Chris Cardona did not read memorandum with Vitals investors before signing it in 2015
The compilation of evidence against Joseph Muscat, Konrad Mizzi and others continued on Wednesday
21 August 2024, 10:07am
Matthew Agius
Matthew Agius
4 min read
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Former economy minister Chris Cardona has told a court that he had only read the Memorandum of Understanding between the Government and the investors in the hospitals deal after being called to give evidence before the National Audit Office.
Cardona, a lawyer, testified in the case against former Prime Minister Joseph Muscat, his Minister Konrad Mizzi, and Chief of Staff Keith Schembri, among 14 individuals and 9 companies accused of crimes including money laundering, fraud, conspiracy, and involvement in a criminal organisation.
In addition to the money laundering, fraud and conspiracy charges, Muscat and Mizzi are charged with having accepted bribes and corruption in public office, while Schembri stands accused of offences relating to the solicitation of bribes and abuse of his office to exact an unlawful advantage.
‘They asked me to sign it and I signed it’ - Cardona
In his 30 minutes on the witness stand, Cardona attempted to distance himself from the Memorandum of Understanding which he had signed in his ministerial capacity.
He told the court that he had not read the document before signing it and had only done so in preparation for his testimony before the National Audit Office. When asked by both the prosecution and the court why he had signed it, Cardona first replied that he had done so because he had been asked to. “I was the minister responsible for Malta Enterprise. They asked me to sign it and I signed it.”
But Cardona’s explanation changed later in his testimony, after he attempted to downplay the MoU’s importance by saying that the government had subsequently withdrawn from the agreement.
“Why was it signed, then?” asked the Magistrate.
“To see whether it could provide this kind of deliverables.” Cardona replied.
Although the former minister was unable to recall who had been present for the signing, he told the court that he believed it had been signed at the Auberge de Castille, home to the Office of the Prime Minister. “I believe that there were no other officials bar Malta Enterprise officials,” he added moments later. Asked whether a representative from the OPM had been present, Cardona said he did not remember, but was more certain that Muscat had not been present, when asked directly about this by the court. “Madame, if he had, I think I would remember it,” said the former minister.
During cross-examination by one of Muscat’s lawyers, Cardona said that he had not seen anything that stood out or that he was unhappy with in the MoU. “Absolutely not.”
The witness also stated that he had never been pressured into signing the MoU “by Muscat or anyone else.”
He insisted that the MoU had fallen through because it “did not specifically address the government’s plan to modernise the health sector,” leading the magistrate to ask him once again why it had been signed in the first place. Cardona replied that an MoU is “a preliminary non-binding agreement to test the waters, to see the deliverables, whether there is a business plan that compliments the Government’s plan.”
PwC saw no red flags
Also testifying today were several senior figures from PriceWaterhouseCoopers, which had been approached by Singapore-based company Bluestone Special Situation in October 2014 to assist in the preparation of a business plan to be pitched to the Maltese government.
They confirmed that the ultimate beneficial owner (UBO) of Bluestone was Mark Pawley and that the designated point of contact for the project was Ram Tumuluri.
Initially PwC had been engaged to advise on a planned project involving the Gozo hospital. A second engagement came later, this time to assist Bluestone prepare its submissions for the Request for Proposals (RfP).
The RfP was not limited to Gozo and was completely separate to the Gozo project, the court was told.
Michel Ganado, a management consultant at PwC, was also asked by the defence whether the firm had noticed any “red flags.” “At the time, no,” Ganado replied.
He explained that Bluestone was an investment company and that VGH had been incorporated into the Bluestone structure further down the line. “Bluestone Special Situation was the Ultimate Beneficial Owner (UBO) of VGH,” he told the court.
Matthew Agius is Senior Reporter on Law and Court Affairs at MaltaToday.
He is also a Leg...
We’re wrapping up our liveblog here and will be providing a write-up shortly. Thank you for following today’s proceedings with us.
The court, in view of the fact that there was insufficient time to hear the remaining witnesses for today, adjourns the compilation of evidence to September 23 at 10am to hear the eight witnesses who could not testify today.
The lawyer asks what services they had provided to Bluestone that would establish its ownership. “You told us that despite only having a letter of engagement with Bluestone, you also provided services to Steward.”
Spina repeats, and the magistrate also points out that this emerges from the letters of engagement, that they had provided Steward with tax advisory services related to the concession.
In reply to questions from lawyer Jason Grima, the witness replies that PwC did not have anything to do with Steward’s audits. Steward had come to them for assistance because their accountant had been aware of PwC’s assistance with the concession, she explains.
