With a little help from their friend and chairman John Dalli: how Marsovin acquired government land in Qormi for €465,000 and sold it to Vassallo Builders for €8 million a few days later

Deborah Schembri, parliamentary secretary for Lands, and Owen Bonnici, the Justice Minister, are currently leading a government campaign against Jason Azzopardi, the shadow minister for justice, and Vassallo Builders Group. The message they are pushing hard is that Vassallo Builders loaned (not donated) a quarter of a million euros to the Nationalist Party, and in return Jason Azzopardi – when he was the Parliamentary Secretary for Lands – signed over a large tract of land, the former site of the failed Löwenbräu brewery, for a few hundred thousand euros when it was worth €8 million.

To add to the conspiracy story, Deborah Schembri has also repeated incessantly that she has the sworn testimony of an anonymous eye-witness who told her he saw “Jason Azzopardi walking round the land with Nazzareno Vassallo”, the company CEO.

Having investigated the story, I am at a loss to decide which is the more shocking: the true facts of the case involving John Dalli and Marsovin, or the sight and sound of the government brazenly lying, when it knows it is lying, in a Joseph-Goebbels-inspired exercise to achieve the double objective of tarnishing its most vociferous critic on the Opposition benches, while simultaneously protecting John Dalli, who is a consultant to the Prime Minister, and Dalli’s clients, the wine-makers Marsovin.

This is the story, and I am going to tell it in chronological order and bald facts, so that there is no room for confusion.

On 7th November 1990, John Dalli, who was then Minister for Economic Affairs in the government led by Prime Minister Eddie Fenech Adami, wrote to the Commissioner of Lands, instructing him to give a large tract of state-owned land in Qormi to a company which Marsovin had incorporated with a view to setting up a brewery to make Löwenbräu
beer under licence.

Dalli told the Commissioner of Lands that the land was to be given to them in perpetuity, for an annual ground rent. Dalli was not the Minister responsible for government property at the time, but he completely bypassed the minister responsible. The granting of public land in perpetuity has been described to me as “unheard of”. Albert Mamo, a retired public servant who was Commissioner for Lands for many years, says that he knows of only two such exceptional cases in his decades-long career: Marsovin/AgriCo and Foster Clarks. (He was speaking to Jason Azzopardi and not directly to this website.)

After he read my earlier promo for this story, an old friend, Georges Bonello Dupuis, rang me. His late father, George, was Finance Minister in 1990. “I remember him coming home steaming with fury about what John Dalli had done,” he said. “It’s as clear as yesterday. He was raging about how Dalli had insisted on transferring a large piece of government land to Marsovin in perpetuity instead of for a fixed period, how completely shocking and absurd it was, and how Dalli had talked Fenech Adami into believing it had to be done that way. My father was furious because he could see what Dalli was up to, and as a notary he knew the meaning and the consequences of a deal like that. But he couldn’t persuade Fenech Adami and Dalli got his way.” (This is reported with Georges Bonello Dupuis’s consent; his father died seven years ago.)

John Dalli’s letter to the Lands Commissioner says:

Messrs Lowenbrau (sic) Ltd are planning to set up an industrial process for the production of alcoholic and non alcoholic beverages.

As the land which they had originally acquired for this project is not considered by Government as environmentally suitable, another site has been identified as shown in the attached plan.

As this project is considered to be of economic benefit to this country, you are requested to take the necessary steps to enter into a lease agreement with the afore mentioned company to grant this land on perpetual emphyteusis at a ground rent of LM5,000 a year for the first two years and LM10,000 a year thereafter.

The usual conditions of the lease as per government policy are to apply.

Marsovin and its fellow shareholder AgriCo acquired the land in exactly that manner and began the process of setting up the brewery. The only fly in the ointment was that the government had over-ruled John Dalli on one aspect only: instead of giving Marsovin the land in perpetuity unencumbered by clauses on conditions of use, it insisted on a clause which specified that the land could be used only for the production of alcoholic and non-alcoholic drinks. This is where the story goes on to become even messier.

