was rebranded to dissociate its name from the oil trading scandal. His own company was negatively affected for a few months but his long-standing reputation helped the issue to die down quicker than it otherwise might have done. It remains the largest accountancy firms in Gozo.

The firm handles a wide spectrum of clients from almost all the economic sectors, mostly SMEs. This – as well as his ongoing political involvement – puts him in a privileged situation when it comes to taking the pulse of the economy – and he believes that there is one particular factor which is slowing down its recovery: long credit periods affecting cash flow.

“The problem in Gozo is much more acute than in Malta, with most companies reporting payment periods of well over 100 days. The problem is that everyone knows each other so well so people are much more reluctant to be strict with creditors who are in arrears.

“Of course, this is compounded by the fact that banks are also tightening up credit. I used to work at Bank of Valletta over 20 years ago and the difference is dramatic: there are a lot more rules and regulations, and no longer as much discretion based on ‘know your customer’. Something needs to be done as large businesses can usually manage but small businesses need help.”

He is philosophical about what happened two years ago, and the experience has not made him bitter.

“If you have a strong character, you keep going. You have to have a thick skin... otherwise I would not have even considered politics,” he smiled.