The taxpayer is owed an explanation

A police investigation into the government acquisition of Cafe Premier in Valletta has concluded that no criminal acts had taken place in securing the deal.

The investigation, conducted by the police’s economic crimes unit, was sparked by Nationalist MP Jason Azzopardi’s suggestions that “commissions” may have been paid to secure the €4.2 million deal to rescind Cities Entertainment’s 65-year lease on the government property.

On closer scrutiny, however, the investigation raises more questions than it answers.

So far, a Freedom of Information request for the workings of the €4.2 million evaluation has been denied; but the police investigation report itself indicates that an additional €210,000 had been factored into that amount, and paid out to one of the company’s shareholders: a fact which was brought to the attention of the police by the other shareholder, who was evidently aggrieved by this arrangement.

On his part, the second shareholder denied to the police that this was a commission, insisting that it was a debt he claimed for having poured in extra cash into the Café Premier to keep the business going.

Even if we take the shareholder’s claim at face value – as the police evidently did – the entire deal remains questionable from start to finish. Since when does the government consider it appropriate to pay off debts incurred by the private sector, using taxpayers’ money? And why only in this case, and not in all instances where government lease conditions are likewise breached?

As things stand, the Lands Department had since 2012 been in court after it called on Cities Entertainment to pay its rental arrears, which the company was contesting in a court of law.

Yet an agreement was subsequently reached enabling the government to take the premises back, and executive letters ordering Cities Entertainment to pay back its arrears were cancelled. Instead of forcing the rescission of the 65-year-lease, the government accepted to pay off the company’s debts before taking the lease back.

This agreement involved simply writing off aforementioned debts to the government, paying off debts to the private sector, compensating the shareholders (for what, exactly, remains unclear), and withdrawing the court case to rescind the lease.

To this end, the government paid out €4.2 million in taxpayer money, which we now know also included ‘debts’ that were questionable, to say the least.

Even before going into the issue of the €210,000, the entire deal has from the outset smacked of nothing more than a government bailout using taxpayer money. The government is after all legally entitled to reclaim properties leased out to the private sector, in cases where the lease conditions are not met. It can (and often does) do this without forking out a cent in taxpayer money: in fact the process to reclaim the property in question was already at an advanced stage, when – following a change in administration – the government suddenly, and for no apparent reason, decided to settle out of court.

Effectively, the government chose to forego its rights, and instead to negotiate a hefty settlement in order to take back that which was its own anyway. The taxpayer, naturally, was left to foot the bill.

This is a serious matter in itself, as it indicates that the government employs weights and measures when dealing with analogous cases. One must question why the same government was suddenly so keen on parting with €4.2 million of taxpayer money… when in other instances it fought tooth and nail not to pay any compensation at all.

Piecing together the chronology of events through court, land registry and police reports, MaltaToday has established that an agreement was formally reached some time in November 2013, after both Cities Entertainment and the Lands Department decided to withdraw civil action over arrears payable by the Café Premier.

Cities Entertainment had launched civil proceedings against the Lands Department, after the latter served it with official letters to pay €200,000 in arrears in December 2012.

This chronology is surely significant. The single most conspicuous change between December 2012 – when the Lands Department, under Jason Azzopardi, was trying to recover the property – and November 2013, was the change in administration ushered in by the March 2013 general elections. It is difficult, if not impossible, to exclude political motives in adopting such a generous line of action in one case, while adopting such very different approaches in other instances.

The other serious question that needs to be raised is exactly how the deal was reached: we know that it was a shareholder in Cities Entertainment (the Café Premier leaseholders) and a consultant in the Office of the Prime Minister – former Lands Department chief John Sciberras – that reached the deal.

Given that the government has already said that it ‘intervened’ in Cities Entertainment’s attempt to divest itself of the lease on the market, something already forbidden by the original lease conditions, how did this intervention come along? Did this merit, as one shareholder told police, that a €210,000 commission/debt be constituted for such a serendipitous agreement? 

Considering that the Labour Party had won the elections by a landslide on the promise of an inclusive and just society, the Labour government now owes the taxpayer a detailed explanation for the cavalier way in which it seems to have singled out specific cases for special treatment, at the taxpayer’s expense.