The Lowenbrau brewery launched in June 1992 and was still operational 10 years later, when it held a programme of events to celebrate that milestone anniversary. But it had struggled all along to make significant inroads into a market dominated by Malta-made Cisk and imported beers, and production dwindled. Soon after that the plant began operating just three or four days a week, and eventually shifted to water-bottling.

In 2009, Marsovin offered the land for sale to Vassallo Builders. You will ask how it could possibly do this as it was not the owner – the land was state-owned. But when you hold real estate in perpetuity (the legal terminology is perpetual emphyteusis) the actual owner can never turf you or your heirs out until the end of time, and you are the de facto owner.

All you then have to do to become the de jure owner – the owner at law – is redeem the ground rent. Marsovin told Vassallo Builders that it would do this, which would make LBM Breweries Ltd the owner of the land at law and free to sell it on to third parties.

Vassallo Builders raised the matter of the clause which said that the land had to be used for the production of drinks. Nazzareno Vassallo told me: “I was very interested in the land, because it is in a prime location. But I wasn’t going to get into producing drinks, so I told Marsovin that I wasn’t interested in buying it with that condition.” (A large supermarket, several shops and a training centre for care home staff have since been built on the land.)

“Marsovin got back to me and said that they could have the clause removed, and would I buy the land from them in that case?” Vassallo said. “I was sceptical about how they could get that done, but said that yes, I would buy the land without that clause. We agreed that Vassallo Builders would buy LBM Breweries Ltd for €8 million as long as LBM Breweries owned freehold of the land and without that clause. We entered into a preliminary agreement on this basis on 30the November 2009.”

The removal of that clause was now worth a cool €8 million to Marsovin, which had been quietly touting the land for sale among the business community ever since John Dalli returned to the cabinet a year earlier. For the four years before that, when he was out of the cabinet, Dalli was chairman of the Marsovin group. In 2004 he had been forced by Prime Minister Gonzi to resign from the cabinet over corruption accusations in the regular purchase of air tickets for his ministry from his daughter’s – for which read, his – travel agency. He was Foreign Minister at the time. As soon as he was forced out of the cabinet, Marsovin made him chairman. As soon as he returned to the cabinet late in 2008, Marsovin began trying to sell the Qormi land, saying that it could redeem the ground rent and have the ‘drinks only’ clause dropped by the government.

Now this is where it gets even uglier. On 1st December, just one day after its preliminary agreement with Vassallo Builders, LBM Breweries Ltd wrote to the Lands Department requesting that it be allowed to redeem the ground rent on the perpetual emphyteusis (which would make it the owner of the land).

Twenty-four hours later, on 2nd December, the notary to the Government Property Division, Keith German, requested from his Director General authorisation to proceed with allowing LBM Breweries Ltd to redeem the ground rent for €465,875 (The odd figure is the result of conversion from Lm200,000, even though Malta’s currency had been euros for at least a year already.)

The deal was authorised that very same day, including the removal of the irritant clause. The contract between the government and LBM Breweries Ltd was signed the very next day, on 3rd December. On that date, LBM Breweries Ltd became the owner of the land, just 48 hours after writing to the Government Property Division with its request.

Lawyers and notaries who spoke to this website all said the same thing: that the deal had to have been fixed up ahead because it is “impossible” to have a contract like that drawn up and delivered in a few hours, and more than impossible to get that kind of prompt response from the Government Property Division.

On 23 December, Vassallo Builders bought the entire shareholding of LBM Breweries Ltd for €8 million. LBM Breweries was a defunct operation and not a going concern, but it now owned the Qormi land. Vassallo Builders never dealt with the government. When it bought LBM Breweries, the company owned the land and the government did not.

It was Marsovin/AgriCo – through LBM Breweries which they owned at the time – which bought the land for just under half a million euros and then sold it on to Vassallo Builders for €8 million. This website has a full copy of the contract.

In the recent investigation carried out by the Auditor General, which is now detailed in a published report, it emerged that neither the Minister responsible for Lands (at the time Finance Minister Tonio Fenech) nor his parliamentary secretary for Lands (Jason Azzopardi) was even informed of the transaction, let alone gave his approval or permission.

