17 Black | Five holes in Joseph Muscat’s delaying tactic

1. There would have been no inquiry at all if the Opposition had not asked for it

The only inquiry on the Panama Papers related to the 17 Black allegations is not the result of an investigation carried out by the police force but is the result of a report filed by former Opposition leader Simon Busuttil after the 2017 general election.  

What the latest revelations by the Daphne Project confirm is that the police’s Economic Crimes Unit received a report from the FIAU indicating Yorgen Fenech as the owner of 17 Black seven months ago.  

In itself this suggests that even after the general election the FIAU left no stones unturned to investigate a case involving close allies of Muscat after his re-election. But as was the case before 2017 the FIAU’s sterling work has not prompted police action.

The police may still be investigating these reports but it may well be the case that it lacks the will to take this investigation to the next level.  
In some ways Muscat is using an inquiry called for by the former leader of the Opposition to hide the institutional paralysis after panamagate.

Since before the general election Prime Minister Joseph Muscat had declared that his chief of staff will only resign if the magistrates appointed to hold an inquiry into documents presented by Opposition leader Simon Busuttil find that there is enough evidence for a criminal investigation.  

Schembri is facing two separate money-laundering inquiries unrelated to 17 Black, which pre-date the election.  

In July 2017 Magistrate Ian Farrugia decided there are enough grounds for a magisterial inquiry to determine whether money laundering allegations against tourism minister Konrad Mizzi and the Prime Minister’s chief of staff Keith Schembri warrant a criminal investigation.  

In May 2018 Magistrate Franco Depasquale concluded that it made no sense to open a separate investigation on the $1.6 million transfer allegation to the “target clients” in Panama belonging to Mizzi and Schembri but ordered that this information should be investigated in the inquiry presided by Magistrate Ian Farrugia.  

2. The PM himself is stalling the investigation on which he is relying to determine Schembri and Mizzi’s political future

Magistrate Ian Farrugia’s decision to launch an inquiry into whether chief of staff Keith Schembri and minister Konrad Mizzi breached money-laundering laws can only start after the conclusion of seven appeals, one of which was presented by the Prime Minister. Other appeals were presented by Konrad Mizzi, Keith Schembri, Brian Tonna, Karl Cini, Malcolm Scerri and Adrian Hillman.

This means that if the PM wins his appeal, even on procedural or technical grounds, Mizzi and Schembri won’t ever be investigated for money laundering.

A decision on the appeal was further delayed by Simon Busuttil’s objection to the case being heard by Antonio Mizzi who is married to a Labour MEP.

This led to new court proceedings, which further delayed the case. Mizzi has recently adjourned the hearing on this case to after his retirement date.

All this raises the question; why is the PM obstructing a formal inquiry on Mizzi and Schembri to await the outcome of an investigation, which he is objecting to?

3. Compared to Egrant allegations, 17 Black revelations are a completely different kettle of fish

The fundamental difference between egrant and 17 Black is that while in the former case it was the PM who called for an inquiry on himself in a bid to clear his name, in the latter case the PM is actively seeking to stop the inquiry from even starting through his appeal.  

Yet the results of the egrant inquiry which cleared the PM of himself opening a panama company are now conveniently used to wash away the whole Panama scandal.

On Sunday the PM even raised parallels between the egrant allegations and the story investigated by Reuters and the Times of Malta saying that he is not taking at face value the revelation that the mysterious Dubai company 17 Black belongs to Tumas Group CEO Yorgen Fenech, arguing that the Egrant story was rubbished by a magisterial inquiry.

Yet the PM ignores another fundamental difference between the egrant story and the one on 17 Black.

While the Egrant story was based exclusively on the reliability of a whistle-blower who ultimately failed to produce any documentation to back up her claims, the story on 17 Black is corroborated by an email, which clearly indicates 17 Black as one of two clients of the two Panama companies.

The documented evidence in itself raises questions related to political ethics and standards.

The emails state that Schembri and Mizzi were set to receive “€150,000” monthly through their Panama companies, via 17 Black and Macbridge, according to details provided by Nexia BT partner Karl Cini in the same email.   

And very differently from pre-election stories on egrant published on Caruana Galizia’s blog, the latest 17 Black story – endorsed by the reputable news agency Reuters – relies on different levels of corroboration; not just the leak from the FIAU but also on sources in the United Arab Emirates.

Furthermore, while the PM had always been consistent in his denial of the egrant allegations, Mizzi and Schembri have been evasive or economical with the truth in their terse replies.

When 17 Black was first floated in the press as a company designed to pay money into Schembri’s and Mizzi’s offshore companies, the two men described the report as “a blatant lie”, failing to confirm the very existence of the company while denying any allegation of money laundering.

While still denying these allegations Mizzi acknowledged the existence of 17 Black in April 2018 after the first revelations by the Daphne Project. Mizzi’s declaration that he does not know the identity of the owner of 17 Black, which was mentioned as target client of his Panama company, remains mind-boggling. Equally mind-boggling is the PM’s claim that he learned that Yorgen Fenech is the owner of 17 Black from the media.

Indeed, it is hard to believe that the PM did not ask his own chief of staff to reveal to him the identity of the owner of a company described as “a target client” of his Panama company in April.

Moreover, initially Mizzi had suggested that the complicated offshore structure linked to a trust in New Zealand was meant for family planning.

He even suggested that the Panama company was worth €92. But the emails published so far suggest that the companies were meant to receive money from other sources like remote gaming and recycling amongst other activities.

4. The courts cannot determine political responsibility

Ultimately the whole issue revolves on the inappropriateness of public officials opening secret companies in Panama while in office.  

Muscat may well argue that this issue has already been addressed when Mizzi was demoted to minister without a portfolio in 2016.  But on that occasion he also retained Schembri in his same role.

Mizzi also remained responsible for major decisions related to public-private partnerships and land transfers.  

But the issue is now further compounded by revelations that the companies were set up with the intention of receiving money from two other offshore companies. While corruption has not been proved, the triangulation between an Energy Minister, a chief of staff in Castille and a shareholder in the winning bid for the new power station is very suggestive.

The fact that Electrogas shareholder Yorgen Fenech has not categorically denied owning 17 Black means that a shadow has been cast on a major energy project, which was intimately tied to the Labour Party’s pre-2013 pledge to reduce electricity bills.

Fenech has vehemenently denied any wrongdoing and any link to the Panama companies.

Even if no illegalities have taken place, the very existence of a commercial relationship linking a former energy minister, the PM’s own chief of staff and one of the owners of Malta’s main energy providers would be highly inappropriate.  

The fact that this relationship may have been conducted through secret companies opened in secretive jurisdictions makes the political position of Schembri and Mizzi even more politically untenable.  

5. The PM is setting a dangerous precedent for future cases of unethical political behaviour

The PM is inevitably setting a yardstick for future cases of political inappropriateness. In the past Muscat had no qualms in forcing politicians like Anglu Farrugia, Michael Falzon and Manuel Mallia to resign even though none of them were faced by any criminal investigation.

In 2013 Muscat claimed that Farrugia’s resignation (for criticising a magistrate’s decision) reflected the difference in standards between the two parties, “with those within the PL bearing their responsibilities and the PN’s Austin Gatt evading a no-confidence vote till the end”.

What will Muscat do now when faced by a case which does not warrant criminal action but which may be politically inappropriate?

By not sacking Schembri and Mizzi, Muscat has lowered the bar for any errant Labour politician. He is also sending a message to his supporters that political propriety is a secondary consideration.

This may well increase the temptation of some to act inappropriately in the hope that the PM will apply the same yardstick he applied to Mizzi and Schembri.