by Carlo Bonini
This measure backfired and Muscat’s government exploited the hunger for construction and the related short-term benefits to the economy of feeding it. When it came to power, the PL government gave free rein to ‘development’, a misnomer if ever there was one.
Local plans, the yardstick by which land use was defined and the limits of development set, were in practice shelved. The legal status of the structure plan was rescinded and, with the dismissal of planning authority heads and their replacement with party agents, the building permits became a transactional activity.
The ‘sack of Malta’ ensued, a series of events reminiscent of the ‘sack of Palermo’ when political ineptitude and complicity with crime allowed the laundering of Mafia money through a ‘construction boom’ that spoilt the once-beautiful landscape of the Sicilian capital. Protection of historical buildings was observed in the breach and they were replaced by countless characterless buildings that stuffed as many dwellings as could reasonably (and sometimes unreasonably) be squeezed into the footprint.
The value of the transformation of a two-storey townhouse into a block of 12 flats made many home-owners minor entrepreneurs and property speculators overnight. But it was the big developers who greatly benefited from this building spree. Some of them, those particularly close to political power, were aided by procuring government-owned land on prime real estate for a fraction of the market cost.
One case in particular, the development of a hotel and a tower block of flats in St George’s Bay, on a tract of land previously occupied by a state school in Malta’s entertainment heartland, was documented by Daphne and the developer filed no fewer than 19 libel suits against her.
Another ploy was to change the conditions of lease for land given to the private sector at subsidised rates. This had taken place at a time when the tourism industry was still growing and they had been encouraged to build hotels on the land. The changes made it permissible for the owners to knock down the hotels and replace them with more profitable luxury apartments. This meant they could benefit from state aid to line their pockets, a moral if not legal transgression.
The environmental cost of this plunder is enormous. But since a lot of people are benefiting from the boom in construction, political disaffection is rare. Increased need of labourers on construction sites has led to consistent reports of exploitation and an increase in site accidents, several of them fatal, due to a lack of health and safety standards.
Enforcement is lax. The health and safety authority is run by a PL MP, Manuel Mallia. Originally given a post as cabinet minister, he lost his seat when his chauffer used his side arm to shoot at a car which had the temerity to drive too close to the minister’s car.
Soon after, Mallia was compensated for the loss of his ministerial position with a new political appointment as the regulator of laws unpopular with the funders of his political party.
Daphne was particularly enraged by the fact that the new government did not even attempt to hide its wrongdoing. Documenting these scandals did not require special investigative skills. These were not hidden secrets revealed by strategically placed moles or whistleblowers.
What was required was scrutiny, integrity, and courage and she had all of those traits.
But there was much else that was hidden from public view.
In their first week in office, just outside the prime minister’s study at the Auberge de Castille, three men had set up their new desks: Keith Schembri, Konrad Mizzi, and Brian Tonna. Their first move was to get in touch with a law-firm in Panama, Mossack Fonseca.
A PANAMA HAT AND CAESAR’S WIFE
On 22 February, 2016, five weeks before Easter, Daphne wrote a cryptic post with an obscure reference to the tradition of cooking lamb for Easter.
It’s traditional to eat lamb on Easter Sunday, so Konrad Mizzi and his estranged wife Sai Mizzi Liang will be getting theirs from New Zealand, courtesy of their fixer Brian Tonna, who has a desk at the Auberge de Castille. When I say that I have an international worldwide network of spies, I’m not quite joking. But sadly, I can’t say more for now though I’m bursting to. Lots of things will fall into place and lots of other things will suddenly look very trivial indeed.
Another cryptic post made jokes about Panama hats, written when Panama had no political significance whatsoever in Malta’s consciousness.
A few days later the country would work out what she was getting at.
Konrad Mizzi (PL) was fairly new to Maltese politics in 2013 when he became minister for energy and was given a desk inside the prime minister’s office. Muscat had presented Mizzi as a ‘star candidate’ recruited from the private sector to provide a new energy package for Malta that would lower the cost of electricity to consumers.
