Hospitals Heist: Concession investors lived the high life while the deal lasted

Investors behind the Vitals-Steward public hospitals’ deal – recently found by the courts to have been fraudulent from the outset – spent millions of euros living the high life while the hospitals under their care went virtually ignored.

Over 22,000 transactions between October 2015 and January 2020, obtained by the Organised Crime and Corruption Reporting Project (OCCRP) and shared with partners in Malta – The Shift and The Times of Malta – show investors paying each other millions in consultancies as well as personal expenses, including ATM withdrawals, luxury cars, travel and household expenses.

Financial documents – including bank statements for VGH, its successor Steward Malta, and Bluestone – show VGH shifted at least €21 million to its parent company Bluestone Investments – headed by Ram Tumuluri and Mark Pawley – between 2016 and 2018.

It is impossible to determine how much, if any, of those funds came from the hospital concession, but documents show some of those transactions were made on the same day that VGH received payments from the government.

Tumuluri and Pawley both say the transactions in question solely involved investors’ initial funding of €8 million to €10 million.

Among the thousands of transactions reviewed are loans and consultancy payments, payments to shell companies, large cash withdrawals, school tuition, luxury cars and even grocery shopping and pet care. There are also personal transfers to the companies’ directors and their relatives.

The data made available to the investigation shows cash withdrawals from ATMs in Balluta, Dingli Street, and The Point shopping mall, and other cash withdrawals in Zurich, Switzerland, amounting to €54,000 between 2015 and 2017 alone.

According to public records, Shaukat Ali and his family reside in Switzerland and also own an apartment near The Point in Sliema.

They also show €785,000 in credit card payments between 2016-2019, another €180,000 in point-of-sale purchases and €36,000 in cheque payments.

Another €133,184 was spent on hotels and renting an office in Montenegro, where Vitals intended to set up shop next and where it appeared ready to replicate the Malta deal between 2016 and 2017.

Almost half a million euros in taxpayer funds were spent on hotel and travel expenses and another €33,000 on private schooling.

Hotel payments exceeded €220,000. The figure includes a €6,300 stay at the Hilton in Podgorica paid for in October 2016, €25,000 in payments to Five Star Hotels Ltd and a €3,500 payment to the Corinthia Marina San Gorg.

There were also €273,000 in payments to a Maltese travel agency.

Vitals officials also appeared to have had a taste for Mercedes Benz cars, having spent €248,000 on their purchase and lease between 2015 and 2018.

The transactions reviewed ranged from the millions that went to Shaukat Ali and his sons to payments for items as small as €8.99 at a toy shop and €4.15 at a health food store.

Payments came from ‘investor sources’ – Tumuluri

When contacted, Tumuluri rejected the court ruling that the contract was fraudulently obtained.

In written comments provided by his US lawyer Andrew P. Bakaj, Tumuluri said that spending by VGH’s parent company Bluestone Investments Malta Limited was financed by investors and shareholders, not the hospitals’ contract: “The funds used for that spending were not VGH funds,” he said.

Tumuluri’s lawyer said his client’s contract with Bluestone included “the provision for personal expenses and school fees for my children.”

He said Tumuluri was not taking a salary from Bluestone or VGH at the time and that these payments came from “investor sources” and not public money sent to VGH.

‘Payments without business rationale would be of concern’ – Mark Pawley

When reporters contacted Mark Pawley, one of the original people, along with Ram Tumuluri, behind the concession deal, he told the investigation that some of the transactions in question could have been legitimate relocation expenses for Tumuluri and his family.

Pawley said he could not comment on the other payments “other than to say that payments which did not have a business rationale would be of concern”.

He insisted that he “didn’t control the bank accounts” but that “Mr Tumuluri moved his wife and daughter to Malta to run the project full time so there is nothing untoward in paying his school fees and other reasonable living expenses as this would have been part of any expat package.”

A rogues’ gallery of the usual suspects

At the time of the concession’s signing, Vitals Global Healthcare had committed to investing €200 million within two years to upgrade the hospitals. But by 2018, the company claimed to be deep in debt.

The Shift has revealed how VGH had registered a dozen namesakes in Jersey, seemingly intended to funnel commissions to the people behind the deal and from where purchases were made from suppliers to the hospitals.

The financial documentation obtained by the joint investigation includes transfers and payments received by Vitals Global Healthcare, its parent company Bluestone Investments and VGH’s successor, Steward.

