Australian Financial Review reveals existence of third linked set-up called Egrant “without personal details”. Is it the Prime Minister’s?

Neil Chenoweth of the Australian Financial Review – which has a media partner of the International Consortium of Investigative Journalists and has full access to all documents in its Panama Papers database – has written another piece today in which the focus is on Malta.

He describes how “senior members of Malta’s Labour Party” began the process for setting up Panama companies “five days after they won power in election”.

Chenoweth also indicates that their attempts to open a bank account linked to these holdings may not have been refused by the bank in Dubai after all (but only by the Panama bank). He writes: “Malta’s opposition called a national protest on Sunday over revelations in The Australian Financial Review last week that detailed how Malta’s Energy Minister, Konrad Mizzi, and the prime minister’s chief of staff, Keith Schembri, set up secret holdings in Panama and New Zealand linked to a Dubai bank account.”

Equally significant, to those of us who know the industry and the background to the graft accusations involving Adrian Hillman, who was made to step down as managing director of the Allied Newspapers (published of the Times of Malta and The Sunday Times of Malta) and Progress Press group of companies, and Keith Schembri, whose Kasco business has been chief supplier to the newspaper and printing group since Hillman took charge, are Chenoweth’s new revelations this morning about Pierre Sladden of Redmap Projects Ltd.

Sladden and Redmap were key contractors in the conversion of the existing building on the Mriehel bypass for use by Progress Press when it moved out of Valletta. Sladden, Hillman and the Prime Minister’s chief of staff, Keith Schembri routinely socialise together and have long been suspected to be some kind of operational business unit that is under the radar. A fourth man (and this is not in Chenoweth’s story today but is known to people involved in the print/advertising trade) is Kenneth Abela, who owns a Chinese restaurant on the Mriehel Industrial Estate, and whose billboard company supplied the Labour Party with billboards in the general election campaign.

Chenoweth reveals today that Pierre Sladden “assigned an invoice for close to US$1 million to a British Virgin Islands company, Blue Sea Portfolio Ltd, last November”.

He writes that documents among the Panama Papers “show how Mossack Fonseca bragged to clients how easy New Zealand laws make it for foreign investors to hide their tax-free profits”.

“The saga in Malta began with an email on March 14, 2013, from Karl Cini, a partner at Maltese financial adviser Nexia, to Mossack Fonseca’s Panama office,” Neil Chenoweth writes in the Australian Financial Review today. Coincidentally I wrote about this yesterday, and you can read my post, which gives the background to this, here.

This was just FIVE DAYS after the Labour Party swept to power and Muscat had barely taken his oath of office as prime minister. Yet the first thing on Brian Tonna’s mind – he had been given a desk at the Office of the Prime Minister – was how to set up these secret operations. Karl Cini is the partner he brought in to Nexia BT (the BT stands for Brian Tonna).

Chenoweth, who has access to copies of the emails, said that Mossack Fonseca didn’t reply to Cini’s first email and he tried again a week later on March 21. Let’s leave aside the shocking Maltese English and focus instead on the considerably more shocking fact that the first thing on their minds, as soon as they took office, was setting up secret Panama companies for themselves.

“When you can please send me details for setting up a Panama company and possibly a trust,” Karl Cini wrote to Mossack Fonseca in Panama, saying that the ultimate beneficial owner for this Panama company and trust “will be an individual and I will speak to Luis on Skype to give him more details”.

Karl Cini also informed Mossack Fonseca in Panama that henceforth he would be the contact person for “three companies in the British Virgin Islands” that Mossack Fonseca manage. On 24 January 2011, Michael Del Vecchio (see my post on the subject yesterday) set up a company in the British Virgin Islands for Keith Schembri in his personal name (not Kasco), called Colson Services Ltd. Earlier, he had set up Selson Holding Corporation for Malcolm Scerri, who is Kasco’s managing director.

On 10 May, 2011, Michael Del Vecchio set up a company there for Adrian Hillman, called Lestor Holdings Group Ltd. “These were all long-term account clients of Nexia BT — and now Nexia was cutting out the middleman, so to speak. Exit Del Vecchio,” Neil Chenoweth writes. Here I quote in full from the Australian Financial Review:

And there would need to be some changes. “I need for each company a [nominee] director and a nominee shareholder is appointed,” Cini wrote.

This would remove Mr Schembri’s and Mr Hillman’s name from the records, making them even harder to find. Mr Cini also needed a new British Virgin Islands’ company, Blue Sea Portfolio.

The British Virgin Islands companies exploded into the news last month, when Mr Hillman stood down from Allied Newspapers after Malta blogger Daphne Caruana Galizia reported that Mr Schembri had been making payments to the Hillman company as an inducement for Allied to buy newsprint from Kasco. Mr Hillman and Mr Schembri have strenuously denied the claim.

On August 8, 2013, Mossack Fonseca came through with Mr Cini’s original order for a Panama company. But by now the order had grown to three Panama companies: Tillgate Inc, which would be controlled by Schembri, Hearnville Inc, which would be controlled by the newly appointed Energy Minister, Mr Mizzi, and a third company, Egrant, but this one had no details of its owner.

On paper all three were controlled by Mr Cini and a Nexia senior partner, Brian Tonna, under a power of attorney. But who was the third player behind Egrant?

This fresh evidence indicates that Egrant may well be the Prime Minister’s own set-up. The timing of the emails and the confidence with which Nexia BT wrote to Mossack Fonseca just five days after Muscat became prime minister constitutes near-irrefutable evidence that setting up the Panama companies and New Zealand trusts were not ad hoc decisions taken due to temptation by graft that cropped up along the way, but that they got into power precisely to be able to make secret money out of it. It is now also impossible, given the timings, for the Prime Minister to behave as though he is not part of it and that they acted without his knowledge (he has never even actually said that).

