EXPLAINER | Enemalta oil scandal, Aikon Ltd, George Farrugia and Intershore

What does Intershore Fiduciary do? | Who is George Farrugia? | What has Tonio Fenech accused Intershore of? | What did he accuse Labour of? | Is Fenech right about Joe Cordina, Intershore and Aikon? | What has Labour's angle been on this affair? | How does this tie in with the kickbacks on oil? | What is Tonio Fenech's relationship with Farrugia?

What does Intershore Fiduciary do?

Intershore served as a nominee company for George Farrugia's Aikon Ltd. Between 2002 and 2010, it appeared as the director of Aikon Ltd.

Not everyone can create a fiduciary company or be its director. The company must be a licensed institution, regulated by financial regulator MFSA, and its directors must have a good reputation, a good banking reference, be professional accountants and lawyers, and pass a due diligence analysis.

The nominee company renders its service to a client who must be vouched for as a 'bona fide' client by a professional - as was George Farrugia at the time, who came on recommendation of his auditor Ray Stafrace.

On instructions of the 'real owner', Intershore acted as the shareholder, director, and company secretary so that Farrugia does not reveal his interest and participation in the 'target company'.

The fiduciary, on the basis of the agreement with the owner, does not need to run the business. It needs to submit annual returns to the regulator on behalf of the owner. The MFSA usually sends its inspectors to see if a fiduciary is doing its job well, and that it is not fronting an illegal operation or managing third party funds obtained illegally.

Who is George Farrugia?

George Farrugia is the oil trader who turned State's evidence on the strength of a presidential pardon, after MaltaToday broke the story that Trafigura - whom Farrugia represented - paid commissions to a former Enemalta consultant, Frank Sammut, on the sale of oil to Enemalta.

One of the brothers who run the John's Group, he ran family subsidiary Powerplan, formerly the agents for Trafigura and Total. In 2010, his brothers accused him of siphoning €6 million in oil commissions into the company Aikon Ltd.

When the lawsuit was filed, Intershore withdrew its representation of Farrugia, who became Aikon Ltd's sole shareholder and director, but also continued to represent Total and Trafigura who continued to make business with him, not Powerplan.

What has Tonio Fenech accused Intershore of?

When the Times revealed that Aikon Ltd was the subject of a tax fraud investigation by the Tax Compliance Unit, it was later revealed by MaltaToday that the investigation had been started by the Malta Security Service and then forwarded to the finance ministry in August 2011, before landing in the lap of the TCU.

Tonio Fenech later imputed Labour of having used its knowledge of the operations of Aikon Ltd, to capitalise on the corruption story revealed inside Enemalta, for its electoral purposes.

Intershore's director is Joe Cordina, a Labour candidate and the PL's financial controller, Fenech upped the ante, accusing Intershore of having been party to any illegal activity Aikon Ltd may have carried out, by having carried the legal responsibility for the company before January 2011. Since the suspect commissions Trafigura paid to an Enemalta consultant took place in 2004, Fenech said that Intershore's director (he has only mentioned Cordina, not another director, former PN candidate martin Fenech) should also take responsibility for this.

What did he accuse Labour of?

Fenech said that lawyers engaged by Powerplan to get their money back from George Farrugia are all Labour candidates, but his lofty accusation is that they are "behind the oil scandal" - so he tied the tax investigation, the nominee company, the Farrugias' lawsuit with the oil kickbacks.

This obfuscation is partly also Labour's fault: when the TCU investigation was made public, Labour MPs claimed that the TCU should have made a link between Aikon Ltd's tax fraud and the oil kickbacks,

Since PL candidates Manuel Mallia and David Farrugia Sacco were legal counsels to Powerplan, Fenech said that they knew of all this before the story was made public.

He also reiterated that Intershore director Joe Cordina was "criminally responsible" for Aikon's activities. "If there's a party implicated in this whole matter, it's Labour."

However, it has to be pointed out that the Powerplan suit is unconnected to the oil scandal in which Trafigura was found to have paid Sammut commissions for Enematla oil supplies.

Is Fenech right about Joe Cordina, Intershore and Aikon?

This is unclear for the time being.

