Prime Minister’s Gaffarena case could have criminal consequences

A criminal investigation into the €1.65 million expropriation of Marco Gaffarena’s 50% share in the 36, Old Mint Street, Valletta building could be precipitated by the very case that Prime Minister Joseph Muscat personally instituted to recoup the government lands transferred to Gaffarena.

The Qormi property developer was granted €516,000 in cash and the rest in government lands he selected in return for his share in the Valletta palazzo that houses the government’s BICC offices.

The irregular expropriation has cost former parliamentary secretary Michael Falzon his Cabinet position, but also prompted the resignation of civil servants who facilitated an expropriation that had no public purpose, and whose erroneous valuations netted Gaffarena an aggregate €3,378,000.

But under legal action instituted by Muscat to recover the wrongly-valued lands, the prime minister could also kick-start a criminal investigation.

Under the Disposal of Government Land Act (DGLA), any person “who enters into or appears on any deed, instrument or contract” in contravention of the DGLA’s provisions is guilty of an offence and liable on conviction to a fine of not more than €2,329 or imprisonment not exceeding six months, or both.

The contravention must be in breach of Article 3 of the DGLA, which lists the ways in which government land can be disposed of – article 3 (g) states that no government land can be disposed of unless it is made “in accordance with any other law for the time being in force”.

The question is whether this would apply to the DGLA’s Schedule, which does not allow the exchange of lands for expropriation purposes – as happened in the Gaffarena case – “if the value of the government land to be given exceeds 30% of the value of the expropriated land”.

Even so, under the DGLA it is a defence for any person to prove they took “reasonable steps to ascertain that the deed, instrument or contract would not, where made, be in contravention of the provisions aforesaid”.

The other question to ask is whether any breach would directly affect Falzon, who rubber-stamped the expropriation, or the former GPD directors, who have been accused by the NAO of acting in collusion with Gaffarena. 

If the court declares that the transfer of lands to Gaffarena is null and void on the ground that it was made in contravention of Article 3, it will be conclusive evidence that the disposal was made in contravention of these provisions. “Where any action for any such declaration has been taken, the period of prescription in respect of any offence against this article shall be suspended until a final judgment on the issue is given or the action is abandoned.”

The Civil Court has provisionally upheld a prohibitory injunction filed by the Prime Minister against Gaffarena. The warrant was filed to protect the staggering credit of €1,594,500, which the government wants refunded following the rescission of the contracts of sale for Gaffarena’s two 25% shares in 36, Old Mint Street.

The properties whose transfer are potentially subject to rescission are: a shop on Manwel Dimech Street, Sliema; land at tal-Handaq, Hal Qormi; land at Tas-Salvatur, Siggiewi; two parcels of land at Bahar ic-Caghaq; and land at Hal Mula, Haz Zebbug.

According to valuations carried out by PricewaterhouseCoopers on behalf of the Office of the Prime Minister’s internal audit and investigations department (IAID), the Old Mint Street property was over-valued by the Lands Department’s external architect Joseph H. Spiteri – the government in effect ended up acquiring property worth €944,500 while the lands Gaffarena received were worth €2,862,000. Gaffarena also received €516,000 in cash.

Falzon hits back at NAO

An allegation by Michael Falzon that the architect who valued the Old Mint Street palazzo had a “conflict of interest” because he also rendered services to the National Audit Office, turns out to be not entirely precise.

Architect Joseph H. Spiteri was last engaged with the NAO back in 2009. 

Falzon made the allegation during an interview on Friday evening on the PBS chat-show Xarabank, in which he took exception to the findings of the NAO report that hammered the final nail in the case of the former parliamentary secretary for lands.

“The report was all a justification for a politically motivated attack against me for having drawn the NAO’s attention before this case erupted on [NAO chief investigating officer] Mr [Keith] Mercieca’s antics… It is a shameful mess of a report,” he said.

When the Gaffarena expropriation scandal broke, Falzon had actually defended the valuations of Spiteri as the work of a university academic whose specialisation is property valuations.

The NAO has defended its examination of Spiteri’s role in the expropriation saga. “The NAO met with Spiteri and clarified various aspects of his involvement in the process of valuing the lands exchanged, as well as his relationship with Gaffarena and the GPD,” a spokesperson said. 

The NAO’s own audit found that Spiteri was well aware that the lease on the palazzo would expire in 2028, “which fact should have been considered when determining the value... equivalent to a reduction of 20 per cent of the value, which, if applied by the consultant architect, would have resulted in a significantly lower valuation.”