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Auditor General points to Keith Schembri’s active role in hospitals’ deal

Auditor General questions why the government persisted in negotiations despite Malta Enterprise revoking the agreement.

The Office of the Prime Minister, Castille, Valletta. Photo: Paul Borg Olivier

The meeting between Malta Enterprise and the investors interested in the acquisition of the Gozo General Hospital was held at the Office of the Prime Minister and it was former government Chief of Staff Keith Schembri who convened the meeting.

According to a fresh report, the Auditor General’s office made multiple attempts to contact and question Schembri over his involvement in the controversial project. Efforts to have him explain the gaps in the negotiations which started in October 2014 failed.

In an addendum tabled in parliament on Tuesday, the Auditor General explained the steps taken by the National Audit Office to try and trace back the entity or persons who struck the controversial deal between the government and Vitals Global Healthcare.

While Malta Enterprise and the Ministry for the Economy kept passing the buck, the NAO points towards the agreement signed at the OPM.

The NAO said: “many gaps persist in this Office’s understanding of the process leading to the MoU. These gaps result from the fact that no records were retained by the OPM in relation to the MoU and attempts at sourcing information from the former Chief of Staff proved to no avail. Despite the NAO’s efforts at deciphering the active role played by the OPM, this remains obscure.”

The Auditor General, once it had established that Malta Enterprise was not involved in the identification of the project, sought information from the Ministry of Economy but “very limited information was obtained.”

The Minister for the Economy recalled being requested to sign the MOU on behalf of the government but insisted he was not involved in any other way.

Of interest to the NAO was the emphasis made by the Minister for the Economy that the MoU was not signed at the Ministry for the Economy, and indicated that in all probability it was signed at the OPM.

On a list of other issues related to the hospitals’ concessions deal, the NAO noticed that the entities involved, be it the Ministry of the Economy or Malta Enterprise, knew very little about the feasibility of the project, advantages for the government and delivery of project targets.

For instance, the NAO asked for studies to support the concept of medical tourism in Gozo. The Auditor General was not presented with any research of the sort.

On feasibility, the NAO wrote that “the Minister for the Economy indicated that he could not comment in this regard as he was not involved in any significant way.”

Similarly, the Principal Chief Officer Malta Enterprise indicated that Malta Enterprise was not involved in assessing the project’s viability.

While Malta Enterprise told the Auditor General that due diligence on investors had been carried out, the entity failed to provide the NAO with any documentation in this respect, citing provisions in the Business Promotion Act and legal advice obtained precluding it from disclosing such information.

The refusal to disclose such information was worrying, the NAO said.

It also emerged that according to the Ministry for the Economy, the due diligence by Malta Enterprise had a negative outcome which led the entity to revoke the MoU. Yet the government persisted with negotiations.

“Despite the lack of visibility afforded to the NAO regarding the nature of the negative outcome of the due diligence, concerns emerge when one considers that, irrespective of the critical risks flagged, government opted to persist in negotiations with investors that, for the most part, remained unchanged when bidding in reply to the RfP (Request for Proposals).”

The NAO is clear that the whole process was fraudulent: “The overlap in terms of the nature of the project and the identity of the investors is evident and strongly supports this Office’s understanding of a process that was fraudulently contrived.”

This addendum comes following a ‘lost’ Memorandum of Understanding. The MoU was ‘found’ following public outcry and handed to the NAO. This remains unpublished. Yet, the Shift has managed to acquire information on what the document contains through multiple sources and related documents. 

In a statement issued on the same day as the NAO report, Schembri denied being involved in the MoU.

Investigations by The Shift over two years have revealed dirty dealings and backdoor manoeuvres in this project. When disgraced former Prime Minister Joseph Muscat was forced to resign, he turned up at Castille soon after for a meeting with Prime Minister Robert Abela, with Steward Healthcare which took over the concession worth billions for €1.

The first in a series of three reports by the Auditor General clearly stated that VGH should have been disqualified because of what the NAO described as “collusive behaviour” between the government and the company. It referred to the secret deal which was signed before the issuing of the tender saying the deal was “predetermined”, as The Shift had stated in its investigation more than a year ago.

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