According to investigations, Swiss payroll company Accutor AG played a key role in funnelling the funds from VGH, Steward and Bluestone to their recipients.

Those payments, made through the Vitals-Steward bank account, went through Accutor AG in Switzerland and an associated company, Spring X Media. Some of those transactions are reported to have been made on the same day the company received payments from the Maltese government – money intended for the hospitals.

Accutor is the same firm that disgraced former prime minister Joseph Muscat claims to have advised after stepping down from the premiership in January 2020.

Muscat had a €15,000-a-month contract (that amounted to four payments, worth a total of €60,000) after he left office in January 2020 with Accutor and its head Wasay Bhatti.

Armin Ernst previously worked for Vitals in Malta but somehow resurfaced as Steward Health Care’s Malta President after the transaction.

Emails seen by the investigation show that Ernst personally negotiated the terms of the takeover.

The transactions show millions of euros in payments to Pakistani businessman Shaukat Ali, his companies and relatives.

VGH’s original owner Ram Tumuluri has alleged in a sworn statement seen by the investigation that Ali was the concession deal’s mastermind. Ali, however, has denied connections to VGH and insists the secret agreement he signed with the government in 2014 had been superseded by an agreement with other VGH investors.

Dozens of payments to 3City Design, a company owned by former Office of the Prime Minister chief of staff Keith Schembri’s wife, Josette Schembri Vella, are also contained in the data made available.

As first reported by The Times of Malta, the company received a total of €76,200 from Vitals and Steward, supposedly for the construction and rental of a parking garage.

3CityDesign was identified as the vehicle for allegedly laundering €1.5 million, and both Schembri and Schembri Vella have been charged with money laundering. They both deny any wrongdoing.

Questioned about those payments, Pawley says he “had nothing to do with any such payments and would never have agreed to make such payments, if they were illegal.

“Mr Tumuluri had taken over the concession via VGH Jersey in early 2017, and ran all the bank accounts. He would be the one who can answer this question.”

He insists his involvement late in 2017 “was focused primarily on helping VGH/ Mr Tumuluri arrange a $25m standby financing deal to continue the project; to settle Malta Government statutory dues that I had recently become aware of, and pay back my original investors. Those discussions were underway in parallel with the Steward deal.

“Overall, I recall we had either a potential Deutsche Bank-led financing solution (replacing Allianz) or disposing of the business to Steward as our main options at the time.

“I thought Steward was the best outcome in the circumstances, as they were highly credible, well-backed and ready to commit capital.”

Paying themselves millions for consultancies

The transaction details also show the original ‘investors’ behind Vitals received payments of over €7 million – €1.7 million for Shaukat Ali and his family members and another €5 million for the United Arab Emirates-based Mount Everest General Trading LLC company, in which Shaukat Ali was the sole shareholder, for ‘consultancies’ and ‘loans’.

Mount Everest Investments Ltd, another company owned by Shaukat Ali, was among a chain of 12 Vitals-related companies first set up in Jersey in October 2016, as revealed by The Shift.

The companies were owned by the real beneficiaries of the concession on Malta’s public hospitals. Contracts they signed among themselves showed these companies were set up to extract income in the form of ‘commissions’ from the local concessionaire without needing to reflect the true beneficial ownership of the concession through public share transfers.

Bluestone, whose directors were VGH frontmen Ram Tumuluri and Mark Pawley, also transferred at least €3.7 million to Mount Everest General Trading, owned by Shaukat Ali. Millions more were transferred to Ali’s relatives.

“In light of the deteriorating financial markets and Allianz’s (financing) withdrawal, I was requested and agreed to transfer the ownership of the project to Mr Tumuluri and his new VGH Jersey structure, which was set up in early 2017,” Pawley said when asked to explain.

“I don’t know what happened afterwards.”

He says that all the bank accounts in Malta were set up and controlled by Tumuluri and that he is not entirely sure of what bank accounts existed in Malta.

Mount Everest also provided shareholder payments to Accutor AG beginning in 2017 for ‘start-up’ costs. Bank statements show Accutor owed Mount Everest almost a million dollars by 2019.

When contacted, Ali denied any ownership of the company after 2016. He claimed the company was established for residency purposes and that he transferred it to Tumuluri when he no longer needed it to avoid liquidation fees. A copy of the transfer certificate, written in Arabic and reflecting Tumuluri’s legal presence, was provided.

Ali declined to explain where or how he met Tumuluri, except through mutual acquaintances.

