Update 2 | Fenech: no connection between kickbacks and tax fraud investigation

Updated with statement by finance ministry and Tonio Fenech at 8:26pm

Finance Minister Tonio Fenech issued a statement late this evening declaring that a tax fraud allegation against oil trader George Farrugia had been delivered to his ministry from official sources, and insisted the allegations were not connected to any suspicion of corruption but to tax under-declaration.

In a statement intended as a reply to statements by Labour leader Joseph Muscat at today's mass meeting in Naxxar, Fenech said that his ministry had recieved information on Farrugia's company Aikon Limited's tax evasion in August 2011. "This information was in no way connected to an act of corruption," Fenech said.

The information was passed on by the minister to the Tax Compliance Unit for investigation - it turned out that Aikon's shareholder and director was then listed as Intershore Fiduciary Services, and no connection could be made with George Farrugia, who is the actual owner of Aikon, agent for commodities firms Total and Trafigura.

Fenech also categorically denied "any form of reference or indication" that reports in MaltaToday showing that Farrugia will reveal the beneficiaries of specific gifts, had no form of reference or indication in the information he had recieved and passed on to tax authorities. "This shows that any of the Opposition's attempts to tie this tax investigation with corruption allegations on fuel procurement are unfounded and serving only to confuse people's minds."

George Farrugia, the oil trader at the centre of the oil scandal was already on the government’s radar for alleged tax fraud in 2011.

Prime Minister Lawrence Gonzi had repeatedly denied having any knowledge of the oil procurement scandal, but it would appear that the finance ministry already had George Farrugia on their radar for potential tax fraud.

The Sunday Times indicates that the finance ministry had received a document in 2011 indicating “rampant tax fraud” on the part of Aikon Ltd, a company belonging to Farrugia.

The Ministry of Finance said that the document in question was forwarded to the tax compliance unit on August 25, 2011 according to The Times. The investigations are still ongoing almost two and a half years after the evidence first became known.

A spokesperson for the finance ministry said that tax fraud investigations are always lengthy by nature. A lot of data needs to be collated and a number of components parts need to be brought together in order to analyse the facts.

The tax abuse appears to be linked to the 2010 case where Farrugia was found to be siphoning off assets from oil trading firm Powerplan Ltd., a subsidiary of John’s Group co-owned with his siblings. Powerplan Ltd. was entitled to an above board $1 per metric tonne commission on oil sold to Enemalta though an agreement reached with Trafigura and Total.

Trafigura is the company embroiled in the centre of the oil procurement scandal for its ‘consultancy fee’ payments to Frank Sammut.

It appears that Farrugia was invoicing some of these sales under his own personal company, unbeknownst to his brothers. An investigative audit quoted by The Times estimates that Farrugia diverted some $8.6 million worth of commission from Powerplan to Aikon. The finance ministry has denied any knowledge of this audit.

Finance minister Tonio Fenech said in a reaction to comments by Labour MP Gino Cauchi that information received by his minister in August 2011 on a tax fraud investigation implicating oil trader George Farrugia of Aikon Limited, is "in no way related to any corruption allegation but was related to under-declared turnover with no link to the current corruption investigation."

Fenech said the ministry takes such matters extremely seriously, and that it had immediately forwarded the case for investigation to the Tax Compliance Unit on the 25th August 2011.

"All details received were immediately forwarded to the Head of TCU for investigation.

"It must be emphasised, that the information received by the ministry, which was reported to the TCU, was in connection with Aikon Limited. The TCU reported back that the shareholder and director in Aikon Limited is a registered fiduciary company going by the name of Intershore Fiduciary Services Limited. Hence, at the time of the receipt of this information, the TCU and the ministry were unaware of any possible link between the company and George Farrugia, or anyone else for that matter."