Dalligate redux: OLAF’s lax probity in snus investigation

As in all matters dealing with John Dalli, even the evident shortcomings of the infamous OLAF investigation – widely seen as the pretext for Barroso to oust him from office, allegedly at the behest of Big Tobacco – often fail to give the former commissioner a clean bill of health.

Like so many politicians of his time, the finance minister from Qormi balanced his considerable popularity with allegations, some whispered, others not, of impropriety. At his apex, he made a bid for PN leader in 2004, losing to Lawrence Gonzi. A year later, the new prime minister was asking him to resign after the police received allegations that Dalli was taking kickbacks on the new national hospital construction contract. The allegations turned out to be a fabrication by a former police officer posing as a private investigator, who would later be convicted. Just ahead of Gonzi’s 2008 re-election, Dalli was ‘rehabilitated’, and soon made foreign minister. Then two years later, Gonzi kicked him upstairs when the self-styled ‘father confessor’ to errant MPs started making moves yet again.

But even in his Brussels sojourn, as in Malta, Dalli always seemed to be occupied with side-gigs that – unbeknown to all – betrayed his inability to ward off any conflicts of interest.

It only became known in 2013, a year after he had resigned following the OLAF report, that he had taken a Bahamas ‘holiday’ to meet a group of American, Christian investors, together with his daughter. The central antagonist was a con-woman, Marie Eloise Corbin Klein, who employed Dalli’s corporate services via his two daughters. Posing as a Christian missionary, Klein, 75, convinced a group of Americans to invest $600,000 in an African mining project. The FBI, investigating the fraud, called it a Ponzi scheme, with the cash – $600,000 – going to two Maltese companies, Tyre Ltd and Corporate Group, owned by Louise Dalli and Claire Gauci Borda. Dalli himself has always denied any wrongdoing, even though his two daughters are now still facing charges of money laundering and misappropriation of funds in connection with the FBI investigation.

Then in 2021, the ICIJ leak of secret offshore companies in the Pandora Papers revealed that Dalli had since 2006 owned a BVI company, Westmead Overseas. Dalli never declared its existence to the House of Representatives or when he was appointed European Commissioner. Dalli’s daughters later took over as the company’s directors before it was struck off from the BVI registry in 2013.

This reputation for lax probity haunts Dalli, even while having assiduously protested his innocence in the OLAF investigation, which even back in 2012 smacked of serious errors of judgement in the way it was marshalled by its chief, the Italian prosecutor Giovanni Kessler.

Shortcomings of OLAF investigation

The serious shortcomings of the four-month investigation, endorsed though they were by Maltese police who pressed charges against Zammit first in 2012, then belatedly against Dalli in 2021, today appear as a charade of European standards.

OLAF firstly instructed its Maltese liaison, the Prime Minister’s internal audit unit (IAID) to question Silvio Zammit, who was corralled into an interrogation with an apparent lack of due process. Zammit was first given less than 24 hours’ notice to attend the grilling, breaching OLAF’s minimum 10 working days’ notice as laid in EU regulations.

But then Kessler suspiciously ‘extended’ what was an internal OLAF investigation into an external investigation on EU funds, because OLAF rules do not allow officials to conduct interviews outside the EU institutions. In order to fly down to Malta to personally interrogate Silvio Zammit, he contrived an investigation on EU funds that concerned Zammit, then Sliema’s deputy mayor, and his business. To do this, he had to convince OLAF’s internal review unit, the ISRU, which later declared that the investigations’ extension was “doubtful” and had “very limited evidence” of what financial interests were affected to justify the spot-check at Zammit’s business premise. Despite the flimsy grounds, the ISRU still proceeded to grant the extension, giving Kessler the go-ahead to rope in the OPM’s IAID.

Controversially, Kessler and two aides decided to intercept Swedish Match lobbyist Gayle Kimberley during a business trip in Portugal for her employer, the Malta Gaming Authority. As described by Kimberley, whom Kessler later wanted police to prosecute, she was “ambushed” by Kessler and asked to be questioned in their room. “There were three of them,” she said. “They said ‘we are here from Brussels and if you do not cooperate you know what will happen. You are a public officer… you are being interrogated as a witness’.”

