Café Premier director paid €210,000 as ‘debt’ for reaching €4.2 million deal

One of the shareholders in the Café Premier ‘bailout’ was paid €210,000 by constituting himself as a creditor – much to the chagrin of another shareholder – after the arrangement was secured to vacate the government property in the heart of Valletta.

The acrimonious split between the director-shareholders of Cities Entertainment Ltd was laid bare in an investigation by the police’s economic crimes unit into suggestions by Nationalist MP Jason Azzopardi as to whether “commissions” had been paid to secure the €4.2 million deal to rescind Cities Entertainment’s 65-year lease on the government property.

Details of the investigation – which MaltaToday has seen – concluded that there was no evidence of any criminal act or underhand payments.

But it was director Neville Curmi who suggested to police that his former business partner, Mario Camilleri, was paid €210,000 from the final price as a brokerage fee – something vehemently denied by Camilleri, who told police this was money owed to him by the company.

The €210,000 was eventually paid by Cities Entertainment Ltd to its own shareholder, M&A Investments.

Both directors denied paying any commissions to reach the deal, while MP Jason Azzopardi said that he had only asked – in a comment he had given to MaltaToday – whether any consultants in the deal had been paid “commissions” for their work; although he said he had no information to suggest that something criminal had taken place.

The police investigation stopped at the allegations, but did not follow the trail of the €210,000 debt claimed in the final payout.

The story of the €4.2 million deal was revealed by MaltaToday after it turned out that Cities Entertainment had been called to pay outstanding debts to the Lands Department back in late 2012. After being served with official letters of executive title to pay €200,000 in arrears for breach of contract, Cities Entertainment initiated civil court action to challenge the executive title action.

Wracked with mounting debts and losses, Cities Entertainment was paying a handsome €93,000 on their 65-year emphyteusis to run the café on Old Treasury Street, and an adjoining waxworks museum in Old Theatre Street.

But when it turned out that in July 2013 – only months after Labour had been elected in power – lawyers from both Cities Entertainment and the Commissioner for Lands ceased all court action, the agreement to ‘buy back’ Café Premier so that all government debts and dues could be settled started to ring alarm bells.

It was nothing short of a timely bailout. Attempts to sell off their lease on the market had been unsuccessful. In the end, it was Mario Camilleri who secured the deal to settle the company’s outstanding debts, and vacate the premises, which are situated beneath the National Library.

The police investigation makes clear that it was Camilleri who brought forward the offer to vacate the catering outlet so that the government could re-use the space for the Library above.

Originally, the parliamentary secretariat for lands had told MaltaToday that it had “found out” that Cities Entertainment “was negotiating with third parties to sell the business” – even though the original deed states clearly that the company cannot transfer the lease without government permission.

Now a consultant in the Office of the Prime Minister, architect John Sciberras – formerly director-general of the Government Property Division – evaluated Camilleri’s offer. No evidence was found to suggest that he had been paid anything to carry out the evaluation of the €4.2 million payment.

The amount paid to Cities Entertainment was established by the director of the Joint Office, architect Duncan Mifsud. His report on the property, which used a formula established by the previous government, remains under wraps after the Government Property Division refused a freedom of information request submitted by this newspaper.

Investigating police officers concluded in their report that no evidence suggested any criminal acts had taken place in securing the deal.

Only Neville Curmi insisted with the police that his former business partner had claimed €210,000 as a commission for brokering the deal – but Camilleri denied that the extra payment was a commission, he had demanded repayment for cash he forked out to keep the Café Premier afloat.

Premier saga

In February this year, the Lands Department paid out €4.2 million to Cities Entertainment Ltd in what Michael Farrugia, then parliamentary secretary for lands, dubbed an “amicable expropriation” intended to clear for the National Library the underlying cafeteria and any deleterious effect it might have on the Library and its invaluable manuscripts.

The government had told MaltaToday that the acquisition of the emphyteutical grant was intended to “eliminate once and for all any hazard that a catering establishment could pose to the treasures housed in the Biblioteca” and to build an elevator to improve access.

Farrugia said that any form of expropriation would have incurred compensation. “The final agreed value is also much lower than the value originally requested by Cities Entertainment.”

What captured the public’s attention was the fact that the government was paying Cities Entertainment money to pay back the company’s dues to the State: €307,346 to settle outstanding arrears with the government property division and €504,000 in capital gains tax owed on the land; €192,748 to the Inland Revenue Department to settle income tax and social security payments, €227,058 to the VAT Department on outstanding dues and legal procedures against the company, and €130,963 in energy bills for ARMS; and €3,265 to creditors Golden Harvest.

Additionally, Mario Camilleri’s company M&A Investments was paid €210,000, a debt which his former business partner Neville Curmi described to police investigators as “a commission” for securing the deal.

Finally, another €2,560,800 was to be paid to Banif Bank, in four instalments, in settlement of the outstanding bank loans that Cities Entertainment held with the bank.