Looking Back 2024: How to make a deal with the devil
The Vitals story is one of many deals – memorandums, concessions, side agreements. MaltaToday looks back at the Vitals inquiry saga and takes a deep dive into the devilish deals involved
While Malta’s political parties were gearing up for the European and Local Council Election campaigns in April, Magistrate Gabriella Vella was finalising her investigation into the hospital’s concession deal. The starting pistol was fired the moment she submitted her inquiry report to the Attorney General, the same day the Electoral Commission began receiving candidate nominations for the two elections.
The Vitals scandal began with a deal – a memorandum of understanding, to be precise – signed by then-economy minister Chris Cardona. It became a concession agreement a year later, spearheaded by Konrad Mizzi, the former health minister. Other agreements were added to the contract, and illicit financial arrangements were negotiated in the background.
There has been a steady trickle of information in the public domain about the dubious agreements that make up the Vitals scandal, but the floodgates burst open when MaltaToday published the magisterial inquiry report, unredacted, for everyone to read before casting their vote in the European and Local Council Elections.
MaltaToday looks back at the inquiry findings and the political repercussions to identify the dubious deals made in the process.
Muscat’s dealings with VGH
A month after Muscat’s forced resignation in January 2020 – prompted by Keith Schembri’s arrest on suspicion of being the mastermind behind the Daphne Caruana Galizia assassination (Schembri was released without facing murder charges, though he was charged with breaching the Official Secrets Act for passing sensitive information to the then-suspect, Yorgen Fenech) – Muscat began lobbying Robert Abela to renegotiate the hospitals deal with Steward.
Around the same time, Muscat flew to Switzerland and visited the offices of Accutor, which collected money for VGH shareholders. He drafted an indefinite contract with Spring X Media, which is linked to Accutor, and began receiving payments from the company.
Investigators suspected that this consultancy contract could have been used to disguise payments from the Malta hospitals deal. Accutor Consulting used to be called VGH Europe, but it was renamed Accutor Consulting in January 2018, shortly before Steward Healthcare took over the concession to run three hospitals in Malta.
Under the full consultancy contract, Muscat was set to receive €540,000 across 36 monthly payments. But the payments stopped abruptly after four months, meaning Muscat netted €60,000 from Spring X Media and Accutor Consulting.
Muscat started receiving money from the consultancy in March 2020. At this point, he was still a sitting member of parliament. He resigned as an MP in October of that year. That summer, Muscat had been questioned by police over a statement given by Yorgen Fenech, who is in court for masterminding the murder of Daphne Caruana Galizia.
In January 2022, police searched Muscat’s Burmarrad home and collected electronic devices as part of the ongoing inquiry.
Muscat insists the consultancy contract was above board, documented, and had nothing to do with the Malta concession. He denied ever receiving money from corruption and went on to file a court request to have the inquiring magistrate recuse herself, claiming that the information had been leaked from the inquiry.
Keith and Konrad’s dealings with... everyone?
Two of the most prominent local players in the Vitals scandal are Konrad Mizzi and Keith Schembri, who were two of Muscat’s closest confidantes when he was prime minister.
Mizzi was the principal architect of the hospitals deal, overseeing nearly every aspect of the concession, even after losing his health and energy portfolios in 2016 due to his involvement in the Panama Papers scandal.
Mizzi also oversaw the transfer of the concession to Steward Healthcare in 2018 and was the primary negotiator with Steward on side agreements reached prior to the end of the Muscat administration.
A report by the Auditor General suggested that Mizzi negotiated contractual changes with Steward behind Chris Fearne’s back when the latter was Malta’s health minister. It described an “unorthodox dynamic” between the prime minister at the time, Joseph Muscat, and Konrad Mizzi, to the detriment of the health minister’s ability to negotiate with Steward Healthcare.
One of the most significant developments was the €100 million side agreement secured by Steward Health Care in August 2019, designed to safeguard the company in the event that the concession agreement was declared null by the courts. The NAO described this as “a situation precipitated by the Minister for Tourism and engineered through his misleading of Cabinet”.
Meanwhile, Schembri had denied any direct involvement in the negotiations over the hospitals deal. However, Schembri was Muscat’s enforcer and the go-to person in government, making it unlikely that he was totally uninvolved. The inquiry findings reinforce this somewhat.
Even beyond the inquiry findings, it was clear that Schembri had good relations with some of the Vitals investors. Lawyer Wasay Bhatti, who ran the two Swiss companies from which Muscat was paid consultancy fees after stepping down as PM, had also bragged about his proximity to Muscat and Schembri. In one email exchange, Yorgen Fenech sought Bhatti’s assistance to transfer funds in foreign jurisdictions. A reference was made to “a common friend” – presumably Keith Schembri.
