The hearing in the compilation of evidence against 11 people facing charges related to a series of major financial crimes continued today with former OPM chief of staff Keith Schembri among the accused, together with his father Alfio Schembri, Kasco Group CEO Malcolm Scerri and Robert Zammit, Kasco’s financial controller.
All four have been charged with money laundering, criminal conspiracy, accountancy crimes and fraud. Keith Schembri faces additional charges of false testimony and forgery, while Robert Zammit has also been charged with breaching accountancy obligations.
Today’s hearing followed that of Nexia BT representatives Brian Tonna, Karl Cini, Katrin Bondin Carter and Manuel Castagna yesterday, as well the representatives of Zenith (formerly MFSP) – Lorraine Falzon and Matthew Pace.
They are among the 11 arrested last Saturday, with the exception of the former Managing Director of Allied Newspapers Adrian Hillman who was abroad at the time and is yet to be formally charged. Vince Buhagiar, another former Managing Director of Allied Newspapers, publishers of The Times of Malta, has also been accused of fraud, money laundering, and criminal conspiracy, as well as making false declarations to Customs and Malta Enterprise.
Magistrate Donatella Frendo Dimech began today’s proceedings by addressing the bail request by Matthew Pace and Lorraine Falzon, the two Zenith finance directors. Both individuals were granted bail.
Following a brief pause, the proceedings turned to Keith Schembri, his father, Schembri’s business partner Malcolm Scerri and company financial controller Robert Zammit. All four have been denied bail since their arraignment last Saturday and a second bail request has been filed by their lawyers.
Police inspector Anne Marie Xuereb was the first to testify and recounted much of the details that emerged in yesterday’s proceedings in the case against Nexia BT directors – the charges against the four are based on the outcome of two inquiries. One involved potential kickbacks to Schembri from Nexia BT on passport sales, and the other focuses on the deal Schembri made with Progress Press on three machines.
Police inspector Joseph Xerri was the next person to take the witness stand. Xerri, who works for the police’s anti-money laundering unit, analysed the findings of the inquiry concerning the allegations of €650,000 in kickbacks between Schembri and Hillman between 2010 and 2015. He said Michel Rizzo, the current managing director of Allied Newspapers, and another board member were among those who testified in the inquiry.
Detailing the deals between Allied Group and Keith Schembri’s companies, Inspector Xerri explained how the company had issued an “invitation only” call for new machines. Kasco Engineering’s offer at US$13 million (€11 million) was accepted following a presentation to the Board by Buhagiar and Hillman – at the time chairman and managing director of Progress Press respectively.
The investigators discovered a document on Kasco’s server that showed the machine was purchased using offshore companies to avoid tax. Kasco made a US$5 million (€4.2 million) profit on the deal. The profits were to be distributed between Schembri, Scerri, Hillman and Buhagiar.
Hillman resigned in 2016 and the company had reached an out-of-court settlement with him that has remained confidential. Allied Newspapers has refused to comment on the deal.
Inspector Xerri revealed findings in court today that Malmos Ltd, the company that bought the machine, transferred money to a Swiss account belonging to Schembri. From that account, money was transferred to other accounts – US$300,000 (€255,000) to another account of Schembri and US$168,000 (€143,000) to a Hillman account at MFSP (now Zenith) whose representatives are also among the 11 accused.
Another US$135,000 (€115,000) payment was made to Hillman as well as US$350,000 ((€297,000) to Malcolm Scerri. Vince Buhagiar also received a payment of US$105,000 (€89,000) for consultancy fees.
Police investigations noted that while this money was flowing, Progress Press paid $6.5 million (€5.5 million) more than it should have while the company applied for a subsidy from Malta Enterprise. In his Facebook post before his arraignment last Saturday, Schembri issued a missive saying the company had defrauded Malta Enterprise.
Listing further payments made to Hillman and Buhagiar, Inspector Xerri told the court the documents were fabricated since no consultancy services were involved. He said Zenith’s Matthew Pace could not explain the transfers. Inspector Xerri told the court investigators believe Schembri paid out $5.5 million (€4.7 million) in backhanders.
Investigations also questioned over €20 million in raw materials that Progress Press purchased from Kasco between 2010 and 2016. The unexplained deposits in the personal accounts of Hillman and Buhagiar were a clear case of “bribery”, Inspector Xerri said.
Defence lawyer Edward Gatt asked the court to hold off issuing its decree on the men’s request for bail because the defence wants to make submissions on Monday when it will cross-examine the two inspectors who testified today. The court upheld the defence’s request, meaning that Schembri and his co-accused will remain in prison for at least another weekend.
The compilation of evidence then continued against Vince Buhagiar, chairman of Progress Press when the deals on the printing machines occurred. Investigators report he told the police that Adrian Hillman had introduced him to Kasco in 2000. The publishing house then started buying its paper supplies from Keith Schembri’s company.
When questioned by the police about the lack of documentation related to consultancy fees claimed in invoices, Buhagiar had said that it was based on a ‘verbal agreement’. He was served with a Bill of Indictment.