1. Intershore was not involved in the running of Aikon Ltd, and it received compliance visits by MFSA which would have raised the alarm of whether its stewardship of its affairs were illegal or irregular.

2. Secondly, what illegal activity did Aikon Ltd engage in? Did Intershore have a role to play in any tax fraud? Its directors claim they filed the annual reports filed by Aikon Ltd's auditor.

3. MaltaToday has revealed that Intershore only had access to Aikon Ltd's account at Bank of Valletta which totalled €333,726 in funds. The bulk of the €6 million that Farrugia was accused of having siphoned off by his brothers must have gone to his personal Swiss bank account: which Intershore was not responsible for.

4. Fenech accused Intershore of illegal activity by quoting the contents of a management audit by the company FST Consulting, which was employed by Powerplan. FST Consulting concluded that Intershore "was an accomplice to the fraudulent activity" of Farrugia and his wife, since the directors should have realised that Aikon's activities were in direct competition with Powerplan's business.

5. In the meantime, Cordina resigned his position as Labour financial controller as well as withdrew his candidature for the elections. Labour claim Cordina "assumed political responsibility" - but it is clear that Cordina's role here is embarrassing for the PL.

What has Labour's angle been on this affair?

Labour muddied the waters from the start by implying that the tax investigation into Aikon Ltd should have alerted the authorities to the oil kickbacks going on. This is unclear at best: so far only the 2004 kickbacks have been established, long before Farrugia assumed visible ownership of Aikon Ltd.

Labour also raised questions as to why the TCU didn't realise in August 2011 that Aikon Ltd was owned by George Farrugia - Fenech claimed the TCU only focused on Intershore director. It is hard to think that the TCU - hard-nosed tax investigators - could not have realised the link between Aikon and George Farrugia.

Additionally, George Farrugia, now State's evidence on the Trafigura kickbacks, told police he had once gifted Tonio Fenech with an artisanal clock. This led Labour to surmise that once again, Fenech was being economical about the extent of his relationship with George Farrugia.

Three Labour MPs have now filed for criminal slander against Fenech and PN secretary-general Paul Borg Olivier. Fenech did the same, over allegations he received a €5,000 artisanal clock from Farrugia. What's in dispute is the value of the clock, and the implication that it served to win his favour - but that's up to the courts to decide.

How does this tie in with the kickbacks on oil?

It doesn't, so far, even though Labour was keen on implying a connection, and the Nationalist Party has been confusing the two issues.

The tax investigation on Aikon Ltd appears to be unrelated to the criminal investigation that started on 21 January 2013 which has led to the charges of corruption against former MOBC and Enemalta consultant Frank Sammut and former Enemalta chairman Tancred Tabone, and two partners in Tabone's Island Bunker Oils, Francis Portelli and Anthony Cassar.

The origins of this criminal investigation stem from the fact that Trafigura directly paid Frank Sammut through an HSBC account in Geneva, into his company Energy & Environment Consultants, based in Gibraltar, back in 2004.

And questions remain unanswered: what other commissions were paid on the supply of oil to Enemalta? Did Island Bunker Oils benefit from the sale of MOBC to the State and the release of excess storage capacity? What inside knowledge did Sammut and Tabone bring to Island Bunker Oils?

What is Tonio Fenech's relationship with Farrugia?

It has now been established that Fenech was visited by George and his brother Ray Farrugia, to give him an artisanal Maltese clock (tal-lira) that the trader's sister-in-law had made as a gesture of appreciation, the minister claims.

Fenech also asked for a confrontation at the police headquarters with George Farrugia - who has turned State's evidence on the allegations of kickbacks - over allegations made by Labour MPs that Farrugia had told police of the gift.

Fenech said he had met Ray Farrugia at a social activity: according to Fenech, Farrugia pointed out that his wife "admired me a lot and that she wished to gift me with this clock... the gift was made to me before I became responsible for Enemalta in 2010."

George Farrugia - according to Fenech's version - told the police he personally came over to the minister's house with his brother Raymond, but Fenech said he does not recall George Farrugia being at his house.

As for the value of the artisanal clock, Raymond Farrugia's gracious wife will have to answer for that...