The court asks a different question. “There was a lot of work in two months on the financial model. Our work was inputting the numbers from the experts and the client in the model. There were many volumes in drafting. We also checked that that client’s actions were reflected in the numbers as part of the RfP process. It is not simply a checklist, it takes time to do it.”
Modellers also help eliminate errors in the Excel sheets which the client would submit as part of the bidding process.
Filletti asks what work PwC had done for Vitals, as there was no letter of engagement. “The same with Bluestone, because to us they were one and the same.”
The lawyer asks what modellers do. “They are persons specialised in finance who can create Excel models with all the required financials, cashflows, different funding, along the course of the concession,” replies the witness.
The person who has to be satisfied with the model is the client, Spina says. “He also brought in his own experts to provide the inputs to bring this plan to fruition.”
“I understood precisely nothing of that,” Filletti remarks.
Lawyer Vince Galea cross-examines, asking for the names of team members and experts. She names Michel Ganado, Claudine Attard, Nadia de Marco and Andrew Sammut. They had not accompanied the clients when they visited the banks, she says in reply to Galea’s questions.
When you issue an RfP you have a list of documents that must be supplied and the client is aware of them. “You have a checklist of these documents,” she says.
“So really the client doesn't need you,” Galea remarks, “because you don’t verify the information,” before being stopped by the court.
“We don’t carry out verifications, we are project managers. But some things are obvious and experience teaches you what is necessary.”
The witness says the team had been content with the documentation provided by the client. "Nobody can be a lawyer, architect and doctor at the same time. We saw that there was sufficient expertise in these fields for the RfP," she explains.
That review process had started around 2016, after the concession had been awarded, Spina says, and ended with the changeover from VGH to Steward.
“We always engaged with Bluestone. VGH was the company it used to apply for the concession, but essentially VGH was Bluestone,” says the witness, adding that this was a normal practice.
PwC had performed further work for Steward after 2016, providing technical accounting and tax advisory services.
The business plan was 100% the client’s, she insisted. “He came to us for help. He already had the first phase ready and presented us with an excel model, but it needed to be adjusted.” Every adjustment was done with the client’s knowledge and consent. “At the end of the day the model is the client’s.”
At a point, the financial modelling was shifted to a UK firm and PwC’s role was to ensure that it was in line with local regulations and legislation. “The client was seeking financing for the capital expenditure on the process. The financers were not happy simply with a model given directly by that firm, so they appointed us to review it.”
“This review was essentially never concluded,” she says. “There was a process, you need to check completeness of documentation and not all the documentation was being provided. So from our end we could only issue objects reports, in which we pointed out these defects.”
Ram Tumuluri was the contact person, she says in reply to a question from the prosecution. Dr. Ambrish Gupta, Ashok Ratelli had been amongst those who had assisted with the medical aspects of the RfP, she says.
The RfP engagement lasted till January 2015 and the matter was deemed closed. Another engagement letter came later, not about the Gozo hospital but about a much larger project. “To me they were two separate things.”
“We are financial modellers. My background is advisory, so the process is that the client gives feedback on the model and it is updated. It was basically placed on screen most of the time and getting inputs from various experts.”
“So you put things together?” asked the court. The witness said it was not quite so simple.
“As modellers, we check the mathematical accuracy, the details of the text and the updated inputs requested in the RfP coming through. At the end of the day the client must be happy that the numbers are what he had in mind.”
Accountant Angelique Spina is the next witness. She explains that her role was assisting Bluestone Special Situation in replying to the RfP. This involved updating the business plan and process management, she says. “We were engaged around April 2015 and it ended in May 2015, so around two months.”
Magistrate Montebello asks about their involvement in the MoU. “The two are separate processes. Our first involvement was in October 2014, about the Gozo project.”
There were no red flags about Bluestone and so the project was recommended to proceed, she says. “We knew at the time that an MoU had been signed about the Gozo medical complex.”
Lawyer Vince Galea is amongst the lawyers cross-examining the witness. He asks about the client onboarding process at PwC.
This is carried out by a dedicated team, she says. She confirms that at the time nothing came up in the screening process.
Lawyer Jason Grima asks whether PwC had been aware that audits at VGH weren’t being carried out. “When you came to give advice, weren’t you informed about this?”
“The process wasn’t handled directly by myself but it was not relevant to the transaction either,” Pace Ross replies.
