How Joseph swindled the nation

“Funds provided by government to Vitals were being channelled outside the company”. The NAO report on the Vitals concession documented these allegations made by a ministry for health advisor.

Vitals was paid millions – more than sufficient to cover operating costs. Yet in just two years it amassed €12 million in losses and €32 million in debts. They provided no audited accounts. 

Vitals failed to pay national insurance and PAYE taxes paid by government for its employees. Instead, it used that money for other unknown purposes.

In 2015, 74% of Vitals’ expenses were for “other expenses” which were not defined in financial statements. “Other expenses” accounted for 26% and 28% of expenses in the following two years.  In 2017, when plans were underway to sell up, Vitals’ directors took €6 million despite the dire financial situation. 

Convinced of the veracity of those allegations, the NAO “recommended further investigation by the competent authorities in terms of possible misuse of public funds”.

Vitals failed to meet any of the government’s promised objectives.  Vitals made no improvement to the health service and the concession continued to appear on the government’s balance sheet increasing government debt by €42 million. 

This wasn’t just “a gross failure of good governance”.  This was highway robbery planned to perfection. This was the biggest heist in Maltese history planned and executed by Joseph Muscat, Konrad Mizzi and Keith Schembri.

Deputy Prime Minister Chris Fearne reported to the NAO that Muscat’s office held “covert negotiations” with Vitals. Mizzi and Schembri would meet Vitals in secret, keeping him in the dark. When his ministry objected to Vitals about various “contentious issues”, Vitals resorted to the intervention of the OPM to override those objections.

As Fearne and his permanent secretary attempted to mitigate the damage to the health service, Muscat, Mizzi and Schembri were wrecking it and pumping millions into Vitals.

Mizzi drew up a secret memorandum of understanding on 10 October 2014 with those who would later form Vitals, months before the Request for Proposals (RfP). That MOU remained secret until Robert Abela demanded it is found. The NAO had to publish an addendum highlighting that the process to award the concession was “staged and deceitful”. It was a sham.  

Awarding the concession to Vitals constituted, according to the NAO, “grave ineptitude in governance, since Vitals was immediately and evidently not fit for purpose”. 

Vitals had no money.  The share capital of Bluestone special situation 4 Ltd, Vitals’ mother company was a mere €1,200.  It was registered in the highly secretive British Virgin Islands, preventing any visibility of its standing. The RfP required the concessionaire to invest a minimum of €150 million.

Yet when the agreement between government and Vitals was signed that requirement, Labour bragged so much about, was dropped. The NAO commented that “the mismatch between the value of the concession, conservatively estimated at €4 billion, and the net asset value of the company was stark” and “cast doubt on the basis of the award”.

Vitals also completely lacked technical expertise. Only Ram Tumuluri and his legal counsel represented Vitals in meetings regarding technical issues. Vitals hadn’t even run a clinic.

Mizzi had it all planned. He appointed his childhood friend, David Galea as chair of the negotiation committee. His personal lawyer Aaron Mifsud Bonnici, Malta Enterprise CEO Mario Vella (later made central bank governor) and a partner from  RSM (Labour’s auditors) completed the committee. No experts from the health department were included. Even when Fearne was appointed minister he was not consulted and was “entirely uninformed about the contents of the contracts”. 

Mizzi’s negotiation committee worked in complete secrecy.  No minutes were kept of meetings and no copies of draft transaction agreements were retained. The NAO noted its “gravest concerns” that the committee “failed to retain any documentation”.

David Galea maintained that Fearne’s secretariat was directly involved, but Fearne’s permanent secretary denied it. Galea claimed they had sought the Attorney General’s advice but no information about this was provided.  When the NAO requested information on the advice given by the AG to the prime minister, this “could not be traced”.

Malta Enterprise refused to cooperate. Mizzi refused to meet the NAO.

The Vitals agreement signed on 30 November 2015 diverged markedly from the RfP. Not only was the €150 million investment excluded, but bed numbers were increased, raising Vitals’ revenue by €10.4 million annually. The RfP envisaged that government would pay monthly in arrears. Instead, Vitals would be paid three months in advance. 

Within a week of signing, the agreement was changed. The services to be provided by Vitals were reduced but payment was increased. Vitals was obliged to provide evidence of financial backing. It failed to do so.

Government granted waiver after waiver, never taking any action it was entitled to, including financial penalties and recouping the €3 million guarantee. Vitals failed all its concession milestones and Mizzi signed one side letter after another exonerating Vitals from paying penalties and removing deadlines for completion of projects.

Cabinet authorisation was only sought after those side letters were signed. Side letters of 19 May 2016  and 15 September 2016 were never referred to Cabinet.  The addendum to the agreement, extending deadlines, lacked cabinet authorisation.

The most brazen inclusion in the agreement was the termination clause. If the government terminated the deal it would pay Vitals €100 million as well as all of the debts it incurred. 

Muscat bound the nation to continue to pump millions into Vitals. As millions disappeared, Muscat lobbied for Steward Health Care with his successor. Steward paid €3.6 million to a Swiss company which later paid Muscat €60,000.

The NAO is calling for police investigations. The deputy prime minister reports on “covert negotiations”. A €4 billion concession is awarded to a company that was insolvent and technically incompetent in a “staged and deceitful process”. Millions of euros remain unaccounted for. What more does the police commissioner need?