Gaffarena inquiry finds land values were ‘illegal’

The Office of the Prime Minister could be in a strong legal position to recoup lands granted to the property entrepreneur Marco Gaffarena, from a controversially fast-track expropriation of a Valletta palazzino he owned.

An inquiry by the OPM’s internal audit and investigations department (IAID) which was handed over to the Auditor General, has revealed that the lands granted to Gaffarena as payment for the Valletta property expropriated from him, was in excess of a legal 30% ceiling which such land valuations cannot exceed.

Gaffarena made headlines this year when The Times revealed that the property owner was granted €1.65 million in a land and cash compensation, for just a 50% stake in the Old Mint Street building that houses government offices for the Building Industry Consultative Council.

The expropriation was controversial because Gaffarena originally took ownership of 25% of the building in 2007 for just €23,294 – and was compensated €822,500 in cash and lands in January 2015.

But in February 2015 he had also managed to purchase another 25% portion of the building for €139,762, and was paid another €822,500 in lands and cash in April 2015.

He also personally selected the lands for compensation, all of which were situated close to land he owned or leased, or which he intended to develop, adding even more value to the property he received in compensation.

This newspaper can now confirm that in its investigation, the IAID discovered a trend of excessive valuations of land which may have been ongoing since 2008.

In the Gaffarena case, the land transferred was in excess of a 30% ceiling set in the Disposal of Government Land Act: that in land exchanges, the value of the government land to be given cannot exceed 30% of the value of the expropriated land.

Sources privy to the investigation told MaltaToday that the Attorney General was consulted on the findings, and that the AG surmised that the lack of compliance with the 30% ceiling was “the only basis” for which the land deal could be considered to be null and void.

The IAID in fact engaged auditors PricewaterhouseCoopers to confirm the valuation of the Old Mint Street building and the other lands granted to Gaffarena.

It appears however that in their interviews with staff from the Government Property Department, the IAID found that there were a number of cases of expropriation and land transfers which might have breached the law in the same way.

MaltaToday understands that there are three other cases which breached the 30% ceiling, one in 2008, another in 2009 and another in 2013.

Controversial expropriation

The Old Mint Street expropriation set the ball rolling for one of the most intensive series of news stories, as well as two investigations, one by the IAID, and the other by the National Audit Office into the controversial land exchange.

Gaffarena is a well-known sponsor of a number of Labour candidates, especially in the sixth and seventh electoral districts, and a petrol pump station he owns in Qormi is associated with a number of illegalities that were finally only sanctioned under the Labour administration after re-election.

His father Joseph Gaffarena was similarly in business with various members of the political establishment on both sides of the divide: he carried out a property transaction with former PN secretary-general Joe Saliba, and went into the healthcare business with former Labour MP Louis Buhagiar.

MaltaToday subsequently revealed that Marco Gaffarena had petitioned the Government Property Division to have his share of the Valletta palazzo expropriated as early as summer 2014; and that parliamentary secretary for lands Michael Falzon received him at his office at Auberge de Castille although the embattled junior minister has denied having accepted any donations from Gaffarena, who was allowed to select the lands he should received in exchange for the expropriation.

The properties Gaffarena chose were matched up to his own property portfolio: a €65,000 shop on Manwel Dimech Street, Sliema was the missing piece needed to complete the neighbouring two-storey townhouse he bought in 2013 for €72,000. In May 2015, Gaffarena applied for a MEPA permit to demolish the townhouse and shop for the construction of five garages, 10 apartments spread over four levels, and a penthouse. An application for this development was already rejected in 2012 after MEPA’s Heritage Advisory Committee objected to the application.

He was also given lands in Qormi, Bahar ic-Caghaq, and Zebbug, all touching on lands he already owns or leases, such as the land for an unlicensed restaurant he operates, called Cavett Place in Qormi.

Parliamentary secretary Michael Falzon, who rubber-stamped the land exchanges, denied that there was any political intervention, and that the Government Property Department’s architects acted in their own professional capacity without any direction.

On the other hand, a member of Falzon’s secretariat, Clint Scerri, personally accompanied Gaffarena to the GPD offices, suggesting a certain degree of expeditiousness the expropriation.

The Labour MP Charles Buhagiar, who is the chairman of the Building Industry Consultative Council, also claimed he was unaware of the €1.65 million compensation. An architect who once rendered services to the Gaffarena family, Buhagiar denied knowing of Gaffarena’s intentions to purchase shares in the property.

Opposition pressures Falzon

News of the illegal land valuations, which in the main were carried out by university professor Joseph H. Spiteri, may fuel the Opposition’s calls for Falzon’s resignation.

PN leader Simon Busuttil mounted charge upon charge on the Labour administration’s proximity with construction contractors and people like Marco Gaffarena, and has also called on Michael Falzon to resign. “This happened with government’s blessing… and that’s why this is institutionalised corruption,” Busuttil said in parliament. 

Prime Minister Joseph Muscat has been adamant on waiting for the IAID to conclude its investigation.

But Falzon has defended his role in the expropriation saying that there was no form of political interference in the way either expropriation or evaluation of the Old Mint Street property, were made. “I assure you there was no sort of political intervention,” he said in parliament. 

Falzon emphatically denied having been influenced by his friendship with Gaffarena in rubber-stamping the expropriation. “I would never go down to these base levels to interfere in your private lives and see with whom you ever went abroad,” Falzon said of a hunting trip with Gaffarena he had been on, some 13 years ago.