Panamagate libel | On Schembri, Muscat may be legally right but politically wrong

Addressing the party faithful on Sunday on the morning of yet another protest asking for the resignation of his chief of staff, Prime Minister Joseph Muscat chose not to ignore the elephant in the room and gave a legal explanation on why he is still waiting for the conclusion of a magisterial inquiry to determine Keith Schembri’s fate.

This is probably a recognition that the decision by his chief of staff to drop a libel he had himself filed against Simon Busuttil in 2016, to avoid answering questions on his relationship with offshore company 17 Black, which revelations came a year later after the suit was filed, left many including Labour voters, baffled.

For in this particular episode of the long winded saga, Schembri came across as someone unwilling to man up and defend his own name, after promising to do exactly that when Busuttil called him corrupt.

Moreover legalisms on Schembri prejudicing his position in the on-going inquiry inevitably raised the question; would anyone who has nothing to hide have any reason to avoid questions in a public court?

To address these concerns, Muscat presented a strong legalistic argument, which effectively postpones his decision on whether Schembri should resign or not to after the publication of a magisterial inquiry commenced last year after revelations by the Daphne project in November last year, that power station investor Jorgen Fenech is the owner of 17 Black, a Dubai based offshore company which included Schembri as one of its clients.

It was only in April 2019 that magistrate Doreen Clarke ruled that the inquiry into the Panama Papers and the actions of Konrad Mizzi and Keith Schembri was to be included in the inquiry started last year by Magistrate Charmaine Galea into allegations surrounding 17 Black.

A similar request for an inquiry into the Panama Papers made after the 2017 election had been accepted but was eventually thrown out following appeals by Schembri and Mizzi.

Therefore the inquiry would have to establish whether criminal investigations should be commenced against Schembri and the other protagonists of the case.

Muscat contends that Schembri found himself in a situation where, if he replied to the questions in court, the on-going inquiry could have been prejudiced and undermined. It is the inquiry, not the libel suit withdrawn by Schembri, which would bring to light “all the facts” according to Muscat.

Muscat is right in saying that it is the inquiry and not the libel case withdrawn by Schembri which will determine whether Schembri should face criminal prosecution or not.

While there is a degree of consistency and logic to Muscat’s legal argumentation, it fails to address the political aspect and deliberately confuses hard evidence on 17 Black with the nebulous allegations surrounding egrant.

Here are four reasons why Muscat’s legalistic interpretation remains politically questionable.

1. 17 Black is not Egrant

On Sunday Muscat drew parallels with the Egrant saga, arguing that he had acted in the same way when it came to “the invented story about Michelle and I.” In the Egrant case, time had proved him right, he said.

But the comparison does not hold water. No hard evidence was ever provided to back the claim that egrant belonged to Muscat or his wife.

On the other Schembri never denied that he was the owner of a secret company set up after 2013. Moreover Dubai company 17 Black was named as a “target client” of the Panama companies set up for Keith Schembri and Konrad Mizzi. In April Schembri himself had acknowledged that 17 Black and Macbridge were included in draft business plans for his business group as potential clients while insisting that no transactions were ever recorded with these companies.

Neither has Jorgen Fenech denied being the owner of 17 Black.

While these facts do not amount to proof that Schembri is corrupt, on their own they raise questions on Schembri’s political tenability especially in the sensitive role of chief of staff of the Prime Minister. For inevitably people keep asking; why on earth should the Chief of Staff of a Prime Minister set up a secret company in Panama which was in some sort of commercial relationship with a company owned by one of the country’s most powerful businessman?

By drawing parallels by egrant, Muscat is intelligently exploiting the greatest weakness of the opposition under Busuttil; that of raising the stakes too high and relying on unverified claims in what people interpreted as a shortcut to power.

But in this case, so far the evidence pointing towards political impropriety exists. Moreover the egrant episode itself, suggests Muscat’s own revulsion at being named as an owner of a secret company. Yet the same Muscat seems perfectly at ease at having his closest aide doing business through secret companies.

2. Muscat is once again confusing legal and political correctness

Muscat may well be hoping that despite the political impropriety of Schembri’s business setups, the magisterial inquiry-which will depend on evidence from Dubai which is renowned for its secrecy, won’t find anything which incriminates Schembri.

Such a conclusion will be inevitably used to vindicate Schembri. Still in this case the inability to prove a crime does not absolve Schembri from political responsibility not to drag the government down in to his shady business.

Muscat may well bank on the fact that panamagate has not in any way eroded his super majority and that the initial shock has subsided as people are losing interest in a case where the details change but the protagonists remain the same.

This explains why last year’s explosive news on 17 Black did not have any impact on Muscat’s performance in midterm elections. Moreover Muscat may rely on the temptation by his detractors to raise the stakes, conjuring improbable scenarios which when disproven only serve to turn the focus away from Schembri’s political impropriety.

3. If Schembri did commit anything illegal, the inquiry would cast a shadow on Muscat for keeping Schembri in office for so long

If it is established that Schembri should be formally investigated for breaking the law, Muscat’s own position may become untenable. So it stands to reason that Muscat should have averted this by asking Schembri to clear his name without dragging the public office he holds with him.

Sure enough the PM may well claim that he is being consistent to his pre 2017 election commitment that he would remove Schembri only if he is put under formal criminal investigation. But he would go down in history as the Prime Minister who kept someone formally accused of breaking the law, in a very sensitive office for a long period of time, despite repeated requests by the opposition, the European parliament and the media to kick him out. For in this case the suspicion of impropriety stems from the original sin of opening a secret company while in office, something which on its own suggests a propensity for shady dealings.

In the scenario of Schembri facing criminal prosecution, Muscat may have no choice but to resign himself, even if he can do so with the excuse of honouring his other commitment to step down before the next election. So even if worse comes to the worse, Muscat would not even have to say that he is bowing out because of Schembri.

Still the fact that Muscat is still standing by his man may indicate that he honestly believes that Schembri is not at risk of criminal prosecution. In this sense Schembri’s detractors may well be providing Muscat a lifeline by insisting on criminal responsibility instead of sticking to the more water tight arguments related to Schembri and Muscat’s political responsibilities.  

What is sure is that no PM would want to bow out with such a blemish on his record, which endangers the prospect of future employment in international institutions.

4. Muscat has lowered the bar for the whole country

The ultimate consequence is that by adopting such a legalistic approach Muscat has lowered the bar for the whole country after substantially raising it in his first three years in office.

Muscat who had little qualms in firing Anglu Farrugia, Manuel Mallia and Michael Falzon in the absence of any criminal responsibilities, now links Schembri’s future to him facing criminal prosecution.

In this way he has made the Labour Party pay the price of losing the high ground when faced with the moral question. For beyond criminal responsibilities, the problem facing Labour is the creeping perception that a law exists for the animals and another one for the Gods.

Perhaps this was the price to pay for gaining the blessing from part of the country’s capitalist establishment, something which gave Muscat the breathing space to embark on radical social reforms without being sabotaged by the dominant players.

Schembri is perceived as a vital peg in Labour’s deal with big business. But this deal returns to haunt Muscat each time he has to decide between defending the common good and private interests.

This has become abundantly clear on land use issues, where Labour’s commitments to business have clashed with those towards residents including those living in Labour strongholds.

The fact that a segment of the party is increasingly uncomfortable may explain why Muscat could not ignore the elephant in the room while speaking to party activists in Rabat.

It may be that what Muscat fears most is not Busuttil’s wrath but that of party loyalists who feel betrayed.