The court releases the next witness, Lucienne Pace Ross, an accountant and Partner at PwC, from professional secrecy. She is asked to exhibit a number of letters of engagement. The first from Bluestone Special Situations - November 2015, for assistance with the business plan.
As part of the onboarding process, they had carried out their KYC screening on the companies, directors and shareholders involved. The court asks about Mark Pawley and Ram Tumuluri in particular. “There were no red flags,” the witness says.
She gives an overview of the five letters of engagement PwC had sent in relation to the hospitals concession. Four were sent to Bluestone over the years, with the last, in 2022, sent to Steward about financial projections.
Asked by the court, Spiteri says the prosecution had intended to hear 10 further witnesses today. “We hadn’t anticipated such in-depth cross-examinations,”the prosecutor tells the court.
It doesn’t look like they will all be testifying today.
Lawyer Edward Gatt asks whether the police had ever requested an explanation about the matters he had testified about today. Cremona confirms that this was the first time that either he or the law firm he worked with had been questioned about this issue by the authorities.
Filletti asks whether he had been under any pressure to refer to the MoU while drafting the RfP. The witness says he had not. The court suggested that it existed but did not feature in the advice they gave, unless it was subject to an appeal.
“The last time we spoke about the RfP was on 27 March…then we were approached some time in May to draw up a base draft,” Cremona says.
Lawyer Shazoo Ghaznavi asks the witness whether he remembered what the October 2014 MoU was about. “I don’t remember clearly but I think it was about the Gozo project.”
Lawyer Vince Galea asks whether his client, Joseph Muscat, had ever failed to take their advice or whether Muscat had ever spoken to Cremona or Ganado about this matter.
“The reply is no, we had not met or spoken to the then Prime Minister at the time,” Cremona replies.
The court directs Cremona to exhibit a copy of the letter of engagement and the related non-disclosure agreement, telling the witness that he will be required to be cross examined about them in a later sitting.
Galea asks whether they had seen anything illegal in the agreement. “Illicit no, but as I said before there was too much haste. We had never encountered [a client in] such a rush before.”
In reply to another question from Galea, Cremona says he had not been asked to testify before the magisterial inquiry.
While the firm was still trying to understand the project, on February 12, Mifsud Bonnici had sent a Powerpoint presentation to illustrate it. Mifsud Bonnici had also sent Ganado an unsigned document on a DF Advocates letterhead, said the witness.
Mifsud Bonnici had been part of the team advising the government on the project, as were RSM and Beat, Cremona says in reply to another question. RSM were the technical specialists on healthcare. “We had stated that there was a need for more technical detail…it could be beefed up more.”
“After 22 July we heard nothing about this project from the Government. The next communication we received was when Steward had filed arbitration proceedings.”
The magistrate and De Marco have a back and forth after the lawyer repeatedly attempts to question the witness about the subject of the arbitration proceedings between Government and Steward Healthcare.
In reply to a question from lawyer Giannella De Marco, the witness confirms that the letter of engagement had been signed with Projects Malta and that as far as he was aware there was only one such letter. He also confirms that lawyer Aaron Mifsud Bonnici had been the instructing counsel that had gone to Ganado with this project.
De Marco asks: “Did your client take this advice on board?”
“Joining the dots, that’s where you arrive,” replied the witness. “Our advice was that there is no way that this type of project can go ahead without a competitive process.”
“During the period of our involvement there was always a great sense of urgency: from the investors, Dr. Mifsud Bonnici, other consultants in the RfP,” Ganado says. “In late February 2015, we had received points from Dr. Mifsud Bonnici which were to be included in the agreement. When you receive instructions like that from the client, it is understood that your advice has been accepted.”
Other disparate entities had also been involved in the drafting process, “Ganado Advocates did its part and it all came together when on March 27, the RfP was issued.”
The firm’s last involvement came the following May. “The Government presented it to the market and as the deadline approached we were asked to help draft the legal side of the contract.
The first version was sent internally to the team appointed by Projects Malta around May. After seeking feedback an amended draft was sent again in July, insisting that answers to a number of questions were needed.
“After July we never heard back from them again [about this matter],” Cremona says. He told the court that he could only assume that the base draft supplied was needed as a basis for negotiations.
Lawyer Antoine Cremona from Ganado Advocates is called to the stand to testify about his clients Projects Malta Ltd and the Ministry for Health. He asks the court to note that he had been formally released from his obligation to professional secrecy this morning.
Cremona says Ganado had been engaged for legal advice as to whether this foreign investment in the healthcare sector was viable. The EU directive on public service concessions had been passed in 2014 but had not yet been fully transposed into Maltese law at the time. Ganado treated the matter as if the directive had been fully transposed, he says.