The inquiry report found that Ivan Vassallo, a former marketing director at Technoline, set up and fronted several companies that were used to extract kickbacks from government projects. According to the findings, one particular company called Eurybates was used to skim profits from government tenders. Investigators concluded that 90% of the shares were planned to be held by Adrian Hilman, Pierre Sladden, Keith Schembri, and Konrad Mizzi.
Eurybates entered into commercial relationships with several contractors involved in various health projects across Malta, including Barts Medical School, Paola Primary Healthcare Regional Hub, Mater Dei Hospital, Sir Anthony Mamo Oncology Centre, and a private hospital at Smart City. Schembri and Mizzi even planned to get involved in the Technoline takeover, according to the findings of the inquiry.
Investigators also found that Schembri, while still chief of staff, was fully aware of the financial misappropriation of public funds by then VGH CEO Ram Tumuluri.
Schembri had trusted a senior VGH official to create a report on Tumuluri's actions, as the report listed eleven separate instances of misappropriation of public funds running into millions of euros, including illicit withdrawals of money the government paid to Karin Grech Hospital for staff salaries.
Despite knowing this, Schembri did not share any of this information within government structures.
Despite knowing about Tumuluri's past, the chief of staff still trusted him with sensitive information. In fact, in November 2016, Schembri had told Tumuluri about an early election scheduled for 2017. This revelation confirms what murder suspect Yorgen Fenech had said: that he knew sometime in December 2016 that the election would happen in 2017.
Abela’s deal with Muscat
When Abela first rose to power as Labour leader and prime minister, he kept his predecessor at arm’s length. He barely dared to mention him by name, so it remained to be seen how he would react to Muscat’s reappearance on the political scene.
In reality, Muscat never reappeared in an active political capacity, but instead appeared in criminal court.
Muscat himself kept a low profile after stepping down as PM when damning allegations were brought against his closest aide, Keith Schembri. It was only when police raided his home in January 2022 that he began to make more public appearances, including video interviews, Facebook posts, and vlogs.
Muscat went on to start court proceedings in the hopes of removing Magistrate Gabriella Vella from the Vitals hospitals investigation after media reports revealed that Muscat had received consultancy fees from a company called VGH Europe.
As this court effort progressed, Abela remained cautious when commenting on the matter. He insisted that those leading the process must work in tranquillity and serenity.
We don’t quite know when the change of heart occurred, but what we do know is that only days into the new year, Abela described Muscat as a “dear friend” at a rally at the Orpheum Theatre in Gzira. This coincided with mounting speculation that the inquiry was coming to a close.
His declaration of friendship was the first time since becoming leader in 2020 that Abela acknowledged Muscat with such fondness. This paved the way for Abela’s own Faustian pact with Muscat.
Like most Faustian pacts, Abela was at a crossroads at the start of the election campaign. His first option was to use Muscat to energise a section of the Labour electorate, playing into the ‘us versus them’ mentality and conjuring the Establishment bogeyman as a scapegoat for the allegations against the Labour government.
His second option was to distance himself from Muscat and the allegations against him, insisting that the judicial system must be left to work in peace and serenity. While the Labour government may have made mistakes in the past, it is not repeating them today.
Abela made his decision. Muscat addressed several local council and MEP candidate events, and hundreds attended to see him speak. Nearly all Labour MEP candidates invited Muscat to their events.
Meanwhile, Abela did little in public to distance himself from Muscat. He allowed propagandist Manuel Cuschieri to interview the former PM on One Radio, even when the charges against him were already known.
Abela went into full siege mentality, claiming that a shadowy Establishment was behind the suspicious timing of the inquiry’s conclusion. Reading between the lines, Abela appears to insinuate what Muscat had been saying for years: that the inquiry was compromised in some way. Muscat preached the same Establishment sermon, claiming that some of the country’s institutions were working against Labour supporters.
A Faustian pact
A deal does not always mean putting pen to paper on a contractual agreement. Deals can be tacit and implied. But generally, they involve an exchange. In Abela’s deal with Muscat, he offers a show of support to Muscat (playing Devil’s Advocate?) in exchange for political power, largely in the hopes of maintaining Labour’s supermajority.
Apart from an exchange, there is one unavoidable feature of the Faustian pact – it doesn’t end well for the person doing the bargaining.
While the Labour Party won the European election, it saw its majority cut by over 30,000 first-count votes. This was followed by a string of resignations over several months: Daniel Micallef, PL deputy leader for party affairs; Chris Fearne as PL deputy leader for parliamentary affairs; Randolph De Battista from the CEO position; and Ramona Attard as PL president. Fearne resigned due to the charges he was facing in connection to the Vitals inquiry, while the others insisted their decision was a long time coming.
Abela does appear to be losing control of his parliamentary group. Disgruntled MPs seem to be working to undermine Abela from within, and he is well aware of this – he has even accused some MPs of undermining the Labour Party’s electoral chances so that he could be blamed for any defeat. If hell has broken loose within the Labour Party, Abela can blame it on his deal with the devil.
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