‘Untruthful, deplorable, unethical’ – How top civil servant fell from grace

A damning report by the National Audit Office has raised serious doubts about Rita Schembri's suitability to head the Prime Minister's internal audit and investigations department (IAID), after she lied under oath to a board of review that investigated the abuse of her public office.

Such was the extent to which Schembri tried to mislead the NAO's board about her abuse, that the Auditor General's office had to remark how saddened it was at "the irony" of the highly paid permanent secretary "having committed these offences when serving in the role of across-government champion of governance...wherein nothing short of exemplary behaviour is expected."

But Schembri - until recently even a member of the supervisory committee of the EU's anti-fraud office, OLAF - was far from a champion of governance.

Currently out on long leave since the start of the inquiry in November 2012, the permanent secretary seriously compromised her public position by using her IAID office at South Street, Valletta, to carry out private business and concealed the extent of her interest in a casino share acquisition to her superior Godwin Grima, formerly the head of the civil service.

Only two weeks ago she resigned from the OLAF supervisory committee: as head of the IAID, she also headed the anti-fraud coordination service (Afcos) to assist OLAF director Giovanni Kessler's collection of information on John Dalli and Silvio Zammit, the latter charged with soliciting a bribe from the company Swedish Match in a bid to reverse an EU trade ban on snus tobacco.

Within weeks of Dalli's resignation in 16 October, Schembri's role in the Dalli investigation propelled her into the public eye. In November MaltaToday broke the story that she was assisting Far East Entertainment plc to acquire a 40% stake in the Casinò di Venezia, in breach of the public service management code.

By December, the head of the civil service - as chair of the Internal Audit and Investigations Board (IAIB) - decided that it should be the National Audit Office, not the Public Service Commission, that decides on Schembri's professional conduct. When the NAO refused, because disciplinary procedures were not in its remit, Finance Minister Tonio Fenech affirmed Grima's recommendation.

The ad hoc board set up by the NAO was unsparing in its meticulous investigation: "Schembri's behaviour and actions were unacceptable and deplorable in the case of any public-serving officer. There were cases when a high degree of a lack of ethical standards was evident... Such a lack is a critical handicap to Ms Schembri's occupying any position of trust or management within the public service."

Based on 20 "extremely detailed and intensive" interviews and an analysis of her emails of January and February 2012, the NAO found that Schembri misused government resources, carried out non-office professional activity, and compromised her position as IAID chief through her conflicts of interest and other ethical issues.

Casino involvement

The NAO established that Schembri had a "heavy involvement" in FEE's multi-million-euro bid for a share acquisition in the Casinò di Venezia - which she had denied both to Godwin Grima and to the NAO - and that she used her IAID office to meet auditor Philip Rizzo to get his perspective on the casino bid.

Rizzo would later reveal himself as the whistleblower in the case, revealing the extensive email evidence that showed Schembri to be a node of communication for FEE chairman Colin Perkins and also showed another shareholder, Schembri's personal lawyer Pio Valletta.

In several instances, Schembri was found by the NAO to have lied to civil service head Grima that she had only used her personal email address to correspond on the casino bid. "Contrary to her formal statement to the IAIB chair...Schembri was customarily emailed on her official gov.mt account, rather than (as stated) on her private Hotmail one," the NAO said, listing 89 emails referring to private matters she handled during office hours, pertaining to the casino deal, a court litigation on her sub-lease of a restaurant (which later made the news in other court reports) and the sale of her Wardija residence.

The "interminable" exchange confirmed the fact that Schembri had been tasked by Colin Perkins, a family friend, to liaise with Philip Rizzo on the acquisition of the casino and the adjacent hotel on the Vittoriosa waterfront. But as the NAO found, her role was "more onerous than her self-declared one of appraising Mr Rizzo for Mr Perkins."

Proof of this was a lengthy email she sent the day of her 15 March 2012 meeting with Rizzo at the IAID office, supplied to the NAO by none other than Perkins himself: it proved how intimate Schembri was with the details of the multi-million bid for the casino, suggesting to Perkins how best to negotiate an offer to Vittoriosa Gaming Ltd, the operators of the Casinò di Venezia.

Schembri for her part insisted that that meeting had been work-related, claiming it was connected to an audit of the disabled people's charity Inspire Foundation, of which Rizzo was honorary treasurer.

Rizzo's version of events, also declared under oath, differed. Substantiated by the documentary evidence of the emails, Rizzo said that it was Dr Pio Valletta - Schembri's lawyer - who had recommended him to Perkins and that Perkins suggested that both Schembri and Rizzo meet to discuss the casino bid.

Describing Schembri as "a kingpin" in the FEE operation (although Perkins disputed this), Rizzo also revealed that Schembri had met another lawyer, John Refalo on the casino bid.