Ganada had advised the government that this investment required a competitive market process. This legal advice was issued in late February 2015.
Aaron Mifsud Bonnici had been introduced to his team by Dr. Steven Attard, due to the procurement angle, Cremona says. Mifsud Bonnici, as instructing counsel, had provided points to be included in the RfP, which had not been suggested by Ganado but were ultimately included.
Lawyer Jason Grima asks whether Ganado had testified in the magisterial inquiry or was questioned by the police. The witness replies that he had not.
Asked about whether PwC had audited the companies, Ganado said the firm had only provided VGH with advice on tax and company financing. “Nothing to do with auditing work…That was not our remit.”
Ganado confirms that PwC had subsequently been engaged by Steward Healthcare, but says that he had not been involved.
With regards to Muscat’s lawyer’s request for documentation for payment records, the court said it was rejecting it as it was not procedurally correct, but reserved the defence’s right to summons Ganado as their own witness.
Galea asks about the company’s document retention period. Normally ten years, Ganado replies.
At the lawyer’s insistence, the court dictates a note in the acts, stating that Joseph Muscat’s defence team was requesting that PwC retain all documentation and information connected to their role, if need be beyond the ten year period. The prosecution does not raise an objection to the request.
“Am I correct to understand that the business plan you had drawn up with your client was a realistic one and not exaggerated. Yes or no?”
“At the end of the day you are providing a service to the best of your ability,” the witness says, confirming that at that point in time it seemed realistic and practicable.
Asked by Galea whether the police had ever conducted a search at their offices, Ganado replies that they hadn’t.
The court asks the witness to expand on the work done by PwC in terms of the two engagements.
With regards to the Gozo presentation, Ganado says they had to look at the role that Barts would play in the process. “To make a project like this sustainable there is not only investment in infrastructure but also the demand has to be investigated. A lot of research went in to see whether this project was sustainable.”
This involved many meetings with experts, conducting research, and attending workshops. “Those two months were a very intense exercise.”
PwC had been engaged to bring people together to work together on the team and help the client compile the four volumes of documents that made up the client’s submission, explains Ganado. “At the end of the day we were not the experts in the role.”
In reply to a question from the magistrate, Ganado says due diligence was conducted on the UBO, not the directors and officers.
The lawyer asks for the firm’s billing records, “to understand what he means by ‘helped the client’.” The court replies that this case was not about an issue regarding PwC’s billing.
“The relevance is that we are talking about PwC and Bluestone…we are in the process of gathering evidence.”
Relevant evidence, points out the court.
“That is something decided on at another stage,” says the lawyer.
Ganado confirms that PwC had assisted in the preparation of the bid submission. The lawyer asks him to elaborate on the other services provided to Vitals, VGH or Bluestone or companies related to them.
“As I already explained, our client was Bluestone Special Situation. Eventually we continued our relationship with Bluestone throughout and it was our client’s request to continue doing so. Eventually VGH became a subsidiary of Bluestone,” Ganado says
“The nature of the services was project-related. Discussions with banks about financing, tax advice and at some point in time they had appointed third parties in the UK for financial assistance and we were asked to review the structure. This had been requested by VGH, in the context of Bluestone,” he says.
Lawyer Stefano Filletti takes over the cross-examination and asks Ganado what Bluestone was and whether they had conducted any due diligence on it.
“It was an investment company,” replies the witness. “We had conducted screening for the UBO but as an investment company you would never…” he says before being cut off mid-sentence by Filletti.
The lawyer asks about VGH. “They were incorporated in the Bluestone structure further down the line. Bluestone Special Situation was the UBO of VGH,” he says, confirming that they effectively owned VGH.
Filletti asks whether the witness had ever provided tax advice to VGH after the concession. Ganado replies that he was not involved in that matter.
Galea asks the witness whether he was saying that he had not signed any documents.
Ganado explains his point.“Regarding that which I was responsible for, there was the submission about Gozo, which was a presentation. Then there was the RfP submission, which was not a PwC submission, it was done by Bluestone. On the basis of these two, no.”
After the concession was awarded there were subsequent engagements for PwC, he adds however.
Lawyer Vince Galea asks the witness about the client onboarding process. “Were there any red flags?”
“At the time, no,” Ganado replies. PwC’s role was to help bring together the business plan into a coherent whole, he says.
The lawyer questions PwC’s involvement in the financial side. “If you engage an architect to examine a building for a refurbishment, at the end of the day you have to rely on his input,” Ganado says.
