Air Malta owed €2.5 million by Reggio Calabria council – Italian magistrates

Italian magistrates are currently probing a series of agreements between the national airline Air Malta, and the southern Italian city of Reggio Calabria: currently embroiled in a financial scandal.

Air Malta has confirmed that the Reggio Calabria council incurred substantial financial debt with the airline, and only recently managed to enter into a repayment scheme with the city's administrators to collect its dues.

According to Italian magistrates, Air Malta is owed a staggering €2.5 million by Reggio Calabria, but Air Malta has insisted that "all monies outstanding to Air Malta are being repaid according to a standing agreement between both parties."

A spokesman for the airline told MaltaToday that it was "aware" of the investigation into the agreements with Reggio Calabria, adding however that "this case is currently being investigated by Italian magistrates and, as a result, it is not appropriate to comment further."

The investigation, led by a pool of anti-mafia prosecutors led by Magistrate Giuseppe Pignatone, was launched in June last year, following the death by suicide of Orsola Fallara, Reggio Calabria's council financial controller. She had resigned her post after government inspectors discovered a shocking €170 million deficit in the council's coffers.

Then mayor Giuseppe Scopelliti - now governor of the Calabria region - has been placed under investigation for fraud, misappropriation and embezzlement of public funds, which have allegedly found their way to Malta.

According to the magistrates, Scopelliti's giunta members fabricated false invoices that ran into the hundreds of thousands of euro, which were then exchanged for cash from the council's accounts.

The money would then be packed into cases and brought to Malta, and laundered at the Casino's and subsequently deposited into local bank accounts or invested in companies.

Investigators are set to travel to Malta to follow the money trail, and want to talk to Air Malta officials over the agreements reached with Reggio Calabria's former mayor.

They also want to speak to government officials and delve into the invoices and payments made in connection to an agreement reached between the ministry of foreign affairs in 2007, between then minister Michael Frendo and Scopelliti which provided for taking 450 Maltese students to Reggio Calabria to learn Italian.

A similar agreement had been reached to bring over hundreds of students to Malta from Reggio Calabria to learn English at the Link School of English in Swieqi.

Contacted yesterday, a school official refused to comment about the investigation and told MaltaToday that "school business is nobody else's business."

A number of people have been arrested in connection with the scandal in Reggio Calabria, as Rome's central government is calling on Scopelliti to resign over the heavy debts incurred under his administration.

The probe has also been widened into the possibility of Calabrian mafia involvement - the 'Ndrangheta - as investigators have reportedly intercepted phone calls between Malta and Reggio Calabria between a number of known persons connected to the powerful clans, known for handling dirty money.

Meanwhile, investigators are also said to be closing in on the identity of the "main man" - possibly a Maltese national - who took care of the money laundering exercise in Malta, and facilitated the process for Reggio's officials.

Shortly before details of the scandal led to Orsola Fallaro's resignation and eventual suicide by ingesting sulphuric acid, Air Malta celebrated its 150,000th passenger since starting operations to Reggio Calabria in 2005.

Urged by Scopelliti, Air Malta expanded its operations to Paris Orly, Rome, Genoa, Madrid and Barcelona via Reggio Calabria's Tito Minniti airport.

Scopelliti honoured Air Malta's former chief executive Joe Capello during a gala night at the city's town hall and awarded him with the San Giorgio s'Oro award.

The financial scandal that rocked Reggio Calabria hit simultaneously as Air Malta faced its financial losses, and had to receive a €52 million capital injection by government to keep afloat.

Air Malta announced it was suspending the Reggio route last September, in a bid to "review its viability" just a few months after "celebrating" 150,000 passengers.

A press statement in September 2011 announced that "Air Malta's flights to Reggio Calabria are currently under review and reservations have been suspended temporarily. Air Malta is considering the future of this route due to commercial expectations not being met."

The suspension of the route however coincides with the Italian magistrates investigation and the alarm raised by the substantial amounts which the airline was owed by the city.

Air Malta is expected to announce its financial statements for the financial year ending in March, which are expected to show if any monies have been collected from the troublesome Reggio Calabria route.