Auditor recommends legal action against Paul Muscat

An auditor's report has recommended that legal action be taken against former Cospicua mayor Paul Muscat after "a thorough investigation of matters" revealed "fraud" and "irregularities" in the way he had acted as mayor.

Among other allegations, the auditor claims that Mr Muscat received a donation of Lm2,500 which is not recorded in the council's books.

The report, by Joseph Gauci, the managing partner of Alliott Gauci and Co., was released by the government yesterday. Justice Minister Austin Gatt has sent copies of it to the Police Commissioner and the Auditor General for investigation.

The auditors were appointed by the Cospicua council on the initiative of current mayor Joe Scerri, to determine whether the previous mayor and council adhered to the local councils' financial regulations and procedures.

Asked for his reaction, Mr Muscat denied the allegations and said the report was part of "an orchestrated campaign because they know that I intend to contest the council elections as an independent candidate".

It is not the first time that Mr Muscat has been in the spotlight.

He had been named as the person who claimed to have tampered with the vote when Alfred Sant was elected leader of the MLP. He was banned from the party after the board of vigilance found the vote-rigging claims to be unfounded.

He was forced to resign as mayor last June after he was threatened by a vote of no confidence by his former fellow labour councillors.

The auditor's report claims there were no proper controls on capital expenditure during the past two years; that Mr Muscat never appointed a works manager and used to determine the costs himself. Moreover, contractors were paid for works not actually carried out.

"In our opinion, certain capital expenditure was inflated," and "methods were used to divide contracts in such a way not to issue tenders, which obviously gave rise to abuses and unsolicited advantages to certain contractors used by the council", the report says.

The report cites an example in which a particular contractor was paid to supply and fix street lamps. Fieldwork carried out by the auditors revealed that the work was never completed. Twenty-nine lamps meant to be installed were not fixed and only 12 of them are accounted for in the council's stores, the report says.

The report adds that a loan of Lm1,500 was given to a contractor without authoritisation from the council and contrary to law.

"Moreover, a donation of Lm2,300 was received by Mr Muscat on behalf of the council, and these were never accounted for in the book of accounts," the report says.

The report also states that there exists no control on stocks and fixed assets owned by the council.

"This is clearly evidenced from the purchase of 15 kilometres of Christmas lights. It resulted that eight kilometres of these lights have gone missing and no one knows where they have been installed," the report says.

"Moreover, in certain instances Mr Muscat entered in many verbal agreements to pay expenses to individual persons for work not connected with the council. This, in our opinion, goes against the law," the report says.

"Due to bad management and lack of controls, liabilities amounting to Lm17,080 due to creditors have not been accounted for in the audited financial statements as at March 31, 2002. Some of the creditors may not have a legal right for payment from the council".

The report recommends that legal action be taken by the council to recoup funds from persons who received irregular payments from the previous mayor, and that Mr Muscat repays Lm2,300 he received as a donation on behalf of the council, otherwise legal action should be taken against him.

The report recommends that an architect should be appointed to estimate whether the expenditure incurred by the council on past projects reflects the real value of the work done and that a works manager be appointed to supervise all capital expenditure.

It also recommends that legal action be taken against Mr Muscat and the contractor who was paid for the installation of the street lamps, which work was never carried out. It recommends that the police be informed as the auditors consider this to be fraudulent.

The auditors recommend that their report be passed on to the police for further investigation due "to constant malpractices and fraud by the ex-mayor".

"We would like to draw the attention of the council that there may be other matters which may not have come to our notice. This is mainly due to the way the council operates," the report says.

Contacted yesterday, Mr Muscat said he, together with other councillors, was given a copy of the report on Tuesday.

"The report is still in draft form and has not yet been discussed in the council. How can anyone take steps on it?" he asked.

"Although the report says that I have been spoken to, I was never interviewed or consulted by the auditors or anybody else about these matters.

"The Local Councils Act says that the executive secretary is effectively the executive, administrative and financial head of the council. Yet the report singles me out as a culprit."

He denied there were no controls on expenditure, saying all capital expenditure was approved by the council.

Mr Muscat said the council had not appointed a works manager as they had an architect, who used to be paid an hourly rate, to oversee the quality of the work.

"Had we to engage a works manager, we would have had to pay him a percentage on the work he inspects, which would have been more expensive for the council," he said.

Mr Muscat rebutted the claim that he used to determine costs himself and that contractors were paid for works not actually carried out.

"Before an order was made, three quotations were obtained for orders below Lm2,000 or a tender if the amount of money was over Lm2,000. So the amount of money that was to be spent was known beforehand," he said.

He categorically denied that he used to split works orders to avoid issuing tenders.

"When I became involved with the council, I used the same contractor that had been engaged by the previous council and the council was happy with his work. When we were not happy with the work, he used to rectify the problems. We used to give him one job at a time, and when it was completed, he would be given another.

"This was done to avoid a lot of disruption and because it was better for the council to pay small amounts of money at any given time. Contractors sometimes preferred to send a single bill for two or three jobs, but that is not my fault," he said.

Asked about the allegation regarding the missing street lamps, Mr Muscat said when work was completed on two roads, discussions started on the devolution of responsibility for street lights to local councils.

"The new regulations stipulated that each street light had to have a fuse and isolator so that when replacing a spent bulb, one need not switch on the power of the whole street. All we did was postpone the fixture of street lights to fix them in accordance with the new regulations," he said.

Asked about the missing Christmas lights, Mr Muscat said these were purchased following a call for tenders and as the council could not afford to buy them at one go, they agreed with the contractor to pay him Lm1,000 a month.

"They were stored in a garage in Marsaxlokk and in Cospicua. Am I to blame if some went missing?' he asked.

Asked about the donation of Lm2,300 he was said to have received, Mr Muscat said he used to receive a donation of Lm250 a month.

"These were not given to the council but were given to me personally to help people in need. The secretary and deputy secretary knew about this. I had offered the present mayor to take him to the people to whom I passed on the donations. It is not fair to expose these needy people publicly.

"In addition to this money, I used to spend the honoraria I received as mayor on such needy people, buying them school uniforms, bathrooms and water heaters," Mr Muscat said.

"Our accounts were audited by the National Audit Office and were approved.

"I was not perfect. But this is an orchestrated campaign because they know that I intend to contest as an independent candidate.

"I am not afraid of any investigation as I have no finger in any pie. Everything is documented. I can make these documents available to anyone. It only bothers me because a lot of mud has been thrown at me over the past months and some of this mud sticks," he said.