“The financial model was built from the bottom up with different people. There was a discussion process where things which do not seem appropriate are challenged, but at the end of the day the final decision of whether a project is tenable is the client’s.”
Lawyer Giannella De Marco cross examines the witness. “You have just explained that you had two engagements. One about the business plan for the MoU…”
“The first one was for Gozo,” says the witness, confirming that Bluestone had paid for this.
“Then there was a second engagement…” the lawyer says.
“Helping Bluestone prepare the RfP submissions,” concludes the witness. The RfP was not limited to Gozo and was a different thing completely, he confirms. The MoU had lapsed by then, he says.
“It was about different things so much so that you needed a second letter of engagement, correct?” De Marco asks. The witness confirms this and that Tumuluri was the point contact.
Ganado also confirms that he had seen nothing untoward in the MoU or the RfP.
He confirms that he had seen a copy of the MoU after the firm was engaged to assist the Government. “The reference was specifically for the Gozo medical complex and there was a fixed time period to put forward a business plan.”
The firm was later also engaged to provide input from a project management angle. There were many discussions with professionals and experts about the financial aspect. The experts had come to Malta at Bluestone’s behest, he confirms in reply to a question from the magistrate.
Michel Ganado, a management consultant at PriceWaterhouseCoopers, is the next witness. He asks the court to release him from professional secrecy, which it does.
PwC’s first involvement in the deal was in October 2014 when they were approached by Singapore-based Bluestone to assist in the drawing up of a business plan to pitch to the Maltese government, Ganado tells the court.
He recalls that Bluestone’s UBO was Mark Pawley but the designated point of contact was Ram Tumuluri, he says.
Cardona says his ministry was not involved in the tender process.
The court asks the witness whether Muscat had been present for the signing of the MoU.
“Madame, if he had, I think I would remember it,” Cardona replies.
The ex-minister steps off the witness stand.
In cross-examination, lawyer Vince Galea asks whether he had seen anything that stood out to him or he was not happy with in the MoU.
“Absoltuely not,” he says. “I never was pressured by Dr. Muscat or anyone to sign this memorandum.”
Cardona insists that the MoU was not followed through because it did not specifically address the government’s plan to modernise the health sector.
The magistrate asks why it was signed then.
“A MoU is a preliminary, non-binding agreement to test the waters. To see the deliverables, whether there is a business plan that compliments the Government’s plan…otherwise you wouldn’t know what you are dealing with,” he says.
“At this stage, I am not sure whether any due diligence or enhanced due diligence had been done.”
Prosecutor Rebekah Spiteri asks him how Barts came into the equation.
Cardona reads from the MoU. “It was tied to the delivery. It was not tied to the hospitals, besides St Lukes. […] The government withdrew from the MoU subsequently.” The magistrate asks why it was signed then.
“To see whether it could provide this kind of deliverables.” Cardona replies.
Spiteri asks who had been present for the signature. Cardona doesn’t recall, but says he believes that it had been signed at the Auberge de Castille, home to the Office of the Prime Minister. I believe there were no other officials bar Malta Enterprise officials.”
“Someone from Castille?”
“I don’t remember.”
The October 2014 MoU has been located and is being read by the witness.
“First of all it is a memorandum between the Government and the investors in the project, which is why Malta Enterprise was involved,” Cardona notes. “The investors are interested in investing in a ‘Gozo Medical Complex’.”
He had only read the document when he had been summonsed to testify before the NAO. He had not read it before signing it, he says. Asked why he had signed it, he responds: “I was the minister responsible for Malta Enterprise. They asked me to sign it and I signed it…We had wanted to attract medical tourism and top notch academics.”
Cardona says the MoU was just one of a substantial amount of memoranda that he had signed during his tenure in the ministry. “I only signed it as a minister,” he says. After the signature, Malta Enterprise would handle the details, he says.
"In this case the MoU was not renewed, rather it was withdrawn...because it was established that it didn't lead to what the government wanted. If I remember correctly it only dealt with Gozo," he says.
Asked whether he had spoken to the investors, Cardona replies: "No. I don't even know who they are."
The sitting has just begun. Magistrate Rachel Montebello asks the first witness to be called in, and former minister Chris Cardona takes the stand.
The prosecutor asks him about his involvement in the concession. "I have been summonsed to testify about the Memorandum of Understanding, not the concession,” he replies. Cardona asks to see the MoU, which a court messenger is now trying to locate in the eight boxes of documents in the courtroom.