Oil trader believes he was blackmailed by former Enemalta chairman

Oil trader George Farrugia told a court that the money that he and former Enemalta chairman Tancred Tabone and former MOBC chief Frank Sammut had received on oil sales to Enemalta never increased the financial burden on the state utility company's oil purchases or energy bills for consumers.

Farrugia, who is State's witness on the charges of corruption against Tabone and Sammut, was an oil trader representing Trafigura and who diverted commissions for the sale of oil consignments to Enemalta, to both Tabone and Sammut.

Testifying in the case against Frank Sammut, Farrugia said that he believed he was being "blackmailed" by Sammut and Tabone into paying them kickbacks, as tenders submitted by TOTSA and Trafigura, which he represented in Malta, had always been the cheapest and most favourable tenders.

"Now I realise I was paying commission on contracts that I should have been awarded anyway. In the first three months of 2013 I understood why people committed suicide - I am no monster who burdened the country with expensive utility bills as the media pictured me to be," Farrugia told the court.

Complaining that he was unjustly described as rogue trader by the press, the witness said he was neither an oil trader nor did he ever negotiate oil purchasing contracts. "My job was to assist multinational companies to infiltrate new market," he said. Farrugia met Sammut while the former was the CEO of Enemalta's bunkering arm Mediterranean Oil Bunkering Corporation. "As CEO of Powerplan I represented Total. I found it very difficult to infiltrate the bunkering market, however Sammut once took me for a drive saying he'd give me work as long as he received 50% of my fees," he explained.

Farrugia said he not want to pay to win contracts but he agreed to pay to be allowed to operate.

He then said he paid some $100,000 in kickbacks to Sammut on diesel sales, and that he later learnt they were being shared with Tabone. "When Sammut left MOBC, Tabone called me to his office and said that he was in cahoots with Sammut and since Sammut left he wanted the whole lot for himself. I told him the oil market had started tightening up and he replied that unless I continue paying he had already spoken to AOT, which were ready to play by his rules."

Farrugia said Trafigura's representative Tim Waters had met Sammut in Malta, where he held a private meeting with him that lasted some 20 minutes. "Waters remained silent during the drive to the hotel, but the same evening while dining at the Buffalo Bill restaurant at The Hilton, he expressed his disgust at Sammut's proposals. He told me this was not the way the company did business."

Farrugia said that Waters had been requested a $0.50c commission on every metric tonne of fuel bought. The amounts would be invoiced directly by him and paid into an offshore bank account.

Subsequently Trafigura won an Enemalta tender, "not because of any promised commission but because they had the cheapest and most advantageous bid," Farrugia said.

Trafigura had not agreed to Sammut's terms but the former Enemalta consultant still issued an invoice of about $20,000 to them.

Farrugia said Trafigura had agreed to pay the invoice to play ball, having communicated to him that this was a one-time payment, "even if it cost them their contract."

"But Sammut kept invoicing them, and to safeguard the deal and my work, I started paying Sammut's commission from my profits," Farrugia said

Farrugia explained that they payments were being issued by his family business Powerplan or the John's Group, and paid into Sammut's offshore account. In one instance, Farrugia had been asked for a "brand new Ssangyong Korando vehicle" which Farrguia's company imported, as payment.

Under cross-examination by Joe Giglio, Farrugia said that his fees fluctuated from $0.25 to $1 per metric tonne, according to the type of contract won, changes in the oil market and the size of the purchase. "Sammut's commissions were always paid from my own profits and neither me nor the accused ever inflated Enemalta invoices to cover such commissions."

He also said he had no monopoly over the oil contracts with Enemalta and MOBC. "We also lost bids. But when we won tenders it was because we were the cheapest and most favourable not because of the commissions paid," Farrugia said, adding that both Total and Trafigura had storage facilities in Malta giving them a huge advantage on the bid's economies of scale, since they didn't need to charge storage fees.