Rushed changes to planning laws to accommodate the residential complex at Smart City are not the only developments raising questions on the controversial project, as changes in the ownership of the companies promoting the Shoreline project have led to the sidelining of the man who was once fronting it – Stephen Carter.

The corporate changes that resulted in Carter being excluded from the project coincide with a Court freezing order issued in Carter’s name on 14 May relating to an alleged case of money laundering involving a company called Rightlands Ltd, according to court documents. A freezing order under the Prevention of Money Laundering Act is issued to prevent the disposal of assets suspected to be proceeds of crime.

The latest in a saga of twists and turns on the controversial project, a residential and commercial complex planned at Smart City, the developers have shifted building space from one part of the project to another to allow the major Shoreline development to move forward without awaiting proposed changes to the Master Plan, which was already designed to be revised to accommodate the project.

The Environment Impact Assessment (EIA) for the Shoreline project reveals that the development’s floor-space exceeds the parameters of the Smart City Master Plan.

In June 2017, The Times of Malta had reported that flats were being sold without plans or permits. Carter was fronting the residential project, as well as the hospital project at Smart City that was not delivered.

The company reported to be behind the residential project was Ricasoli Properties Ltd (since renamed as Shoreline Residence Ltd) set up in September 2016.

This company was established with just €1,200 in share capital and ultimately owned (via intermediary companies) by Carter (34%), Ryan Edward Otto (a South African electrical-supply infrastructure magnate) (50%), two senior partners at DF advocates Kevin Deguara and Jean-Carl Farrugia (10%) and Roderick Psaila (the CEO of Agribank and ex-partner in consulting firm Psaila Grech Consult) (6%).

On 27 February, three months before the freezing order was issued, Carter resigned from the Board of Directors of Shoreline Residence, and shortly after transferred his shares to Otto and resigned from the Board of two related companies (Shoreline Contractors Ltd and Shoreline Mall Ltd).

A company linked to the original investment (see below) and in which Carter remains a significant shareholder was swiftly renamed C.T. Ltd, and a new company called Shoreline Holdings Ltd was set up, this time without Carter involved.

In just over three months, any links between Carter and the Shoreline project were, at least according to the public record, erased.

Both the hospital project and the residential project were controversial from the start, including the transfer of land to Ricasoli Properties and the change to planning laws made to accommodate the project and increase the return to investors. The shady company movements then add to the questionable picture emerging.

Prime Minister Joseph Muscat launching the hospital project at Smart City that never took off.

Transfer of public land and permits

In 2017, after it emerged that flats in the planned complex were being sold without permits, a permit application was submitted to amend the Smart City Master Plan.

Under the proposed changes, Plots 3 and 4 acquired by Ricasoli Properties under a promise of sale agreement in November 2016 would see their floor area (what can be built on them) skyrocket from just 8,340 sq.m to 52,000 sq.m.

The return for investors would be further increased because the promise of sale was based on market prices at the time (a year earlier) that reflected planning permissions at the time (before the proposal to change the Master Plan to increase the project’s area).

Curiously, Ricasoli Properties’ permit application in February 2017 had already reflected the increase in floor space and height that came later.

PA documents show that Smart City submitted a letter (quoted above) where it noted that the application included more floor space than that included under the promise of sale agreement and just added that Smart City would “facilitate” the application, transferring the additional “floor space” needed.

In 2007, the public land at Kalkara was given to Smart City Malta Ltd for 99 years for the development of an ICT village. Public land was given away under the previous PN administration for a project that should have served the public interest not private profit.

The Maltese government has a 10% shareholding in Smart City and is currently represented on the board of directors by Keith Schembri, the Prime Minister’s chief of staff.

The company shuffles (and €1.5m for ‘free’)

One of the companies related to the project mentioned in the EIA was one established between Carter and Psaila in 2015, originally called SR Investments Ltd and later renamed Project Contractors Ltd. This company lay dormant for a year. It was worth only €1,200 less accumulated losses, according to its accounts.

On 23 August, 2016 (before Ricasoli Properties was set up), Otto paid over €1.1m to subscribe for shares in this dormant company. Farrugia and Deguara paid €300.

This means that Otto paid over 92,000% of the company’s worth, yet he only received 50% of company shares.

The rest of the shares were issued as ‘bonus’ or free shares to Carter (34%), Psaila (6%), Deguara and Farrugia (joint 10%). The same percentages as Ricasoli Properties Ltd’s shareholdings.

Almost all its assets (98%) were then loaned to a company with identical shareholders around the time Ricasoli Properties Ltd was set up.

Between November 2016 and October 2017, Otto paid in a further €1.7m, and again received only 50% of its worth in shares while the rest got ‘bonus’ shares.

Corporate lawyers who spoke to The Shift News estimated that Carter received shares worth €950,000, Psaila €170,000 and Deguara and Farrugia €280,000 for ‘free’.

This company was later renamed Shoreline Holdings Ltd and two subsidiaries – Shoreline Contractors Ltd and Shoreline Mall Ltd – were set up firmly linking this company to the project.

Plans seem to have changed in February. Carter resigned as director, the company was again renamed (the fourth time in 3 years) to C.T. Ltd, while a new company called Shoreline Holdings Ltd was set up without Carter involved.

The two “shoreline” subsidiaries were transferred from C.T. Ltd to this new company and Ricasoli Properties (now called Shoreline Residence Ltd) was also transferred to that new company as its holding company.

Carter has been sidelined, at least on paper, but questions surrounding the project and its real beneficiaries remain.