An internal Enemalta probe into the Montenegro wind farm deal has raised concerns about a €6.8 million under-declaration of the sale price and flagged “serious reservations” about a clause in the share sale contract.

While the state-owned energy provider bought shares in the project from Cifidex for €10.3 million, the sale price listed on the contract signed between the two companies and declared to tax authorities in the Balkan state was €3.5 million.

17 Black owner and murder suspect Yorgen Fenech had secretly funded Cifidex’s acquisition of the shares from the actual owners weeks prior to them being sold on to Enemalta. E-mail correspondence referenced in the internal probe shows the issue was even raised prior to the contract signing, with a Montenegro law firm representing intermediaries Cifidex stating that the move could be interpreted by the tax authority in Montenegro as an attempt to avoid paying full capital gains tax.

A legal opinion referenced in the internal report highlights how the transaction was subject to the laws of Montenegro, therefore any issues about the legality or otherwise of the transfer had to be referred to a Montenegro lawyer.

The legal opinion also expresses “serious reservations” about a clause in the contract leaving the door open for “further additional compensation” to be paid by Enemalta to Cifidex. The legal opinion questioned why this clause was included rather than an express clause referring to the €10.3 million sale price already agreed upon.

The move could be interpreted... as an attempt to avoid paying full capital gains tax

The internal report contains recommendations that Enemalta engage a Montenegro lawyer to examine the argument whether the under-declaration was covered by the clause stating that further compensation could be given to Cifidex.

An examination about whether the difference between the declared and actual price was beneficial to Enemalta in terms of paying lower taxes and duties, if any, was also recommended.

Furthermore, the internal probe states that even if Enemalta did not derive any direct benefit, it should be examined whether it has any liability or responsibility under Montenegro laws for appearing on a contract where such an under-declaration was made.

Suspicions have been raised about the deal, which saw Enemalta pay €10.3 million for shares which Cifidex had bought for €2.9 million just two weeks earlier.

After the sale went through, Cifidex wired a total of €7.6 million to 17 Black, including the original amount loaned to it and an additional €4.6 million “profit share”.

Former Energy Minister Konrad Mizzi, who was responsible for Enemalta at the time, was kicked out of Labour’s parliamentary group after Times of Malta and Reuters exposed last June Fenech’s hidden hand in the deal. The internal Enemalta investigation found due diligence omissions and a lack of professional scepticism in the way Enemalta’s board conducted the deal.

No action has been taken against Enemalta officials involved in the deal.

A police investigation and magisterial inquiry is still ongoing.