Former Allied Newspapers managing director Adrian Hillman was extradited to Malta from the UK and charged with money laundering, making fraudulent gain, conspiracy to commit a crime, making a false declaration to a public authority, accepting bribes, and defrauding his former employer Progress Press, sister company of Allied Newspapers and publishers of The Times of Malta.
The complex case involves the purchase of printing machinery from Kasco Ltd, owned by Keith Schembri, the power behind the throne of disgraced former prime minister Joseph Muscat’s government.
Inspector Joseph Xerri told the courts that Hillman and former Progress Press chairman Vincent Buhagiar bought machines from Kasco at inflated prices and shared the profit among themselves, Schembri and Kasco employee Malcolm Scerri.
The printing machines were bought directly but the transactions were processed through a web of offshore companies in three different jurisdictions.
“What had to be a straightforward purchase became a complicated process to cover up backhanders,” the police inspector said.
Allied Group paid a staggering $6.5 million more than it should have for the printing machinery. The $5.5 million in kickbacks were recorded in a detailed spreadsheet by the former prime minister’s chief of staff that outlined how the four men would receive payments as part of the deal.
“In the opinion of the forensic auditors appointed by the magistrate presiding over the inquiry,” Inspector Xerri said, “the commissions paid were disguised bribery payments, sometimes listed as ‘consultancy fees’ to cover the fact that these were bribes.”
Offshore structures were set up for the men by Karl Cini and Brian Tonna of Nexia BT, the controversial accounting firm that seemed to be at the centre of every shady deal signed by the government of Joseph Muscat, named by the OCCRP as the most corrupt person of the year in 2019.
Nexia BT also opened secret Panama companies for Schembri and former energy minister Konrad Mizzi shortly after the Labour Party was elected to power, the Panama Papers revealed.
Hillman received a total of €1 million in kickbacks on the three printing machines, including those described as ‘consultancy fees’. His offshore company Lester Holdings received €100,000 from Schembri and another €125,000 from a Gibraltar bank.
Nexia BT allegedly fabricated documents to justify some payments and backdated others, actions that the magisterial inquiry described as those of “professional money launderers”. They were assisted by Matthew Pace of financial services firm MFSP, later renamed Zenith, a company that received money from Schembri.
Hillman’s defence lawyer Stefano Filletti asked whether Malta Enterprise, the country’s economic development agency, had filed a police report on fraud. Inspector Xerri said, “No.”
Matthew Caruana Galizia, son of assassinated journalist Daphne Caruana Galizia, shed light on the tangled network of power that has allowed impunity to flourish in Malta. “The answer is no,” Caruana Galizia wrote on Twitter, “because Malta Enterprise is run by one of Schembri’s closest friends, Kurt Farrugia.” Farrugia was the former prime minister’s chief of communications, given a lucrative job at the agency a few months before Joseph Muscat was forced to resign after two months of street protests.
Allied Newspapers launched an internal inquiry in March 2016 when details emerged in the Panama Papers about the deal between Hillman and Schembri. The company appointed its own auditors to the board of inquiry at a cost of €100,000, with Kevin Valenzia, a partner at PricewaterhouseCoopers (PwC), representing the firm despite the fact that PwC was the auditing firm for both Progress Press and Allied Newspapers for a number of years. The result, concluded within three months, has never been published.
Progress Press has recently filed a judicial protest against Schembri, Hillman and Buhagiar in an effort to recover the $5 million.
Hillman resigned from Allied Group while under investigation for money laundering, although he was given what the company referred to as “garden leave” and kept on the company’s books, receiving his full salary for months.
He was then compensated by the government with a post on the Board of Trustees of the so-called American University of Malta where his wife even joined him. The mysterious institution, owned by a Jordanian construction magnate, was given prime public land at below market rates thanks to a controversial deal struck with Joseph Muscat’s government.
Those involved in the Kasco / Allied Group deal were finally arrested and charged in March, and their personal and company assets were frozen by the court pending the outcome of the case.
Questions remain, however, about just how ‘frozen’ those assets really are. The court, with the approval of the Attorney General, has appointed a long time associate of Allied Group’s chairman as the administrator of Progress Press despite potential conflict of interest.
Stephen Paris was a long-serving partner of audit firm Deloitte, previously led by Paul Mercieca, current chairman of the Allied Group and a member of the board of directors of Progress Press.
Mercieca and Paris were found liable for civil damages in 2013 arising out of negligence as auditors of a defunct supermarket chain.
Asked by The Shift to explain how Paris, in his role as administrator of Progress Press, is supposed to act — and be seen to act — as an independent administrator of the funds of the company despite his close relationship with Allied Group’s chairman, the Attorney General remained silent.
Lawyers consulted by The Shift could not explain why the court decided to freeze the assets of Progress Press but not its mother company, Allied Group.
Questions were also raised about Kasco Group when the two court-appointed auditors from Deloitte who were tasked with administering Keith Schembri’s companies renounced their brief after being frozen out by the former chief of staff, who seems to have ignored court orders and continued to run his businesses in breach of the law.
The case, first revealed by assassinated journalist Daphne Caruana Galizia, is finally seeing its day in court. Yet this is Malta, and it remains to be seen whether justice will ever be served.
The following project is weekly Maltese Roundups prepared by The Shift News (Malta) offering the latest news in Daphne Caruana Galizia case.