Falzon resigns: NAO • failed to safeguard government interest, ‘collusion in breach of good governance’, Gaffarena aware of Old Mint Street expropriation well in advance

The National Audit Office (NAO) has established that the standards expected in terms of good governance were lacking when the Government Property Department issued fast-track expropriations for Mark Gaffarena for just a 50% ownership of a Valletta palazzo.

“The actions of the GPD in advocating the expropriations instigated by Gaffarena, without any discussion or analysis, was deemed incomprehensible by the NAO,” the Auditor General said in his report on the highly controversial and fast-track expropriation deal that saw property developer Marco Gaffarena receive €822,500 in cash, together with several parcels of government lands, valued in total at €822,500, for the expropriation of the building that houses the government offices of the Building Industry Consultative Committee.

“The public purpose served by the expropriation of two one-fourth undivided shares of 36 Old Mint Street was far from clear. This must be seen in a context where it was within Government’s control to expropriate the entire property.”

The findings were more damning for parliamentary secretary Michael Falzon. The NAO in fact declared that the expropriation was instigated by Gaffarena, yet readily facilitated by the parliamentary secretary, the GPD and the director for estate management. "The NAO deems such collusive action as highly inappropriate, in clear breach of the fundamental principles of good governance, transparency and fairness."

Damning report on Gaffarena. There is no way out for @JosephMuscat_JM and @DrFalzon. We expect political responsibility to be carried.

— Simon Busuttil (@SimonBusuttil) January 20, 2016

Although the only evidence at hand indicates that the role of Falzon was limited to the authorisation of minutes prepared by the GPD, this was pivotal for the expropriations to go through. Moreover, Falzon failed to question whether any public purpose was to be served by this expropriation and merely insisted adherence to the appropriate legal parameters and that values were reasonable. "Insistence on these two requirements does not exculpate [Falzon] from failing to ask the most basic yet most essential question, that is, what public purpose was to be served through Government’s acquisition of two undivided shares in 36 Old Mint Street."

It concluded that Falzon failed to safeguard government’s interest by expropriating property that, although useful, served no identified public purpose. “When one considers the inflated valuation of 36 Old Mint Street, the undervaluation of government land disposed of, as well as the substantial cash payments made, over and above the vague public purpose, the NAO deems these expropriations as not constituting value for money.”

The NAO unequivocally established that Gaffarena was aware of government’s intention to expropriate well in advance of the publication of the President’s declaration.

“The NAO is of the opinion that this information was confidential as it was sensitive government-related information that only Gaffarena was privy to. This put Gaffarena at an unfair advantage over the other co-owners as he could anticipate Government’s intention to expropriate the remaining undivided shares in advance of this becoming public knowledge. In fact, Gaffarena did exploit this information when he entered into two promise of sale agreements in advance of the publication of Government’s expropriation.”

The NAO notes that if the Attorney General’s advice to the Internal Audit and Investigations Department is applied, then the deeds with Gaffarena may be invalid, as compensation payable by Government for the undivided shares expropriated should have been proportionally paid to all co-owners.