Neil Chenoweth then writes about how the Panama companies lay dormant for a year while the next stage – New Zealand trusts – was pursued. He also explains how the total secrecy of New Zealand trusts was the attraction here. “There is no need to register who puts assets in a foreign trust (known as the “settlor”) and the New Zealand definition of ‘beneficial owner’ is “different to that of many other jurisdictions”, because New Zealand “does not require due diligence on the person/s who will benefit from the funds”, Chenoweth writes.

So much for Joseph Muscat and Konrad Mizzi claiming otherwise. “In other words, you never have to explain who gets the money – and Mossack Fonseca never needed to know either,” Chenoweth writes. “On December 4, 2014, Mr Cini told Mossack Fonseca he would be setting up two New Zealand foreign trusts, which would own the Panama companies set up for Mr Schembri and Mr Mizzi.It wasn’t until May last year that Mr Cini’s clients had their documents ready to go ahead with the trusts.”

So they set up Haast Trust to hold Tillgate Inc, the Panama company owned by the Prime Minister’s chief of staff, and Rotorua Trust to hold Hearnville Inc, the Panama company owned by the Minister of Health and Energy.

Mossack Fonseca’s compliance division had meanwhile realised that Schembri and Mizzi were Politically Exposed Persons, Chenoweth writes, so the due diligence procedure kicked in. Neil Chenoweth writes in the Australian Financial Review:

It all took time and the clock was running. On August 8, with the trust formation still in place, Mr Cini wrote to Panama: “We are in the process of opening a bank account in Dubai for two of our Panama companies. The bank is asking as for the following documents which need to be attested from the UAE Embassy of Panama. They will then attest them further in Dubai.”

Mr Cini wrote again on August 20: “How are the documents coming? I have a meeting with the BOs [Beneficial Owners] this coming Tuesday.” That would be Mr Schembri and Mr Mizzi that Mr Cini wanted to show the finalised trust documents to, on August 25.

But the combination of two Politically Exposed Persons and a Dubai bank account set off alarm bells at Mossack Fonseca. “As both Settlors are PEP, our NZ colleagues need to be comfortable that sufficient due diligence has been carried out to ascertain that funds being settled are not subject to any corruption risk, and ideally that they come from income generated prior to the Settlors´ political appointment,” Mossack Fonseca Panama told Mr Cini.

Mossack Fonseca – perhaps disingenuously – told Karl Cini of Nexia BT that perhaps he could get more information about the source of his clients’ funds when he next met them. The Australian Financial Review again:

“With respect to Haast Trust, it would appear that there was some negative coverage regarding the tender process for supply of paper to the government shortly after the settlor’s appointment as Chief of Staff, so if you could also include a detailed information about this,” Mossack Fonseca’s New Zealand wrote.

And what would the companies be doing? The clients’ description, “‘Management consultancy and brokerage’ does not explain this,” the New Zealand operative complained.

On 24 August, Mossack Fonseca NZ noted: “There is also some negative publicity regarding the amount of remuneration for [Konrad Mizzi’s] wife.”

Mr Cini was still pressing for the documents for Hearnville and Tollgate for the Dubai bank, and now he wanted docs for Schembri’s BVI company, Colson Services, as well. And he needed them by Friday, August 28.

Mr Cini didn’t say what was happening on the Friday, but by the Sunday he was asking how the application for a bank account for the two companies in Panama was going.

On September 10 Panama came back: “Please note that the FPB Bank, have decided to not proceed with the opening of the bank account for the companies Hearnville Inc and Tillgate Inc for some reasons, the principal of them it’s that the UBOs of the said companies are PEP.”

Mossack Fonseca noted, “We have contacted two persons who will help us with these bank accounts.”

Chenoweth writes that “It’s not clear from the documents whether the attempt to open a Dubai account was successful. Mr Mizzi last week said no account was ever opened, and that the accounts were the initiative of Nexia. He never signed anything.”

PIERRE SLADDEN AND HIS COMPANY IN THE BRITISH VIRGIN ISLANDS

Nexia had set up a company in the British Virgin Islands, Blue Sky Portfolio, for Pierre Sladden (his company in Malta is called Redmap Projects Ltd) in 2013 at the same time that Nexia set up Panama companies for Keith Schembri, Konrad Mizzi and ‘Egrant’. Now here comes the interesting bit, which is classic money-laundering.

From the Australian Financial Review:

In November Nexia asked Mossack Fonseca’s British Virgin Island’s office to have the nominee directors certify an assignment of debt between companies linked to Pierre Sladden, another Nexia client and strong supporter of the government.

The documents showed that Sladden’s company, Redmap Constructions Ltd, owed a Cyprus company A2Z Consulta, €900,000 for “the provision of services consisting in quality checks and negotiation with suppliers”.

Apparently A2Z Consulta had sub-contracted the quality checks and negotiations to Blue Sea Portfolio in the British Virgin Islands, which was now due $US978,150 – and it turns out it was another Sladden company that would pay the debt.

This convoluted series of transactions was actually dated December 2014, the month that the New Zealand trusts were first ordered by Nexia.

Mossack Fonseca records show that behind a nominee holding it is Mr Sladden himself who owns the 50,000 shares in Blue Sea, though it’s held in four blocs of 12,500 shares apiece. It’s not clear if he is the ultimate owner of all the blocs.

“Kindly treat this email as urgent,” a Nexia partner wrote on November 24 with another request to rush the documents.