Attorney General Peter Grech had advised against Malta’s Accountancy Board taking action against Nexia BT and its partners while investigations into them were ongoing, a court heard on Wednesday.
“We were always advised not to take disciplinary action until the judicial process was wrapped up,” board chairman Peter Baldacchino told an inquiry into the murder of journalist Daphne Caruana Galizia.
“The attorney general told us that action by the Accountancy Board could obstruct ongoing proceedings,” he said, adding later that the board was “always” given that legal advice, including by private lawyers engaged by the board.
Baldacchino was asked by the inquiry to present evidence of the written advice to that effect.
Accountancy board secretary Martin Spiteri, who also testified on Wednesday, also told the board that “lawyers from well-known firms” had always advised the board to refrain from taking action against members until legal proceedings were concluded.
Spiteri recalled both Grech, who retired as attorney general this month, and the board’s legal counsel Ivan Sammut, advising caution.
“I had spoken to Grech about possibly amending the law,” Spiteri said. “But he told me ‘better leave the law as it is, because it’s dangerous [hija perikoluza]”.
Nexia BT has been in the headlines since the 2016 Panama Papers data leak exposed its work to open secret offshore structures for former minister Konrad Mizzi and former OPM chief of staff Keith Schembri while the two were in office.
Despite multiple inquiries and allegations concerning the firm, the Accountancy Board took no public action against it until earlier this year, when it reprimanded the company for some administrative shortcomings. It eventually suspended warrants belonging to Nexia BT partners last week, after partners Brian Tonna, Karl Cini and Manuel Castagna were arrested and interrogated in relation to suspected money laundering offences.
On Wednesday, board chairman Baldacchino faced a barrage of questions about its apparent unwillingness to take action against the firm.
Judges Michael Mallia, Joseph Said Pullicino and Abigail Lofaro all peppered the witness with questions about the board’s hands-off approach.
“It seems you were looking for an excuse to do nothing,” judge Mallia remarked at one point.
“If a civil servant steals €10 he is suspended. So what about an accountant facing such allegations?” asked judge Said Pullicino.
Baldacchino told the inquiry that the board had sought legal advice about its disciplinary options concerning Nexia BT after MEP David Casa had written to it in July 2018 demanding it investigate the firm.
Answering questions by Caruana Galizia family lawyer Therese Comodini Cachia, he admitted that the board had not looked into the close personal relationship Nexia BT managing partner Tonna had with former OPM chief of staff Schembri.
“We knew others were investigating,” he said, prompting judge Lofaro to exclaim “so why do we have an Accountancy Board?”
Kickback claims
Baldacchino also acknowledged that the board had not delved too deeply into claims that Tonna paid Schembri a €100,000 kickback for passport sales. The two men have insisted the money was repayment of an old loan Schembri had made to Tonna, his accountant, years earlier.
Tonna had presented documents to the board and “insisted it was a loan”, Baldacchino said, “but we were sceptical about it”.
Despite that scepticism, the board had informed Tonna that it would not take the matter further until a magisterial inquiry into the kickback claims was concluded.
“We decided against further action at that time. Such loans are a grey area, there’s a lot of literature about it”.
‘Trial by media’
As Baldacchino faced questions about the board’s inaction, he sought to defend its course of action.
For the board to act preemptively against one of its members would have been a “trial by media”, he argued.
“We expected more tangible evidence to be supplied to us by other regulators such as the MFSA and FIAU,” he said.
Those two entities, as well as the Commissioner for Inland Revenue, had given the board very little information to work with in cases concerning accountants who wrongfully set up offshore structures for clients, he said.
Nikki Dimech case
Both Baldacchino and Spiteri told the inquiry that legal advice to avoid disciplinary proceedings dated back to the early 2010s, when auditor and former Sliema mayor Nikki Dimech faced bribery charges.
In that case, the board had said it would not issue any disciplinary measures until the appeal process was completed. Dimech was acquitted of the charges on appeal.
The comparison between Dimech’s case and that of Nexia BT did not wash with the inquiry judges, however, who noted that Nexia BT had not faced any criminal charges.
“You wouldn’t have obstructed any criminal proceedings,” judge Lofaro told Spiteri.
“We were always advised to hold back. I have nothing on my conscience,” the witness replied.
Earlier in the session, police superintendent George Cremona testified that he had written to US officials to ask for the FBI to help in the Caruana Galizia investigation on the very same day she was murdered.
Cremona also told a court that a dark web order, in 2019, to buy a gun and ammunition was addressed to George Fenech in Portomaso. Fenech died in 2014 and one of his sons, Yorgen, stands accused of complicity in Caruana Galizia's murder.
The inquiry continues on Friday, October 2.