Questioned by Kessler without any legal assistance, Kimberley said OLAF’s men showed an overbearing demeanour, demanding to see her computer’s files over the course of a six-hour meeting. And then, after his hard-nose grilling, she was taken out for an informal dinner with Kessler, where she accepted some wine. When MEPs in the European Parliament learnt of the way OLAF was carrying out its investigations, calls for an audit into Dalligate rang out.

The agency’s supervisory committee was tasked to analyse the investigation. It found that OLAF’s requests for Maltese phone records, as well as its instigation of Estoc to secretly record Silvio Zammit, had not been lawful. OLAF’s own internal review unit had not carried out proper verification of the legal grounds for Kessler’s requests for the phone records which he used as the “unambiguous circumstantial evidence” of the link between John Dalli and Zammit’s bribe request from Estoc.

Dalli did find a phalanx of MEPs backing him: some like French Green MEP José Bove suspected a Big Tobacco conspiracy behind Barroso, a saga recently immortalised in a French movie released this year; others like German EPP MEP Ingeborg Graessle, rued OLAF’s overweening powers. Anti-corporate watchdogs believed Dalli had been entrapped over the review of the powerful Tobacco Products Directive he wanted pushed.

Additionally, in a recording – this time lawful – of a conversation between Bove and Swedish Match officials, it turns out that the company had been aware that Gayle Kimberley had lied to them about an alleged meeting she had had with Dalli. No, the meeting in which Dalli would have discussed a request for money never happened. But then Silvio Zammit had already had a phone-call with Kimberley’s boss in Swedish Match where he suggested a hefty €60 million bribe – and it was at that point that Swedish Match and Estoc took their complaint to the EC.

And they did this by engaging a former Commision official, Michel Petite, now working for lobbyists Clifford Chance (whose clients included tobacco giant Phillip Morris); Petite went directly to Commission secretary-general Catherine Day with the allegations on Zammit and Dalli. OLAF was tasked to carry out the probe – a four-month slog over the summer of 2012 that started with Gayle Kimberley.

Kessler gives Barroso firepower

In the immediate aftermath of Silvo Zammit’s arraignment in December 2012, Dalli sought health treatment in Brussels. When elections were announced, with a three-month campaign starting in January 2013, any planned arraignment of Dalli was suspended. After Labour’s election in March 2013, police chief John Rizzo was replaced; his successor Peter Paul Zammit was of a different opinion on prosecuting Dalli, who in 2014 was made an advisor to then prime minister Joseph Muscat.

These fair winds allowed Dalli to keep up his fight against his detractors, mainly Kessler, who after losing diplomatic immunity in 2016 could be prosecuted by Belgian investigators for having instructed Estoc to secretly record Silvio Zammit soliciting a multi-million bribe.

The definitive sentence against Kessler was issued in June 2024: a conditional release, downgraded from an original one-year prison sentence, for his illegal wiretap. Dalli toasted the symbolic victory this week, by declaring that a “corrupt conspiracy” is still exerting its influence – from within the Commission, the Maltese administrations, the forces of law and order, as well as the press.

That Kessler exceeded the bounds of what a regular investigation should be, had been clear all along.

But even more clear was José Barroso’s enthusiasm in seeing Dalli leave the Commission days before his Tobacco Products Directive came into force. The OLAF investigation, flawed as it was, had given him enough firepower to see Dalli out of the Commission. Barroso moved fast, before the OLAF report could be taken out by its own supervisory committee for any alleged breach of procedure. He made sure OLAF announce the results of the investigation the very day its covering letter fell into Barroso’s lap.

Indeed, it had been Dalli’s procedural mistake to voluntarily step out of the Berlaymont building, instead of forcing Barroso’s hand to make him resign.

As he told the European Court of Justice in Dalli’s unsuccessful lawsuit for unfair dismissal, Barroso said that upon reading OLAF’s covering letter, he felt the “very serious accusations” of improper contacts with Gayle Kimberley – an unregistered lobbyist for Swedish Match – and knowledge of attempted bribery as claimed by OLAF, had pushed him to ask for his exit.

