There is a battle of wills underway in Malta. The current Labour government has faced many accusations of incompetence and corruption in it’s short time in power, but without hard evidence, they remain just accusations.

Recently however, those accusations have stepped up several notches.

Malta really only has four sources of written news reporting – the Times of Malta, the Malta Independent, Malta Today and the blog of Daphne Caruana Galizia. It would be quite fair and reasonable to pass comment about the standards of independence in any of them, they all have their biases, but those are the four.

Typically Daphne’s blog is written off by many because she is “just a blogger”, but the harsh reality is that she is probably Malta’s only investigative journalist. Think of her as Malta’s in-country vituperative wikileaks.

She has an ability to divide people. I don’t know enough about her past to know for sure why, but she seems to be like Marmite – people either love her or hate her.

I have never met or spoken to Daphne, but I imagine her as a cross between Erin Brokovich and Bob Woodward. She is that person that makes the rest of us feel pathetic because we do not stand up for ourselves, others or standards as we could and should – as she does. The world needs more people like her, not less.

Despite many attempts from authority to silence her, everybody reads her blog.

The Dirty Deeds

It is hard for me – not a Maltese – to know when it all began. If I didn’t know better, it really does feel as though crime is the way of life for Malta’s Labour Party.

For example, there is this from the 1980s when both the current and former European Commissioners were involved in some sort of smuggling. Neither were charged, but my Maltese friends tell me that pretty much the entire Maltese population knew what was going on. I’m not going to write it down, so find your nearest Maltese national and ask – they will know!

And there is Toni Abela, potentially Malta’s next member of the European Court of Auditors and the notorious brick of cocaine that his name became connected to whilst Deputy Leader of the party.

Despite these allegations, both he and the Labour party were elected to power, which I presume means that nobody really cares…? Or cocaine has been legalised…?

More recently, now that they are in power, there has been the Cafe Premier property scandal involving the Prime Minister, Joseph Muscat. For a glimpse of the level of farce involved, let The Independent explain:

And the Gaffarena scandal relating to another property in Valletta and for which the Planning Parliamentary Secretary was forced to resign.

Sadly, I could go on and on, but I hope I have made my point that there are some genuinely dodgy deals going on here. So instead of boring you with more unsolved X Files, let’s cut to the chase…

Its All About Power: Round 1

It appears that December 2014 is the important time in this story.

Azerbaijan and Malta agreed an MOU for an energy deal. For reasons that have never been clear, the Maltese delegation visited without the phalanx of established civil servants that might be expected and the agreement signed between the two parties has never been published. Once again, from The Independent:

That wasn’t good, but the government managed to bluff out the questions and interviews, mainly because of their strong parliamentary majority.

However, Daphne’s revelations have thrust all that into doubt.

It would appear that someone in the know has copied and leaked a number of documents to Daphne that make everyone involved look even more corrupt.

Her first revelation was that the Energy and Health Minister had formed a trust in New Zealand to hold assets. Those assets include a company in Panama (explained here).

That looks bad. Maybe a sackable offence for a government minister…?

Nope. Mizzi was in the process of being elected unopposed as Deputy Party Leader as this was unfolding. The position of Deputy Party Leader had opened when Toni Abela (mentioned above) was proposed for Luxembourg. Besides which, the Prime Minister sees nothing wrong in it.

There was a little dilly dally as they tried to figure out what she knew and therefore what to admit to. Needless to say that rolled on as Mizzi denied anything and everything imaginable, then admitted to some things, then changed his mind and admitted to other things and… To be honest, it is just too tiresome to try and understand his statements. In total they give the impression that the man will say anything to anyone in the moment and seem to defy all logic.

The reality though is that he has a property, some savings, some shares, some debt and a government salary. There is nothing there that screams “You need an offshore trust and company to structure your massive wealth!” which I think everyone can see.

Its All About Power: Round 2

You knew that worse was to come, didn’t you! You didn’t…?

Late on Saturday 27th February, Daphne released her second bombshell. A second of the four people at that negotiating table, Keith Schembri, has an identical structure in place!

What are the odds of that???

I’m not an expert on statistics, but the odds seem long that two people at the same table need identical wealth management structures in New Zealand and Panama. Those odds lengthened substantially the following day when Daphne announced that Schembri’s set-up was formed on the same day and by the same company as Mizzi’s.

Oops!

(Just in case you are not up to speed on why bad people love Panama, this article might help to fill in some gaps. Just remember that the EU has blacklisted it as a financial jurisdiction.)

Other Fallout

This makes the standards of Malta’s financial services sector look like a joke. (You might have thought that already, or already).

It seems fair to presume that the people mentioned above did not make personal visits to New Zealand and Panama to set these structures up. In which case, as has been revealed by Daphne, they were formed by Brian Tonna of NexiaBT.

Since Mr Tonna has known the cast of this story for many years, it would seem to be reasonable that he knew they qualified as politically exposed persons. In fact, it seems that he is one himself now.

Despite this, their trusts and companies were formed.

Considering the emphasis in financial services placed on KYC (Know Your Client) declarations, there must be a very solid chance that he and NexiaBT have broken the law. For now, it appears that the Maltese Police are too busy to open an investigation. Who knows whether that will change…

It seems that Malta was the weak link in his chain. The law in Panama prevents companies from being audited or information disclosed to outside parties. I’m no expert on New Zealand trust law, but one presumes that there are some privacy elements in play there too. Why else would you select it as a location?

This means that the weak spot, the location where information walked into Daphne’s hands, is most likely in Malta, from within the administration office. While this is clearly a politically motivated leak, it does not do much for the reputation and standing of the financial or legal professions in Malta.

Since trust and confidentiality are two key elements to any fiduciary, wealth management or banking relationship, the future of NexiaBT – which I am told employs around 200 people in Malta – might be short. Why would anyone want to trust the company now?

What Next?

It appears that Daphne has more to release, though for now she seems to be letting the government stew. If she is hoping that there will be resignations, I fear she will be proved wrong. My guess is that the government will try and tough it out.

– Members of the Labour Party have not (and probably will not) find the backbone to force them out. So far there has not even been a resignation from the Cabinet from a Minister that does not want to be tarred by the association.

– The President is unlikely to step in, even though now would seem to be the only time that she can have an actual role in government.

– The Police ought to be investigating all parties, but for now there has been no action.

– The opposing Nationalist Party does not have enough parliamentary power to force a vote of no confidence.

– While large sections of the population are obviously horrified, there has been no spontaneous demonstrating in the streets, no civil unrest and life is going on as normal.

If Daphne has more to release (if she has payment details that would be damning) then this story might run and run. For now, the Labour Party is tarred with a brush of corruption and since he has not forced these people to resign, the thought that Prime Minister Jospeh Muscat is involved in their plan is impossible to overlook.

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Author : financialguy