The American who knew a lot: Armin Ernst

It was on 11 August 2019 that Armin Ernst, Steward Health Care’s CEO in Malta, authorised the creation of what investigators believe was a political slush fund. 

In an email to Miroslav Boyanov, Steward International Chief Financial Officer, Ernst called the slush fund held by Swiss company Accutor a ‘consultancy agreement’. 

The email is arguably one of the most damning pieces of evidence to be unearthed in the Vitals inquiry that suggests intent to corrupt Maltese public officials, notably former prime minister Joseph Muscat. 

A German by birth, Ernst also holds American citizenship, with the inquiry suggesting that the email could also prompt investigations in the US on the basis of the Foreign Corrupt Practices Act. 

Ernst was a person of interest in the Vitals inquiry because he first appeared as CEO of VGH, the company that acquired the Malta hospitals concession, and after resigning, resurfaced as CEO of Steward Health Care that took over the concession agreement. 

‘Payment is 100K per month’ 

In his August 2019 email, Ernst wrote: “Miro - We have entered into a consulting agreement with Accutor supporting political and government activities and interactions. Payment is 100K Euro per month and the first bill will arrive this month and be paid [by] months [sic] end. I will need to sign off on all bills – Ralph is aware. Please plan accordingly.” 

The ‘Ralph’ mentioned in the email was a reference to Ralph de La Torre, Steward’s supreme boss. 

Ernst and De La Torre are both accused of partaking in criminal activity linked to the Malta hospitals concession. 

Accutor was a Swiss company owned by Wasay Bhatti and one of the associate companies was called VGH Europe before changing its name to Accutor Consulting AG in 2018. 

Just 16 days after Ernst communicated his instructions for the creation of the political fund, the Maltese government, represented by Konrad Mizzi signed a side agreement with Steward that would make the State liable to pay the company €100 million if the contract was annulled by the courts. The Auditor General had established that this agreement like many other decision related to the contractual aspects of the concession was kept hidden from Cabinet. 

The inquiry established that Steward starting making monthly payments of €125,004 to Accutor Consulting AG in September 2019. In all, nine payments were made by Steward Malta, with the last one being in May 2020. 

In total, Steward had paid Accutor €1.1 million on the basis of a ‘consulting agreement’ in support of ‘political and government activities and interactions’. Investigators suspect this was used to bribe Maltese officials under the guise of consultancy agreements. 

The significance of these payments is that they overlap with payments Joseph Muscat started receiving from Accutor soon after stepping down from prime minister in January 2020. 

Muscat reached a consultancy agreement with Accutor Consulting AG and received two payments of €15,000 each in March and April that same year. He received a further two payments of similar amount in May and June from an associated company of Accutor called Spring XMedia AG. 

Muscat has denied wrongdoing and insisted that all work conducted for the Swiss companies is accounted for. He has insisted that he will submit evidence of the work done in court. 

Indebted to Schembri 

The inquiry concluded that the political fund that was created on Ernst’s instruction was intended to settle any dues with Maltese political actors, who helped facilitate the transfer of the lucrative concession from VGH to Steward. 

These consultancy payments to Accutor were funded directly from money paid to Steward by the Maltese government for the operation of the three hospitals. 

The inquiry established that even Keith Schembri and Konrad Mizzi reached separate consultancy agreements with Accutor, making it highly unlikely that these were simply a matter of coincidence. 

The inquiry noted that whilst the replacement of VGH by Steward may have been in the public interest it also presented a large opportunity to the US company to take another step in its development of a global empire. 

“Without Mr Schembri’s interventions and influence and perhaps those of Dr Mizzi, it is difficult to envisage the takeover materialising. It seems clear that Steward and Armin Ernst would therefore have been indebted to Mr Schembri for performing such a pivotal role in the takeover process. It is therefore notable that we found several what are, in our opinion, most unusual consultancy and participation agreements being put in place at the time of the takeover, the beneficiaries of which were carefully concealed,” the inquiry states. 

Ernst’s senior role, first with VGH and then with Steward, put him in a position of being aware of the suspicious arrangements that characterised the VGH deal from inception. 

The inquiry found that Ernst knew that Pakistani national Shaukat Ali, who obtained a Maltese passport, was a major player in VGH even though he had no shareholding. An email unearthed during investigations shows how Ernst referred to Ali as “the major shareholder” even though on paper nobody from the Ali family held shares in the companies involved in the concession. 

Ali and members of his family were constantly kept in the loop of communication that took place between Ernst and Schembri. 

However, investigators were not surprised by such an arrangement. “[It] would be entirely consistent with the normal method of operating habitually employed by this group of investors to conceal their roles from public attention,” the inquiry states. 

The inquiry notes that Ernst’s knowledge of Ali’s hidden shareholding made him “complicit in the anonymization arrangements through his acquiescence of the concealed ownership scheme”. 

Aware of misappropriation of public funds 

Ernst was also aware of the improper use of public funds paid to VGH in the purchase of MTrace and Technoline, two companies intended to reap income from the concession to the benefit of their concealed shareholders. Investigators believe Schembri was one of the hidden beneficiaries of Technoline. 

Between 2016 and 2021, Ernst was responsible for the approval and signing of contracts with various suppliers to the hospital concession – IT services (OHUM), construction services (Shapoorji Pallonji), catering (Malta Healthcare Caterers Ltd), cleaning (Zenith Malta Division). 

Investigators believe that these contracts were used as part of a procurement fraud connected to the relevant suppliers and a company under the control of the Ali family – Incorp SARL.  

The inquiry notes that unlike the investors who formed part of VGH, Ernst had considerable sectoral experience in managing large healthcare facilities and projects. However, the inquiry says that during his term at VGH, despite holding the title of CEO, Ernst appeared to have little control of the project’s management and did not have access to the necessary financial information. 

The inquiry’s opinion is that under VGH, Ernst’s involvement “appears to have been nothing more than a well-chosen figurehead, who provided a necessary veneer of professionalism for those seeking to exploit the concession”. 

At VGH Ernst was paid an annual salary of €400,000 with discretionary company bonuses ranging from €100,000 to €200,000 annually. 

‘A kindred spirit’ 

Ernst resigned from VGH on 31 August 2017, listing a series of concerns he had about the concession’s progress. A couple of weeks later, Ernst was communicating privately with Keith Schembri over a possible takeover of the concession by Steward Health Care. 

Schembri and Joseph Muscat travelled to New York in September to attend the UN General Assembly. It was an occasion for Schembri to meet Ernst and discuss the concession takeover by Steward. 

In an email, he sent Schembri from his Gmail account after the meeting, Ernst described the Maltese government official as “a kindred spirit”. In the following months, Ernst was in constant communication with Schembri to iron out issues that were arising from VGH investors who were reluctant to sell off their shareholding. 

In December 2017, Ernst emailed Schembri about attempts by then-VGH chief Ram Tumuluri to salvage the VGH concession by roping in Partners Healthcare International and in the process disrupting the transfer to Steward. In his email, Ernst told Schembri of allegations that Konrad Mizzi was also supporting Tumuluri in these attempts. The former OPM chief of staff appears to have handled the matter successfully. 

A month earlier, Schembri sought Ali’s help to dig up dirt on Tumuluri and how he misappropriated public funds meant for VGH. The eventual report, which included several allegations of a criminal nature was only meant to be used as leverage over Tumuluri to convince him to acquiesce to the share transfer. 

In February 2018, Ernst was appointed Steward CEO in Malta after the share transfer deal was concluded.