During its campaign, the PL said it had a plan that would lead to lower electricity costs. The plan would turn out to be remarkably reminiscent of the pitch Dalli had made to the PN government while he was EU commissioner.
Famously, Konrad Mizzi had given assurances that his ‘plan was costed’ and he was confident prices would go down within two years of a new PL government. If not, Muscat said, he would resign.
Two years later, in February 2016, the new power station had not yet come on line. But fortune favours the brave, and international oil prices had stabilised, giving the government room to bridge the cost of lower tariffs.
Meanwhile, a group of journalists working for the International Consortium of Investigative Journalists (ICIJ) was combing through thousands of pages leaked from the computer servers at a law firm in Panama that was to become infamous worldwide: Mossack Fonseca.
The Panama Papers contained heaps of evidence of wrongdoing by clients of the law firm all over the world. They had used Mossack Fonseca to set up anonymously-owned shell companies through which they could pass money beneath the radar of tax and law enforcement authorities worldwide.
Daphne’s son Matthew worked in the core team of the ICIJ, combining his technology skills with his journalistic intuition. He was, in this case, a priceless protagonist in his mother’s ‘international network of spies’.
He searched through the list and, heavens to Betsy, prominent Maltese names showed up. Most of them were in business, using Panama to avoid paying tax on their earnings to the Maltese authorities.
But two names stood out: Konrad Mizzi, then the energy minister and Keith Schembri, the prime minister’s chief of staff, a shrewd and cunning businessman in his own right and credited with being the mastermind behind Muscat’s political success.
A third figure was Brian Tonna, an accountant and owner of Malta’s franchise for Nexia International. Nexia is a second-tier international accounting brand which is reportedly the ninth largest global accounting network. Tonna’s business in Malta was called Nexia BT, using his initials. Although he was not a public servant, he too had a desk in the prime minister’s office alongside Mizzi, Schembri, and Muscat.
Tonna also ran the Maltese franchise of another international brand. He was the owner of a company called Mossack Fonseca (Malta) Ltd and together with his junior partner, Karl Cini, he offered to tax dodgers the secret services of the Panama mother company.
One of the services Tonna offered was the possibility of folding companies into trusts that would allow ‘investors’ to access their funds without revealing their identity. In the jargon, this is called ‘layering’ or hiding the true ownership of secret companies under layer upon layer of complexity and opacity.
Mizzi and Schembri’s new Panama companies would be owned by trusts that Tonna had set up for them in New Zealand. The cryptic Easter lamb joke on Daphne’s blog now became clear.
When Daphne revealed that Mizzi and Schembri had set up Panama companies and New Zealand trusts, their first instinct was to deny it. Daphne had been making things up they said. Mizzi was particularly vehement. Schembri, never loquacious in any case, was considerably more circumspect.
The news broke as Mizzi was campaigning for promotion. The PL deputy leader
had resigned and Mizzi contested the vacant post and was elected. He was destined to be raised to number two or three in the cabinet. Or so it seemed.
But Daphne’s stories could no longer be ignored once the ICIJ published the Panama Papers in April 2016. The consortium presented a series of orange-and-black cartoons depicting prominent politicians who were revealed by the Panama leaks to have been clients of Mossack Fonseca. The colourful cartoons quickly became recognisable icons of corruption, money laundering, and tax evasion.
They were called ‘the power players’: 140 politicians from 50 countries in a tax dodging hall of infamy that included the presidents of Argentina and Ukraine, the prime ministers of Iceland and Australia, and former heads of government from Georgia, Iraq, Sudan, Mongolia, and other countries.
There were only two figures from within the European Union, one of them the industry minister in Spain and the other Malta’s energy minister Konrad Mizzi.
Daphne’s story had been confirmed.
The Panama Papers, a Pulitzer Prize-winning ICIJ story, had a transformative effect worldwide. The first impact would be on the fingered politicians in office.
