REVEALED: Secret documents filed by Steward Health Care to prove claim hospitals deal was ‘fraudulent’ and ‘corrupt’

* Steward to get additional €20 million per year to run Gozo General and Karin Grech hospitals

* Steward facing at least five skeleton-laden court cases

* Steward claims in court Vitals concession itself was the result of fraud and corruption

* In September 2021, Steward filed unredacted copies of all VGH agreements, side letters and potentially embarrassing documents

* In February 2022, Robert Abela, Chris Fearne, Joseph Muscat, Konrad Mizzi and Keith Schembri to face cross-examination about Steward’s claims of fraud and corruption in the entire deal

Steward Health Care, the company that took over the running of three public hospitals in Malta from the controversy-laden Vitals Global Healthcare (VGH), has claimed in court that the deal it acquired was mired in fraud and corruption, according to documents filed in court that the government has so far kept secret.

The proceedings relate to an appeal Steward Health Care has filed against a judgement involving one of the original VGH investors. This is just one of a wave of court cases relating to VGH and the Labour government’s decision to sell off public hospitals, all of which threaten to be highly embarrassing for the government.

They occur at a time when the government is seeking to build popular support for the renegotiation of the much-maligned deal originally granted to VGH – described by the National Audit Office as vitiated and illegal.

Steward Health Care’s claims and the revelation of this cache of compromising documents give it powerful leverage over the government, at a critical time in the discussions over the future of the hospitals deal.

Steward Health Care has additionally summoned to testify in court, Prime Minister Robert Abela, Health Minister Chris Fearne, former prime minister Joseph Muscat and his chief of staff Keith Schembri, as well as the minister at the time signing off on the deal – Konrad Mizzi.

The Shift has analysed hundreds of pages of documents related to the deal to understand what the government has been attempting to hide and to give readers perspective on news reports following the budget announcement of an additional €20 million towards healthcare.

That extra €20 million

The additional allocation of €20 million in the budget to bring the budgetary allocation to the three hospitals up to €70 million a year was deceptively described by Fearne as “more investment in the health sector”.

Yet Fearne conveniently glossed over the fact that, under the highly secretive VGH agreements, whatever the government budgets for the running of these hospitals, the funds go straight into Steward Health Care’s coffers – regardless of whether they actually spend it on the hospitals.

This has been done in a context where the deal signed by the government has been remarkable for the lack of results from the concessionaires, whether VGH or Steward Health Care, in both of which CEO Armin Ernst was involved.

The additional budget allocation was made although the government has said it is renegotiating the concession agreement. The health minister has confirmed there has been no conclusion on the new pact, and yet millions continue to be transferred to Steward Health Care’s coffers despite the company’s evident failure to deliver on its promises.

This latest increase also means that between the date that the US medical giant parachuted in to rescue the failed concession (in late 2017) and next year (2022), Steward Health Care has doubled a large chunk of its annual income from the 30-year concession.

What the government and Steward Health Care are not explaining are the reasons for renegotiating the VGH concession agreements or whether it is even legal to do so. Yet the documents filed by Steward Health Care in court shows the US company is in a position to strong-arm the government to meet its demands, despite arguing the deal is fraudulent and corrupt.

A tsunami of embarrassing litigation is building up

Steward is making this claim as it attempts to defend itself in a case that’s joined the morass of litigation building up around the dodgy VGH deal. In 2019, a hidden investor in VGH, Ambrish Gupta, filed a court case in London against Steward Health Care (as the new owners of VGH) claiming $5 million in compensation for being cheated out of 43% of VGH. Steward Health Care lost this case.

Now, in Malta, Steward Health Care is contesting enforcement of that judgement, claiming that the concession itself was awarded as a result of fraud and corruption.

As an evident warning shot to the government, on 23 August 2021, Steward Health Care filed an unredacted copy of each of the VGH agreements and side letters – 488 pages of previously secret and potentially embarrassing documents in court – together with internal correspondence. It is as part of this case that the company has summoned current and former top government representatives to testify.

That potentially explosive sitting was set to take place on 28 September 2021, but it conveniently got postponed by Steward Health Care itself at the last minute to 15 February 2022.

Legal sources consulted by The Shift note that this delay tends to suggest that efforts are underway to reach an out of court settlement.

In parallel, other interesting court cases are slowly making their way through the courts, including a magisterial inquiry and the case initiated by former Opposition Leader Adrian Delia to seek the annulment of the deal with VGH.

