Electrogas director Paul Apap Bologna left the Public Inquiry Board dumbfounded when he said he could not recall why his company – a shareholder in the consortium – had received millions in ‘success fees’ from the project even before it had started delivering on the deal.
“Off the cuff, I don’t know,” Apap Bologna said when asked by lawyer Therese Comodini Cachia.
“Is this a normal amount you usually get?” the lawyer continued.
When he did not reply, the lawyer asked again; “Did you receive the money because of the financial close of the project?”
“I would assume so”, he uttered.
Investigations by the press revealed last week that Electrogas shareholders (GEM Holdings, SOCAR, Gasol and Siemens) paid themselves over €16 million in “success fees” out of loans granted to Electrogas on the back of a last-minute multi-million State guarantee. They were also hidden from the European Commission.
The ‘success fees’, which coincided with interim bank loans being taken out by Electrogas in 2014 and in 2015 and corresponding State guarantees to secure them, were paid two full years before Electrogas first generated electricity.
Apap Bologna’s CP Holdings is one of the four companies owned by business families in Malta making up GEM Holdings – the others are Gasan Enterprises, and two companies owned by the Fenechs: Tumas Energy and Yorgen Fenech’s New Energy Supply Ltd.
They each took millions in ‘success fees’.
“So you were paid €4.1 million for having the bank loan approved?”
Before being able to reply, Judge Michael Mallia intervened: “You basically started milking the cow before producing milk.”
“Were these success fees a common occurrence or a one time thing?” the lawyer asked.
“A one time thing,” he said.
Apap Bologna stuck to his “I don’t know” standard reply when asked how, out of the millions in development costs, €20 million were allocated to development fees, success fees and rebates for shareholders.
Leaked emails show a Siemens senior official expressing concern that this would be seen as “overcompensation”.
Apap Bologna told the court that the contract considers both success fees and development fees and thus he was not concerned with the recent media reports.
“Success fees refer to the time it takes to set a team together, getting the project done. It is a lot of work,” he said.
Joseph Said Pullicino, one of the three judges presiding over the inquiry, asked if the fees for Yorgen’s company were over and above his 8% shareholding. “I have to check,” Apap Bologna replied.
“What is there to check? It is very clear that it is. But if you want to check, please feel free,” Judge Abigail Lofaro added.
Apap Bologna said he is not aware of any information withheld from the emails sent to the government.
“These leaked emails show that the company felt no need to explain these costs to the government,” Comodini Cachia said.
“That’s an assumption,” Apap Bologna told the Board. “The auditors were given a carte blanche”.
When asked if he had read the full audit report, Apap Bologna said he did so “briefly”.
“Do you always read such reports very briefly?” the lawyer asked after Apap Bologna referred to reading a number of critical reports only briefly in his last session before the public inquiry.
Yorgen Fenech’s involvement in original agreement ‘a misdraft’
Comodini Cachia asked the witness if he was the only person involved in the project in 2007.
Apap Bologna said Yorgen Fenech, the suspected mastermind in the murder of journalist Caruana Galizia, only got to know of the project in 2013.
The lawyer read a part of the contract between GEM and New Energy Supply, a company owned by Fenech, promising the latter €2.5 million in ‘development fees’. The contract referred to GEM and New Energy Supply as having worked on the new energy project as far back as 2007 and having proposing it to the government at the time noting that this was rejected.
Apap Bologna said this was a “misdraft in the agreement” (sic). He also told the Board that he got to know of this mistake recently.
“Why did you withhold information?” asked Judge Lofaro. “We are talking about millions of euros and you all missed it?” she asked clearly frustrated.
Judge Said Pullicino warned the witness, “we’re now on a very slippery slope, so be careful”.
Apap Bologna said he only noticed the mistake now, after six years, following questions raised by the media. “We went to look back at the agreement,” he said adding that by ‘we’ he was also including Mark Gasan.
Apap Bologna said he did not have a lawyer or auditor with him to sign the contract as they enjoyed “mutual respect”.
A ‘Happy Christmas’ email
Another statement by Apap Bologna that made Board members, especially Judge Lofaro, sit uncomfortably in their seats was when the witness repeatedly claimed he was not involved in the administration of the project in 2017.
“So why did you send an email to Catherine Halpin telling her about what went on in 2017?” asked the lawyer.
“I was not involved,” he added.
Judge Lofaro quickly asked; “So how did you know it was a challenging and exhausting year?”
This question was raised after Comodini Cachia read from a leaked email that showed the witness auguring Halpin a “Happy Christmas” and thanking her for her work throughout the year.
“Was this a standard email you’d send to everyone?” the judge asked.
“I did attend a couple of meetings,” Apap Bologna then said.
He was then referred to his previous testimony when he claimed he never attended any Electrogas Board meetings. Today he clarified that he did not attend these meetings “as a director”.
“So in what capacity did you attend?”
“As an observer,” he replied.
During his previous testimony before the Board of Inquiry, Apap Bologna was repeatedly warned he was under oath as he told the inquiry he was unaware of important factors tied to the Electrogas project.
Reliance on Konrad Mizzi
The subject then turned to the communication between the company and the government and the €40 million excise tax issue which was ‘solved’ by disgraced minister Konrad Mizzi.
“Did the tax exemption happen on every shipment?” asked the lawyer.
“I believe so. And I was aware that excise tax would need to be paid by the consumer. In this case, Enemalta,” he said.
The lawyer quoted an email by Gasan, published by The Shift, on the need to solve the ‘tax issue’ as this would have an effect on the profit and losses of the project.
“Undoubtedly, this issue would have a negative impact if it remained unsolved. At least that’s according to our business model,” Apap Bologna added.
Yet the bid that won Electrogas the deal was meant to be inclusive of excise tax.
“How reliant was this project on Minister Konrad Mizzi?” the lawyer asked.
“I don’t know.”
She then read a series of emails showing the communication between Electrogas and public relations people at the Office of the Prime Minister.
The Shift had revealed how communications officials at OPM were working hard to manage public relations on the project.
“Are you aware of interference from OPM on replying to the media?”
“No,” he replied.
“So you are not aware there are volumes of emails with Alex Cutajar, Lindsey Gambin and others actually telling Electrogas how to reply to questions from journalists?”
“Not aware, no.”
Apap Bologna said this was the first time he heard of these leaked emails and told the board he does not believe these to be the motive behind the assassination of Daphne Caruana Galizia.
He was then asked whether he had any experience in planning. He said he had none.
“So why were you appointed on the Board of MEPA (now PA) in 2013 if you had no prior experience in the sector?” the lawyer asked.
“Because I thought it would be a good experience,” Apap Bologna replied.
He said it was Minister Michael Farrugia who approached him. The two know each other from the pharmaceutical industry, he added.