Indeed, Barroso conceded that apart from Dalli’s denials and OLAF stating there was “no conclusive evidence of the direct participation” of Dalli as instigator or the mastermind of the bribe, the EC president felt that it was “bizarre” that Dalli kept questionable acquaintances like Silvio Zammit. He had to go.

The Kimberley factor

The other part of the bizarre snus triangle is the role of Maltese lawyer Gayle Kimberley.

Kimberly was tasked by Swedish Match, through mutual contacts in her past role inside the EU institutions, to secure a meeting with Dalli. In tiny Malta, she could count on a network of acquaintances who could take her there: she was intimate with a gaming authority colleague, Iosif Galea, who knew both Silvio Zammit and Dalli.

But by the end of the OLAF investigation, Kessler was recommending that Kimberley be also charged for her role in the affair.

Today, it is arguable that Kimberley was, in part, coaxing Silvio Zammit to either mollify Dalli, or utter the unspeakable to Swedish Match.

On 13 February 2012, when Zammit told a visiting Swedish Match official at his own restaurant in Sliema, to pay €60 million to lift the snus ban, the company told Kimberley to sever all contact with Zammit.

But it did not stop there. On 29 February 2012, Kimberely and her husband Matthew sent Zammit the contents of a lobbying proposal via email: it was the recycled proposal Kimberley had sent to Swedish Match back in November 2011, requesting €5,000 to set up a meeting with Dalli for the company.

In the email, Kimberley’s husband Matthew tells Zammit:

“Silvio, suggest you forward this to Inge [Delfosse: Estoc secretary-general]. Gayle is in copy. You may like to wait for her input before sending.”

On 2 March 2012, Matthew Kimberley advances Zammit a €3,540 bank transfer via his company You Rock Ltd.

On 8 March 2012, Zammit sends Estoc the email, erroneously leaving the original instruction from Kimberley – ‘Re: Copy/paste proposal’ – in the subject line.

Estoc forwards the email to Swedish Match, whose vice-president Patrik Hildingsson tells Delfosse that it was Zammit who had solicited €60 million for a meeting with Dalli to lift the snus ban.

On 15 March, Delfosse tells Zammit she is confused at the proposal; when Zammit informs Kimberley, she reacts with some urgency: “Mela you left the title of email ‘copy/paste proposal’???”. She namedrops Iosif Galea – he was supposed to have confirmed the correct proposal to Estoc. And she scripts an answer for Zammit to send back to Delfosse.

At 11:32pm, Zammit sends back the ghostwritten email: he was only using You Rock as consultants, but he is offering his services “alone and personally”.

OLAF is already on the case at this stage.

On 29 March, Zammit calls Delfosse, and repeats his bribe request, this time pared down to €10 million for a meeting “between my boss and your boss”. OLAF chief Giovanni Kessler has all he needs.

When Swedish Match alerted Kimberley of the copy-paste proposal, she writes back to her contact that she was unhappy about Zammit’s misrepresentation. Under questioning by OLAF months later, she claimed she had told Zammit that her services were no longer available, “‘Make it clear to whoever you are dealing with’. Silvio assured me that he would do this.”

Kessler must have been unconvinced.

The conclusion of OLAF was that the indications were that Kimberly was involved in the bribe request, accusing her of contradictions in her testimony, and of denying contact with Zammit when phone records showed the contrary. “Depending on the interpretation of the facts, she might be responsible for bribery and/or trading in influence…”

Why?

OLAF investigators knew that Kimberley had lied about a second meeting on 10 February 2012 she had alleged to have had with Dalli – the day of St Paul’s feast – supposedly the one in which Dalli was said to have moved out of the room in which Kimberley met him with Zammit by his side, while Zammit then floated the possibility of a bribe. On 13 February, Kimberley reported the fictitious meeting to her Swedish Match handler Johan Gabrielson.

But as Gabrielsson revealed personally to the French MEP José Bové in April 2013, it was OLAF who informed him that Kimberley had lied about this ‘second meeting’ with Dalli.