In addition, in 2018, VGH’s former head of legal was booted out and is claiming damages. She is also spilling the beans on how the VGH concession really operated, claiming interference –  including on human resources decisions – by the OPM.

Significantly, VGH’s former employee is hinting that not all was above-board with the shotgun wedding between the government and Steward Health Care in 2017 – what Health Minister Chris Fearne called “the real deal”.

Separately, Shapoorji Pallonji Group, the contractors that Daphne Caruana Galizia had originally claimed were serenaded by Shaukat Ali Abdul Ghafoor (linked to former Europan Commissioner John Dalli) and VGH frontman Sri Ram Tumuluri, are also in court on the VGH deal.

After being sued by four subcontractors for non-payment because of VGH’s insolvency, Shapoorji Pallonji is again in court now contesting an €8 million tax assessment, claiming that it never got paid by VGH, that its agreement was unilaterally terminated by them, and hinting at further potentially embarrassing revelations in its agreement with VGH.

With Steward Health Care claiming fraud and threatening to put key government officials on the witness stand to confirm it, and at least four other skeleton-laden court proceedings underway, is it any wonder that the government is awarding €20 million per year increases and drifting towards a Steward-friendly re-papering to put all this behind it?

A shotgun marriage mired in secrecy and corruption

The Shift has reported extensively on the VGH concession and its transfer to Steward Health Care for €1 while the secret investors gained millions.

Since assassinated journalist Daphne Caruana Galizia cried foul, naming John Dalli, Keith Schembri and clandestine meetings in Dubai, it is now clear that at least four individuals with diverse backgrounds ‘bagged’ (in their own words) a Memorandum of Understanding (MOU) with the Maltese government to take over some of the country’s public hospitals.

This MOU morphed into a farcical Request for Proposals for a multi-billion euro PPP concession to run three hospitals, designed in such a manner that only they, hidden behind a sham company, could win.

After taking over the hospitals, these individuals and others then proceeded to milk the concession by siphoning off millions as commissions and fees, taking over key medical suppliers to further siphon off funds, and even spread overseas.

Yet milestones in the project were never met, including the €200 million investment promised. Then, just as the facade was about to come crumbling down, Steward Health Care somehow parachuted in to ‘save’ the 30-year concession worth billions.

Against this skeleton-laden background, it’s no wonder that the National Audit Office (NAO) concluded, after reviewing the tendering process, that the deal was vitiated and most likely illegal.

However, a disturbingly large number of key gaps remain. Gaps, which conveniently deny accountability or police prosecution. Such as who exactly originally brought these four individuals and the government together, when, and why?

Or who, within government or close to those in power, got his palms greased, by whom, and how much? Who else stood to benefit and stands to benefit and how?

We also don’t know how or why Steward Health Care, a traditionally insular US healthcare operator, serendipitously started its international expansion in late 2017 with tiny Malta and an imploding “corrupt” deal.

Over six years later, the public and its representatives in parliament have yet to even see the unredacted PPP agreements or the multiple side letters quietly signed by Konrad Mizzi and Joseph Muscat, among others, effectively waiving any form of accountability or timelines for VGH, and now Steward Health Care.

Sidestepping the law

The other gorilla in the room is whether a concession, which, on paper, needed a public tender to be “lawfully” awarded the first time around, can be re-written without needing to re-issue a public tender.

The concession itself includes the granting of public land (the hospitals) for up to 99 years (30 years plus 69 years) and the payment of guaranteed concession fees for 30 years, each of which requires strict EU and Maltese public procurement rules to be followed to ensure fair competition and a good deal for taxpayers.

In 2015, Projects Malta issued a Request for Proposals for the project, even if in practice VGH was the only bidder that could comply with its terms.

To make matters even more complicated, if, as the NAO implied, the concession is invalid and a court confirms this, to what extent can a new agreement with Steward Health Care survive?

Legal sources contacted by The Shift note that while EU and Maltese public procurement laws do permit some modifications to a contract awarded after a public tender, these need to fit within limited exceptions.

The catch, legal sources note, is that potentially unlawful changes to the contracts need to be contested by a potential competitor. Yet no one might be willing to actually touch this possible €2 billion time bomb.

Queried about the effects of a court finding the original VGH concession was illegal and null due to fraud could have on a potentially repapered deal with Steward Health Care, one legal source referred to a Latin proverb: “fraus omnia corrumpit” (fraud vitiates everything).