Shocking details emerge of the corrupt deal first exposed by slain Maltese journalist

A series of new reports by Malta’s Auditor General have uncovered damning evidence of collusion in a massive corruption story first exposed by murdered Maltese journalist Daphne Caruana Galizia.

Details continue to emerge about the public-private partnership that saw disgraced former prime minister Joseph Muscat’s government award a major hospitals contract to a consortium with no prior experience in the field, and to which the government had secretly promised the contract before the bidding process began. 

Taxpayers were told the 30-year deal would result in a €200 million investment to upgrade the three public hospitals. Instead, they were robbed of billions of euros through a combination of government mismanagement and probable criminal collusion.

In November 2016, Caruana Galizia published a post on her blog titled, ‘Vitals Global Healthcare (VGH) is a start-up, and it’s run by a set of shysters’. Five years later, investigations by the Auditor General prove she was right.

The latest report of the National Audit Office (NAO) slammed the government’s “disproportionate and self-defeating” level of risk in the €4 billion concession.

The NAO examined a series of previously secret contracts signed with VGH, in many cases by disgraced former Panama Papers minister Konrad Mizzi without Cabinet approval, that deviated considerably from the original agreement, favouriting the concessionaire over the taxpayer while imposing a high level of risk on the government.

To take just one glaring instance of mismanagement, the original request for proposals required the successful bidder to make a €150 million investment in infrastructure, medical equipment and maintenance, whereas the agreement VGH actually signed did not oblige them to provide any minimum investment at all.

The concession wasn’t meant to start until VGH secured external financing for that promised investment, but this condition was waived too through a side letter that became an ever-extending deadline.

The consortium incurred losses for every year under review by the NAO, and failed to submit its annual audited accounts up until 2020, a fact that did not allow the government to assess the extent of the company’s financial woes.

Rather than shifting the project’s risk burden onto VGH, the government rendered itself “impotent in holding the concessionaire to account” by repeatedly changing the contracts in favour of VGH and deviating from the original request for proposals issued by the government”.

“The government accepted to assume a disproportionate and self-defeating share of the risk,” the NAO report said, “while VGH benefited from an entirely undeserved reward.”

In the end, VGH never raised the required funding. The Maltese taxpayer funded them instead. Despite VGH’s repeated failure to adhere to any of the project milestone deadlines, the government committed to paying VGH annual concession fees amounting to €90 million.

The consortium delivered nothing and later sold the hospitals to a US healthcare company called Steward for €1. The Shift has shown how Steward Healthcare was closely linked to the same individuals behind VGH, including Steward’s CEO (formerly VGH’s CEO) Armin Ernst, which suggests this takeover was intended from the beginning, and that top Maltese government officials facilitated it.

Former Prime Minister Joseph Muscat with CEO Armin Ernst

The sale was finalised just days before EU anti-money laundering laws came into force that would oblige companies to make their owners known.

The minister responsible refused to answer the Auditor General’s questions throughout the course of its investigation.

The answers are hidden inside a complex money trail that’s still being untangled.

An investigation by The Shift News revealed that these companies didn’t just siphon off large amounts of money from Maltese taxpayers without delivering anything. The owners of VGH also awarded multiple subcontracts to a web off offshore companies that they themselves owned.

The secret agreements meant that the owners behind the scam used taxpayers money to buy medical supply companies in Malta, and then gave themselves exclusivity on contracts for the next 10 years.

The sums VGH stole from the Maltese taxpayer during its brief tenure were staggering, but the VGH / Steward Healthcare takeover was just the first stage of a much larger scam that saw the perpetrators use the fact that they were established in Malta, a European Union member state, to export the same fraud to other European countries.

Unfortunately, despite all that is now known about this raw deal, the government is unable to get out of it without incurring even more losses thanks to another “secret” side agreement that will trigger a €100 million payout to Steward if a court or other authority strikes the contract down.

Prime Minister Robert Abela has said the government will take the necessary action to avoid that payout if Steward Healthcare failed to abide by the conditions of the contract. The Opposition reminded him that the company has already failed to deliver on any of its commitments.

Former Opposition Leader Adrian Delia has launched a court battle to get the deal rescinded.

Meanwhile, an investigation has revealed court documents in which Steward Healthcare argued that the VGH concession which it took over was a result of “fraud” and “corruption”.

Yet the government of Joseph Muscat’s handpicked successor continues to throw taxpayer money at the controversial deal. 

On the very same day the National Audit Office published its damning report, government MPs voted unanimously to increase Steward Healthcare’s annual fee by €40 million.

The following project is weekly Maltese Roundups prepared by The Shift News (Malta) offering the latest news in the Daphne Caruana Galizia case.