Major government contractor condemns Malita’s ‘deceit’ on social housing debacle

The CEO of Vella Falzon Group, one of the major contractors currently at loggerheads with a state-backed investment company over its failure to pay the company for its work on a multi-million euro social housing project, condemned Malita’s “deceit”, labelling the government’s conduct throughout the whole ordeal as “fraudulent business.”

Malita Investments plc, which is majority-owned by the government and falls within the remit of social housing minister Roderick Galdes, has drawn sustained criticism following The Shift’s reporting on its ongoing liquidity crisis.

Earlier this month, The Shift was also the first to report on the first casualty of Malita’s financial troubles: the €44 million social housing project in Luqa, which ground to a halt after contractors refused to continue working until the government paid for what was already due.

Alexis Vella Falzon, the CEO of Vella Falzon Group, spoke to The Shift about the stalled Luqa project and the consequences faced by his family’s company as a result.

Noting that this was the first time the company had faced such an issue in decades of public procurement work, Vella Falzon said that his company is currently owed around €1.6 million, including retention and performance guarantees, as well as VAT dues on its €2.7 million share of the project.

All three contractors involved in the Luqa project, which envisages the construction of 267 residential units spread over three apartment blocks and is backed by a loan from the European Investment Bank, are owed millions in total. While one block is at finishing stage, the other two remain far behind schedule.

Besides Vella Falzon Group, major contractors Rockcut and Calibre Industries are also involved.

“We repeatedly confronted them (Malita) about their cash flow problems, and they kept telling us everything was fine and that they were going to be able to pay us. This saga started in April, and between April and November, only one payment has been made. This left the company with depleted cash flow, for which the government takes no accountability,” Vella Falzon said.

The CEO accused Malita of deliberately misleading the project’s contractors with the intent of pouring more resources into a project they knew they couldn’t pay them for, an act of “deceit” that amounts to “fraudulent business.”

“…they were acting in bad faith. Now that we’re in this situation, nobody is giving us a direct response, and at this stage, the business is facing serious difficulties in maintaining its normal operations since Malita is currently holding more than three-fourths of the business’ overdraft facility,” the CEO added.

The development’s problems are further compounded by the fact that the lead architect who doubled as the project’s coordinator resigned from both roles last month, which effectively means that Malita will need to find someone else to finish a development that’s already been designed and partially built.

Vella Falzon also said that both Housing Minister Roderick Galdes and Prime Minister Robert Abela continue to maintain “absolute silence” whenever he attempts to obtain further information about what will happen to payments for the project.

Vella Falzon was one of two contractors who filed a judicial protest seeking to recoup an additional €624,000 in dues from Malita over a separate housing project in Msida. Vella Falzon confirmed that his company was paid for the development in Msida since that judicial protest was filed.

Dspite Malita’s glaring financial woes, which were further exacerbated by political interference and an electoral fraud scandal that led to the removal of Malita’s chair last year, Galdes claims he is not worried about Malita’s situation.

When answering questions from Times of Malta about the massive debts accumulated by Malita, the housing minister – who has also dodged three parliamentary questions filed by Opposition MP Graham Bencini – simply said that Malita “is financially capable of resolving or managing its own financial affairs”, claiming that the government cannot intervene in the company’s operations due to its listing on the Malta Stock Exchange.

In fact, the government has extensively intervened in Malita’s affairs by appointing party loyalists to the company’s board, with insiders previously telling The Shift that the housing ministry was always well-informed about Malita’s finances.

Given Malita’s status as a publicly listed company, the finance ministry has so far resisted Galdes’ attempts to bail out the company with taxpayer funds to avoid falling foul of state aid rules.

While the housing minister insists that Malita’s massive investment portfolio should be more than enough to keep it afloat, significant questions remain about how the company managed to seriously jeopardise housing projects that both the government and the European Investment Bank were heavily backing.