Within days of publication on 5 April 2016, Iceland’s prime minister Sigmundur Davíð Gunnlaugssonwas forced to resign. Five days later Ukraine’s prime minister quit. Five days after that, the Spanish industry minister was forced out. Resignations flowed at Transparency International in Chile, in the FIFA ethics committee, at ABN AMRO.
Pakistan’s prime minister Nawaz Sharif was also named and shamed in the Panama Papers. Eventually he would be tried and convicted for corruption on the back of the leaks. The revelations proved politically harmless to Vladimir Putin and to senior Chinese government officials. But not to Ukraine’s President Petro Poroshenko who eventually lost elections to the comedian who lampooned him on TV.
In this context, Daphne expected her story to lead to Mizzi and Schembri’s resignations or, failing that, their dismissal.
That did not happen.
Muscat squarely defended Schembri’s right to set up offshore companies where he pleased. Schembri had been in business before he accepted to serve as his chief of staff. He had considerable commercial interests which required ‘international banking structures’ and it was frankly nobody’s business where he banked.
Mizzi, the prime minister conceded, was a different matter. The setting up of an offshore company was not necessarily illegal but perhaps ever so slightly inappropriate for someone in politics. For this reason, he asked Mizzi to relinquish the deputy leadership of the PL which he had secured just a month previously.
He would keep Mizzi in cabinet, however. He would officially no longer be minister for energy but would still retain ministerial rank within the office of the prime minister, allowing him to retain his portfolio.
Muscat told the press that Mizzi had listed the ownership of the Panama company in an early draft of his annual declaration of assets. While the draft had not been published, Muscat said he had seen it and was therefore satisfied that Mizzi had had no intention of keeping his Panama company secret.
But there was a flaw in that argument. The Panama documents leaked from the Mossack Fonseca servers documented the exchange of emails between Brian Tonna’s junior partner at Nexia BT, Karl Cini, and his counterparts at Mossack Fonseca in Panama City.
These emails detailed the setting up of Mizzi and Schembri’s companies in Panama and were dated March and April 2013, almost three years previously. The first company Hearnville, would be owned by a New Zealand trust called Roturoa but its real owner would be Mizzi. The second company, Tillgate, would be held by New Zealand trust Haast but its real owner would be Schembri. A third company would be called Egrant but Cini would not say on the email exchange with Mossack Fonseca who the company would belong to. He instead said he would hand over the name orally over a Skype call later.
The significance of the Skype-only communication is that it would leave no trace of the instruction. Why would anyone want to do that? And why would this higher level of security be necessary for the owner of Egrant when it had not been so for Schembri and Mizzi?
When news broke that three companies had been set-up at the same time, some people wondered if Muscat was connected to Egrant. This explanation could fit his rather odd behaviour. Joseph Muscat had previously fired ministers when their conduct threatened his public image. Why did he feel the need to defend Konrad Mizzi and Keith Schembri? Why did he symbolically admonish Mizzi but ensure that in effect he would suffer little punishment?
That year’s political satire, an annual panto-style affair called Comedy Knights, included a knowing call: ‘Prime minister, who owns the third company?’
Adding fuel to the fire, Muscat repeatedly insisted he did not consider it particularly problematic for a government politician to own an offshore company. It would have been a problem, he argued, if Mizzi kept it a secret from his boss, but Mizzi had not.
Mizzi had not been altogether transparent about the existence of the Panama company. Under Maltese law, tax-payers who own companies abroad are obliged to make this known to the tax office. Mizzi had not done that and he had been outed by the Panama Papers. He had to pay a fine to close the issue and did so.
But, for Muscat, that was not a resigning offence.