"Schembri was taxed by this incident," the NAO noted, having claimed that she had only spoken to Refalo as the legal representative of the hotelier building the hotel next to the casino about some outstanding debts. But Refalo's version differed: "She called me on the phone and asked me if I could pass round her office. She didn't tell me what for, and I went." He then confirmed his statement again in an email to the NAO, saying that when he met her "I had no idea that she would be talking to me about the casino."

The NAO subsequently deduced that Schembri had been untruthful in several of her statements. "While Refalo, at face value, would appear to have no motive at all to be untruthful, the same cannot be said for [Schembri]. Admitting to having solicited herself a second person to attend a non-work-related meeting at her IAID premises during working hours would impinge badly on Schembri's case of abuse of government assets, hence her motivation for denial."

Misleading by playing down her role

The NAO's investigation was further crucial in establishing whether Schembri was earmarked for a success fee, like others who were promised a share in the casino bid instead of a fee for their ongoing consultancy.

While FEE chairman Colin Perkins and Pio Valletta denied that Schembri had been on a fee, the NAO board declared that Schembri's claim of having played a peripheral role in the casino bid was "purposely misleading and false."

While Perkins and Valletta claimed Schembri was only a friend whose consultation had been gratis, the NAO said the content of the emails between Schembri and the rest of the FEE team showed she was well acquainted with the deal.

On his part, Perkins told the NAO that he never engaged Schembri as a consultant and had never offered her such a role. In fact, his description of the friendship with Schembri tallied with her own account of how they met on an airplane and their subsequent meetings in Malta. Perkins even wrote to Godwin Grima to protest at the "misinformation contained in articles published in MaltaToday" in an email dated 13 November 2012 - which was a week before Philip Rizzo came out in public with clear evidence showing that Schembri had a serious conflict of interest.

In his interview to the NAO, Perkins defended Schembri as "probably one of the most honest people I have ever known. That woman would not take a penny from anybody" and denied having offered her any money for her role, which he claimed she had provided him as a friend.

The version that Schembri was not a key player in the casino bid was also supported by Pio Valletta. But the NAO said that the main question facing it was whether Schembri was indeed peripheral to the project or not.

In fact the investigative board set much store in an email in which Perkins includes "Rita" as part of "the team," and where he says that Rizzo will "participate with us in a shareholding." When the NAO faced Perkins with this email, the FEE chairman disowned his own email in favour of his sworn statement to the NAO, while Valletta declared that Perkins was wrong to have included her within "the team."

"What is enigmatic is that Perkins should ask Ms Schembri on 15 March 2012, a friend on the periphery, offering friendly help on a free-of-charge basis, to assess Mr Rizzo, a consultant he had already praised behind his back and to Ms Schembri's face on 2 March 2012, a full two weeks before the 'assessment' was to be held," the NAO said.

Indeed, emails already revealed by MaltaToday showed Schembri asking Perkins for guidance on her "role" prior to meeting Rizzo. Perkins replied, "As was before, you like Philip, are an important part of our presence in Malta."

This email alone suggested to the NAO that Schembri's role was not simply that of sizing up Philip Rizzo. In subsequent interviews, the NAO challenged Schembri on her declaration that her discussion with Rizzo on the casino bid had been secondary to her official inquiry on his role as treasurer for the Inspire Foundation. A "confused" Schembri found it difficult to convince the NAO that her decision to interview Rizzo was based on the Inspire audit.

"In actual fact, NAO through questioning IAID staff who worked on the Inspire audit, discovered that while IAID interviewed and spoke to a number of persons in connection with the Inspire audit, they never had cause or reason to contact Mr Rizzo during the entire audit exercise."

On the basis of its documentary evidence, the NAO concluded that Rizzo's version of the proceedings of the meeting was nearer the truth than Schembri's. "The main topic on the agenda... was the dealings related to the acquisition of the casino shares by FEE, rather than the Inspire audit, which possibly did not feature at all."

Additionally, the NAO discovered that Schembri provided Perkins with a detailed response on tax issues, shareholding rules, emphyteusis, returns on investment, casino licence details, gaming rules and architect valuations. They were "indeed detailed, to the point and professional in nature, covering a plethora of non-homogeneous topics."

Although the NAO challenged her on the professionalism of her response, Schembri claimed she had provided Perkins with a 10-minute job. But she later retreated one notch, and then another, as she revealed that there were preceding emails connected to the detailed proposal.

"Regardless of the fact that [she] tried to play down the incident, Ms Schembri's statements including untrue ones were made under oath...From a technical point of view, that so critical a matter as the acquisition of assets worth tens of millions should be so cavalierly discussed 'between friends' and that advice should be sought in such an informal manner is deemed by NAO to be surrealistic and certainly not businesslike/practical/pragmatic."