Allied Newspapers appointed its own auditors to internal graft inquiry

When Allied Newspapers launched an internal inquiry following allegations of graft between its Managing Director at the time, Adrian Hillman, and the former prime minister’s chief of staff Keith Schembri, the company appointed its own auditors to the board of inquiry at a cost of €100,000.

A partner at PricewaterhouseCoopers (PwC), Kevin Valenzia, represented the firm on the board appointed by Allied Newspapers to investigate the claims in March 2016. The result of the inquiry, concluded within three months, has never been published.

PwC was the auditing firm for both Progress Press and Allied Newspapers for a number of years. It was the firm that audited Allied Groups’ deals with Keith Schembri, according to evidence given in court by the police during the compilation of evidence against Schembri who is facing charges related to the deals.

Adrian Hillman has not yet been charged because he remains in the UK, despite his claims of innocence, facing extradition proceedings.

The allegations involve a deal between Allied Group, publishers of The Times of Malta in which the company paid $6.5 million more than it should have for printing machinery, leading to €5.5 million in kickbacks, according to police investigations.

Keith Schembri paid some €5.5 million in kickbacks. The police also said that while the purchase was audited by PwC, it results that the publishers of The Times of Malta paid some €6.5 million more than they should have.

The Shift is informed that PwC’s responsibilities in this inquiry included reviewing all the transactions made between Allied Group and Keith Schembri over a decade.  PwC should have carried out this exercise as part of the annual audit of the same companies.

For this work, Valenzia and PwC were paid over €100,000 by Allied Group. The rest of the Board, including chairman Paul Mercieca, Giovanni Bonello and Kevin Dingli were paid over €10,000 each for the three-month probe.

Michel Rizzo, the current managing director of Allied Newspapers, would not comment when questioned by The Shift.

“In the circumstances, the company is not in a position to respond on issues related to its former auditors, PwC,” Rizzo said.

In 2016, when the board of inquiry was appointed, Rizzo was a director of the company.

The Shift also sent questions to PwC, which confirmed the firm was responsible for Allied Group’s audits for many years. It was only removed in 2018.

While refusing to clarify PwC’s role in the inquiry, citing “professional confidentiality”, the spokesperson said that it was Allied Group that had decided to put Valenzia on the board.

“Kevin Valenzia was appointed as a member of the Board of Inquiry as established by the Board of Directors of Allied Newspapers in March 2016,” the spokesman said. “At the time, Kevin Valenzia was the Territory Senior Partner of PwC in Malta and was therefore engaged as a representative of PwC.”

The kickbacks investigated by the police do not include the millions paid for a planned Mriehel factory to house the new printing press and millions in yearly payments to Schembri’s Kasco Group for supplies, including paper and consumables, which continued even following the conclusions of the Allied Group inquiry.

Police investigators have said in court that these deals, worth over €20 million, should also be investigated as further kickbacks are suspected.

While Hillman evades justice in the UK, another of Allied Group’s directors, Vince Buhagiar, is facing charges of money laundering and kickbacks in court.

The Shift has already revealed that while the Allied Group’s inquiry was ongoing, Vince Buhagiar continued to serve on the board of directors of Progress Press, a company involved in the deals with Schembri. In a one-line statement to The Shift, the company has denied Buhagiar had any access to developments in the inquiry. No further explanation was given.

Buhagiar resigned only after the conclusions of the inquiry were presented to Allied Group management.

At the same time, Hillman was given what the company is referring to as “garden leave” and kept on the company’s books, receiving his full salary, for months.

Hillman then tendered his resignation, after Allied Group reached an out of court settlement with him when he launched a case of unfair dismissal.

The agreement, kept secret, included a confidentiality clause barring both Hillman and Allied Group from making any public declarations.

Allied Newspapers has never filed a police report on the case despite the millions involved, preferring to handle its own matters internally.