A national audit report found "no shortcomings" in the behaviour of former finance minister Edward Scicluna and ex-health minister Chris Fearne over a privitisation deal for three hospitals, the auditor general has told a court.
Charles Deguara was testifying about his mammoth investigation into the deal, which is at the heart of a sprawling corruption case involving senior ministers in Joseph Muscat's government.
Fearne and Scicluna stand accused of fraud and misappropriation over the 2015 deal that saw Karin Grech, St Luke's and Gozo general handed over to Vitals Global Healthcare and then Steward.
Deguara repeated the conclusions of the National Audit Office investigation in which neither Fearne nor Scicluna were singled out for blame.
"The way the process took place it seemed that it was all in the hands of Energy Minister [Konrad Mizzi} and health was not involved at all," Deguara told the magistrate during Monday's hearing.
"Mizzi told us that he tried to consult but we lent more belief to the fact that various health issues were not addressed. The health ministry did not feature at all," he said.
Mizzi, Muscat and former OPM chief of staff Keith Schembri also face charges over the scandal-racked deal.
Ronald Mizzi, Konrad Mizzi's permanent secretary, co-operated with the NAO investigation, the auditor general testified.
As the "guardian of the public purse", Deguara had "great concern" that during this health project, involving massive funds, the health ministry and its experts, were totally sidelined.
Deguara also said the three-report investigation had found "no irregularities" on former health permanent secretary Joseph Rapa, who also faces criminal charges.
Fearne and Scicluna conduct 'impeccable'
Asked specifically about Fearne, Rapa and their team of experts, Deguara stressed that they found “strong cooperation” when the NAO was compiling its report.
On Scicluna's role, Deguara described his and Fearne's conduct as “impeccable” and repeated that he had no negative comment to make about either minister.
Asked by lawyer Stephen Tonna Lowell, Deguaro confirmed that the audit office report found "no shortcomings" in Fearne or Scicluna.
He was also grilled at length about the Request for Proposal and the due diligence that was not laid down as a necessary requirement for the evaluation committee.
“We believe that if proper due diligence were carried out, the concession would never have been granted,” Deguara said.
Moreover he firmly believed that in such public concessions where millions of public funds are involved, due diligence should always be the rule as a matter of good governance.
Deguara confirmed that he couldn’t audit or scrutinize Vitals or Steward because they were private companies and not public entities.
Public service concession vs contract
Deguara also highlighted the fact that in case of a public concession, unlike in case of a public contract, the services are normally paid for by the end user.
In this case, government was to pay for the services since healthcare is free.
The NAO deemed that a public service contract would have been more binding and thus more appropriate.
When asked by the NAO, the Energy Ministry explained that they took over the concession because it fell within the remit of Projects Malta.
The Request for Proposal was not drafted by the health ministry and responsibility for the concession was taken by the energy ministry and not health or finance.
The advantage of the concession was that Vitals and later Steward, were to refurbish the state hospitals without government incurring capital expenditure.
Vitals were to obtain the necessary financing through medical tourism “but that never happened and so the investment didn't happen either,” said Deguara.
Due diligence
Deguara also fielded questions about the lack of due diligence requirement in the Request for Proposal (RFP) - the document that set out what the government required from the hospital concessionaire.
Deguara said that “in such a project worth millions, there should at least have been due diligence on Vitals.”
The evaluation committee had indeed followed the "basic" recommendations of the RFP but due diligence should have been done as a matter of good governance, he said.
The success of the concession depended to an important extent on the drafting of that RFP which “needed to be very good.”
The NAO had sent questions to Ganado Advocates, as the legal consultants tasked with advising on and drafting that RFP.
Both the Health Ministry and the Energy Ministry had replied, “not us,” when asked by the NAO about their input in that document.
So the Auditor’s office went to Ganado Advocates asking, “who gave you input to draft the RFP?”
But that question remained unanswered, said Deguara.
Antoine Cremona, testifying on behalf of Ganado Advocates denied ever receiving emails from the NAO.
He gave a rundown of the company's involvement as consultants to the government ahead of the drafting of the RFP.
Stephen Attard, another partner, was first approached by lawyer Aron Mifsud Bonnici on February 5, 2015 for advice on the legal framework best adopted for the privatization project.
Ganado Advocates advised that there was to be full public procurement and the project was to take the form of a public service concession rather than a real estate concession.
Ganado issued their advice and subsequently drafted the legal aspects of the RFP issuing a draft after Mifsud Bonnici emailed them some points to be included in that proposal.
They were involved in the initial stage of drafting the concession agreement itself but at this stage they flagged some concerns and their involvement came to an end, Cremona testofied.
Asked about lawyer Bradley Gatt, one of the co-accused, Deguara confirmed that after scouring the Vitals-related reports and working papers, he could confirm that Gatt was not mentioned at all.
Email to Keith Schembri
On Monday, Fearne’s lawyer also summoned the Civil Courts Registrar to produce a copy of an email sent by Armin Ernst to former OPM chief of staff Keith Schembri.
That email formed part of court filings submitted by Steward as part of its appeal against a judgment that annulled the hospital concession.
In the email dated January 27, 2018 Steward president Armin Ernst listed the problems they faced to take over from Vitals Global Healthcare.
“Keith, Chris has called me asking for an update. Haven’t said anything but need to get back to him,” the email stated, in an apparent allusion to Fearne, who was then health minister.
'Dumb' or 'closed an eye'
Meanwhile, an email by the finance minister's chief of staff Paul Debattista to Scicluna raising questions about the involvement of permanent secretary Alfred Camilleri, was also raised in court.
Camilleri, who is also facing charges, sat on the board of Projects Malta but has previously insisted that the board was only informed about the generalities of projects, such as the hospitals' deal but never expected or requested to take any decision about them.
“He [Camilleri] is either dumb by accepting to be on a board when he is not informed on what is happening, or he was getting paid and thus closed an eye or else he knew what was happening and he did not say anything to anybody,” Debattista's email read.
Camilleri's lawyer, Franco Debono, claimed this "uninformed opinion" was the basis of the charges against his client.
Asked about the email, Debattista claimed that “getting paid” was intended as “legitimately paid,” and the email should not be taken as suspicion of any wrongdoing.
Asked by defence lawyer Stefano Filletti, Debattista said that he had not spoken to the permanent secretary about the matter.
"That does not fall within the remit of the chief of staff. If there's any ear-pulling to be done it's for the minister not his chief of staff."