Insiders, however, have claimed with the investigation that Mount Everest was established to make payments to Shaukat Ali’s family. Ali confirmed that he received money to pay for properties and bonuses in addition to his salary.

One son, Asad Ali, saw €635,000 from funds from the public in payments as a salary, ‘consultancy fees’ and reimbursements while another, Wajid Ali, received €500,000 in salary and expenses.

According to the financial records, Shaukat Ali received another €313,000 in personal payments for ‘consultancy’ and ‘marketing’. His sons – Asad Ali and Wajid Ali – also received over €1 million from the piggy bank.

‘We were comfortable Tumuluri and Ali were paid for their efforts’

Pawley is shown to receive payments of over €330,000, and he acknowledges receiving director’s fees.

He explains that he, his investors and Ambrish Gupta put up the first US$8 million to US$10 million “before the Malta Government paid VGH anything”.

“My recollection is that we were comfortable that Mr Tumuluri and Shaukat Ali were getting paid for their efforts on the project.

“I had no visibility on any payments in Malta, nor what happened when the Malta Government finally began to pay VGH, I think in October 2016, but both people were integral to the project.”

From the initial investment, Pawley says, “we had or were already funding many other things, including the new Air Ambulance service between Gozo and the main island, all the external consultants’ fees as well as the new VGH staff salaries (including the new CEO).

“There was also a VGH Corporate Office fit-out and the early civil works. I also received some directors’ fees and interest on the bridge loans I had arranged to keep the project going.

“I recall I was a director in both Bluestone Investment Malta and Bluestone Special Situation No 4. My main focus was on the financing side. I had no day-to-day involvement in its management. I resigned from my position at the time of Steward’s takeover in early 2018. I was never a director of any other VGH entities.”

Steward states its case

In comments to the investigation, Steward Health Care International says it first encountered Accutor when the Swiss company was nominated as the destination for funds by the sellers during the buy-out of VGH.

SCHI says that before making the payments, it undertook appropriate due diligence on Accutor, “which at that time revealed no issues of concern and subsequently verified that these funds were paid to the sellers”.

The company points to the appeal it has opened against the local ruling and has also requested the European Court of Justice for a preliminary ruling.

“While we cannot say anything more at this time, we believe the submissions and arguments made in those proceedings will give us the legal venue to answer all the outstanding questions, as well as add to the public’s knowledge of the concession.”

As for Bhatti’s Spring Healthcare, having described Steward as its “clinical partner” on its website, the company insists there was never any such association and that it never had a business relationship with the company.

“We became aware that we were listed on the company’s website as a partner in 2021 and demanded in writing that they remove us from the relevant pages, an action the company had not undertaken. We repeated this correction through another cease-and-desist request in 2022.”

The company was also questioned on its relationship with Muscat and the former prime minister’s attendance at a 12 January 2020 meeting with his successor Robert Abela.

Steward says there had been no engagement or terms “on this or any other issue” with Muscat.

“It is our understanding that he was present at this meeting to assist with the transition from his administration to that of Robert Abela and Chris Fearne.”

‘Major deficiencies in concession’s administration, government supervision’

Asked if the company found problematic bookkeeping or unexplained payments out of the company when it took over from VGH, Steward acknowledges there were “major deficiencies in the way in which VGH administered the concession, and the way in which the government supervised it before we were involved.”

It points to its recent appeal before the Maltese courts and says the accusations will be further detailed through  “pending actions in Europe”.

“Steward International has worked hard to transform the accounting standards of the Maltese business since it arrived, resulting today in fully complete management accounts for all years in which the company has run the concession.”

As for the fact that SCHI waived a due diligence exercise into Vitals before taking over the concession from VGH, the company puts the ball in the government’s court.

It concedes the move was “not normal” but that “it was reasonable to expect that the concession, the accounting, and its management had been awarded and monitored by the government as was its legal and fiduciary responsibility.

“Steward trusted that the government, especially knowing that the EU would find that the concession did not comply with EU standards, would immediately move to ‘fix’ the original concession structure.

It accuses the government of failing to be “accountable for its own shortcomings; to adhere to its promises to renegotiate the ‘unbankable’ and unsustainable terms of the concession – not once but three times – and of, more recently, still being engaged in negotiations up to the time of the verdict.”

Such actions, it said, did not allow the company to raise the finances required to deliver on the terms of its engagement.

Click on the following links for the full replies supplied by Steward Health Care International and Wasay Bhatti.

Additional research contributed by the Daphne Caruana Galizia Foundation.