Steward Healthcare: Labour banks on Adrian Delia ‘fraud’ case

The Maltese government has entered into a stalemate in negotiations with Steward, on the future of the maligned hospitals privatisation contract.

MaltaToday is informed that the Labour administration – despite voting in an additional multi-million budgetary spend on staff resources for the American company’s operations – is refusing an €80 million exit request for Steward.

Instead, it is awaiting the outcome on a court case filed by Nationalist MP Adrian Delia, the former Opposition leader, calling for the rescission of the Steward concession.

With a magisterial inquiry into the original Vitals Global Healthcare concession now even embroiling former prime minister Joseph Muscat, Steward officials could face the prospect of being dragged further into the ongoing investigation.

Steward is running three State hospitals, Gozo, Karin Grech and St Luke’s, as part of the 2014 deal crafted by the Muscat administration with the unknown Vitals Global Healthcare to run the hospitals on behalf of the State.

€100 million exit price

Adrian Delia, who as Opposition leader filed a case against the Maltese government as well as Steward Healthcare to request the rescission of the hospitals’ privatisation, thinks Steward’s endgame is a bid for a €100 million penalty secretly inked by former minister Konrad Mizzi in a 2019 side-letter.

MaltaToday revealed the existence of the side letter in March 2020, showing how the Maltese government was exposed to a hefty bill should the concession ever be rescinded.

The agreement was hammered out in August 2019 when Mizzi gave Steward an “escape clause”, that turns any termination of its concession into a government default.

The wording was part of an agreement in which the government acknowledged a €28 million loan from Bank of Valletta to Steward as “lender’s debt”.

But the agreement laid down that should the hospitals’ concession be terminated by a court of law – for whatever reason, and even if Steward is in breach of contract – such an event would be a government default.

And that would mean that all debts incurred by Steward would be passed on to the government, with the American company eligible for a €100 million contractual pay-out for its equity.

Government insiders baulked at the agreement, claiming the loan facility and Mizzi’s commitment to Steward was unknown to Cabinet colleagues.

Apart from placing the hospital lands under Steward’s control as guarantees for the debt, the agreement gave Steward unprecedented generosity by accepting that should the concession be rescinded by any law, public order or decision, judgement or decree – effectively any government or court decision – such an event will be “a non-rectifiable government of Malta event or default.”

Delia and ‘fraud’ admission

Steward is also embroiled in another court case, challenging a former Vitals Global Healthcare investor, Ambrish Gupta, of expectations of a €6 million payout.

But the concessionaire is claiming the original Vitals concession was obtained fraudulently.

Delia insists this admission means the hospitals privatisation contract has to be rescinded.

That would mean that a court decision upholding his request would also attack Steward’s claim for its €100 million payout.

Budgetary outlay to Steward

Despite the negotiations between the Maltese government and Steward, an additional €40 million was allocated to the health budget for Steward, over and above €50 million first allocated to the company in last year’s 2021 Budget.

The health concession agreements for the Gozo and Karin Grech hospitals, where the State pays Steward Healthcare for the labour resources that work at the state hospitals, were in 2021 costed at €35.6 million and €13.6 million respectively.

These budgets have now been increased by €26.5 million, and €13.9 million, respectively.

The supplementary allocation brings the total payment advanced to Steward in 2021 to €89 million.

The financial vote was approved in the House on the same day a damning National Audit Office excoriated the procurement methods employed in selecting the now-defunct Vitals Global Healthcare.