Investigators at Malta’s anti-money laundering intelligence agency, the FIAU, looked into Schembri’s and Mizzi’s activities. Though under-resourced, under-trained, and stepping on some very important toes, their investigations led to the conclusion that Konrad Mizzi and Keith Schembri may have broken the law. The technical term they use is ‘reasonable suspicion of money laundering’ because the FIAU is not a police force or prosecutor. As an intelligence agency, its job is to compile the evidence and pass it to the police for action. From then on, its staff act as advisors and witnesses.
The FIAU was then headed by a respected professional called Manfred Galdes. He recruited investigators from a shallow pool of suitably-qualified people. One such was a police inspector named Jonathan Ferris who was, at the time, half of the ‘economic crimes unit’ of the police.
In April 2016 Manfred Galdes handed the police a report that concluded the FIAU had ‘reasonable suspicion’ that Konrad Mizzi had laundered money.
The FIAU’s report was handed over to the police chief, then career policeman Michael Cassar. Cassar sat sweating behind his desk. On it lay a case against a government minister, and facing him across his desk was the financial intelligence chief. Cassar did not feel he could ignore the evidence. He was not going to use it either. Instead he went on sick leave while he negotiated an exit from the police corps. He resigned within the week.
His replacement was Lawrence Cutajar, the fifth police chief in Muscat’s first three years in power. Cutajar describes himself a fan of two things in life: Inter Milan FC and Joseph Muscat, whom he once described as a ‘prime minister with brass balls’.
The FIAU report into Konrad Mizzi’s Panama affair went in the drawer. As did another investigation that accused Mizzi of collecting kickbacks for purchasing an offshore gas storage ship to supply the new power station. And another investigation that accused Keith Schembri of collecting kickbacks from the sale of passports to Russian oligarchs.
Manfred Galdes resigned in disgust. His replacement shelved the reports and fired investigators recruited by Galdes, including Jonathan Ferris who turned from police inspector to specialist corruption investigator to unemployed whistleblower in the space of less than six months.
From April 2016 when the Panama Papers scandal broke to a year later, the question on everybody’s lips was: who owns Egrant?
There was one person who knew for sure, Karl Cini of Nexia BT. But he was not talking. And yet no one could know more than the person who gave the instruction to Mossack Fonseca.
At the Nexia BT offices in the northern suburb of San Ġwann, seven kilometres from Valletta, one would have expected to find documents confirming whether Nexia BT had clients
that were laundering proceeds from corruption. Although in April 2016 it was probably already too late.
On 11 March 2016, the day after Daphne broke the news that Cini had set up three shell companies in Panama, she reported that a large number of black bags of shredded paper had been left in a pile for collection right outside the Mossack Fonseca (Malta)/Nexia BT offices in San Ġwann. Later that day Daphne reported that the pile of shredded paper had been collected from outside the Nexia BT offices and not by city waste collectors, but by a van belonging to Keith Schembri’s KASCO Group, a privately-owned paper manufacturer and processor in Malta.
Remember Neville Gafà? He is the government official who took the last photographs of Daphne Caruana Galizia the day before she was killed.
Four months earlier, a Maltese court heard evidence from a Libyan national, Khalen Ben Nasan, who had been charged with blackmailing Gafà.
Ben Nasan had told the police that Gafà had asked him for more money than he expected to pay for visas for Libyans escaping war. He told the police that friends of his in Libya had video evidence of Gafà asking them for money.
The police ‘raided’ an old office Gafà had not used for months. They found ‘nothing’. They did not raid the office he was using at the time or his house. Instead the police ended up arresting not Gafà but Ben Nasan.
Before March 2013, Neville Gafà was an optician’s assistant in a local shop. He has no academic training to speak of. However, he was employed as a ‘person of trust’ along with hundreds of other PL campaigners after that election. His only apparent qualification was that he is a personal friend of Keith Schembri and Konrad Mizzi.
For entirely inexplicable reasons he was assigned the job of handling applications for Libyan civilians wounded in the civil war there to be granted medical visas for treatment in Malta. A visa to Malta is a Schengen visa and is therefore of considerable value to people escaping a war, wounded or unscathed.