I spoke to Jason Azzopardi to ask him how this could have been possible. He said that not even the Commissioner of Lands (at the time, Albert Mamo) knew that the irritant clause had been dropped. In January and February 2011, the Opposition (Labour) had raised questions in parliament about the original contract from 1990, which means that the Labour Party was unaware at that point that John Dalli, who was then a European Commissioner and already cooperating with Joseph Muscat behind the scenes and as a frequent guest on Labour’s television station, was the man responsible for the corrupt deal.

But once the Opposition had asked the question, it was too late to take it back. A public-service train of inquiry had been set in motion that led to the Lands Commissioner, Albert Mamo, asking for an urgent appointment with Jason Azzopardi, the PS for Lands. “He turned up looking extremely distressed and informed me that he had only just discovered that when Marsovin (LBM Breweries) redeemed the ground rent, the Government Property Division had dropped the drinks-production clause,” Azzopardi said. “Mamo told me that the contract had been signed during one particular period when he had been away from the office because of illness. I immediately rang the Attorney-General and asked him to see Mamo right away, which he did.”

The result of that meeting between the Lands Commissioner and the Attorney-General was that a judicial letter was sent to CaterGroup Ltd (Vassallo Builders Ltd had changed the name of LBM Breweries Ltd a year earlier) requesting a meeting for the annulment of the contract signed with the government in December 2009. Vassallo Builders reacted by suing Marsovin, saying that it had bought LBM Breweries Ltd on the sole basis that it owned the free and unencumbered Qormi land. Marsovin refuted all this and responded by telling Vassallo Builders to sort it out with the government.

The government set up a committee of architects to assess the freehold value of the land for unlimited industrial use as at 1990. The figure the committee gave was €706,400. This left a balance due to the government, after deduction of the amount paid already in 2009, of €240,525. The Commissioner of Lands found that the government owed Vassallo Builders €291,660 for real estate which it had expropriated from the company years before. Vassallo Builders transferred the rights to that claim to CaterGroup Ltd, and the mutual debts were cancelled.

In December 2012, Vassallo Builders sued Marsovin and the Commissioner of Lands, for damages. Both cases are still ongoing. In March 2013, Marsovin sent a judicial letter to the Commissioner of Lands, the notary to the Government Property Division and the GPD official who had appeared on the contract for the government, holding them responsible for any damages the company might incur as a result of the law suit filed against it by Vassallo Builders.

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IN SUMMARY: In 1990, on the instruction of John Dalli, who at the time was not Minister for Lands but Minister for Economic Services, the Commissioner of Lands transferred a large tract of state-owned land to LBM Breweries (Marsovin) for the building and operation of a brewery.

The land was transferred in perpetuity, for an annual ground rent, which means that if the company redeemed the ground rent (settled it in a lump sum), it would own the land.

LBM Breweries (Marsovin) redeemed the ground rent for half a million euros in 2009, and a few days later Marsovin sold its shareholding in LBM Breweries, which now owned the land, to Vassallo Builders for €8 million, making an instant profit of €7.5 million, less the debts which encumbered LBM Breweries.

Vassallo Builders bought LBM Breweries, which already owned the Qormi land at the time, from Marsovin. Vassallo Builders did not deal with the government because by then the government did not own the land. Jason Azzopardi did not deal with Vassallo Builders and says that to this day he has never even met Nazzareno Vassallo on any matter whatsoever or in any context. On the contrary, he gave instructions for LBM Breweries/CaterGroup (Vassallo Builders) to be sued as the new owner of the land.

The current government/Labour Party know all this and yet both are lying, and pushing the lies all over the media. They are doing this in an attempt at solving a problem of their own making. The corrupt deal between John Dalli and Marsovin, which allowed Marsovin to sell for €8 million land which it had bought for half a million, only came to light because the Labour Opposition, unaware of Dalli’s involvement in the matter, in 2011 asked a question in parliament which has since led to a flurry of law suits and judicial letters and a formal inquiry by the Auditor General. This has revealed the collusion between John Dalli and Marsovin, which the government is now desperate to obscure.