HSBC drop-down menu blunder that sparked Panama falsification ruckus

It was a bank manager’s error on documents intended for Keith Schembri to open an offshore company in Panama that sparked claims in the press that the Prime Minister’s chief-of-staff had obtained falsified HSBC bank documents.

The accusation was that HSBC reference letters used by Brian Tonna of Nexia BT, to send to Mossack Fonseca, hailed from the shuttered Attard branch of HSBC in 2013, when the branch had been closed for over a year.

A court sitting last week on the defamation suit filed by Tonna against the Malta Independent’s former director Pierre Portelli – now the Nationalist Party’s media boss –  revealed the error HSBC said had resulted in the ‘Attard’ blunder.

“The reference letter’s format is a common one… but the person who issues it has to choose from the drop-down menu the branch’s address they belong to. Attard is by default the first one in the menu, so the relationship manager did not do his job properly and unfortunately the printed letter was issued with the first [branch] he found. That’s the explanation,” HSBC senior international banking manager Victor Muscat told the court.

But the drop-down blunder was simple enough to spark the allegation that HSBC assessments of the reputation and business performance of Schembri, had been falsified, since the Attard branch had in fact been closed in February 2012, over a year from the issuance of the letter in 2013.

“The address does not come up automatically. The menu comes up, it starts from Attard, and you have the rest of the branches in alphabetical order,” Muscat continued. “Then you scroll down and choose. Now if you don’t choose and you print it as is, it will choose the first one on the drop-down menu.”

As ‘luck’ would have it, it turned out that the Attard branch had been shuttered.

The letter was retrieved from the Panama Papers data trove, leading to the allegation first made by journalist Daphne Caruana Galizia and then taken up by her host newspaper, the Malta Independent.

When the newspaper repeated the allegations, HSBC announced a bank probe. Soon after, the bank said the Attard letters had been issued due to an administrative error within the bank’s correspondence system and templates. A letter from commercial banking head Michel Cordina stated that the letters were “legitimately issued on [his] request in terms of standing procedures.”

Tempered by this clarification, the Malta Independent was first to back down, saying it was “now satisfied that in this matter no wrongdoing can be attributed to Mr Keith Schembri and Mr Malcolm Scerri, or their financial consultants Nexia BT.”

Caruana Galizia stood her ground, saying a former senior bank executive told her there was “no way this specific template could have been retained in the system, still less used ‘by administrative error’.”

In a list of questions to HSBC she suggested that such an error would have to be committed twice (two reports were issued, one for Schembri and the other for his business director Malcolm Scerri), and then not noticing the Attard detail on the letter once printed. “Please explain how this was possible in a highly trained bank official.”