A catering company suspected to be involved in a 10% kickback scheme. A medical equipment supplier with hidden owners. A secret shareholder who received monthly €100,000 consultancy payments.

Investigators who combed through the deal to privatise three state hospitals found signs of crime wherever they looked.

Wire transfers were layered. Consultancies flourished. Incoming cash was used to pay former investors – behaviour more commonly associated with Ponzi schemes. 

The entire deal seemed designed to divert public money into private pockets.

And investigators believe it was done with the help of Joseph Muscat and his chief enablers, Keith Schembri and Konrad Mizzi, who shielded the concession from scrutiny and ignored reports of criminal activity, while they privately fostered personal relationships with key actors.

The bigger plan

Investigators believe Vitals – and later Steward – stakeholders had no intention of running Maltese hospitals for the 30-year lease period they agreed to. The real aim, they say, was to quickly find a higher bidder to sell the concession to.

There was massive money to be made: the 30-year deal has been conservatively valued at €4 billion, and a 2017 study by PwC calculated it would generate €2.2 billion just through medical tourism.

Selling a business is not a crime. But prosecutors suspect key players involved in the deal did a great deal more than that. According to calculations made by Vitals’ own financial chief, around €26 million was stolen in just the first two years of the 30-year deal.

Companies that provided services to the hospitals – from cleaning to catering, IT to engineering – were allegedly required to fork out a 10% kickback in exchange for that business.

Individuals suspected of having a hidden interest in the deal were given massive consultancy contracts, or deals guaranteeing them one-off success fees and settlement payments. 

And Maltese government money intended for the hospitals was secretly used to purchase companies that were then given hugely lucrative deals by the hospitals, investigators believe.

The Vitals concession

Investigators were tasked with parsing the now-cancelled hospitals deal to identify patterns of suspected criminal behaviour.

It was a difficult task, given the complex web of companies and contracts investors used to structure the concession. And the job was made even more difficult because many of the companies involved were based in secrecy jurisdictions like Dubai and Switzerland, which do not share company or tax information.

Vitals and Steward received hundreds of millions of euros through the concession between 2016 and 2023, when a civil court annulled the entire deal on the basis of fraud.

That money was intended to be used to run Karin Grech, St Luke’s and Gozo General hospitals. The investors were also contractually bound to invest millions to revamp those facilities – work they never did. 

Throughout the concession period, money moved through multiple companies, in different countries, using a network of lawyers, auditors and accountants. In some cases, money sent to some people appears to have then been forwarded to others.

Practically all the companies involved stopped filing audited accounts from the moment they were involved in the hospitals concession, making it easier to obscure money flows.

How much money vanished?

Given the elaborate way in which money was extracted from the concession and moved, it is hard to quantify the total amount of money that investigators believe was misappropriated in all.

What is clear is that it runs into millions. Vitals’ own financial controller, Saba Abbas, calculated that around €26 million was misappropriated between June 2016 and November 2017 – more than half of all the money Vitals received from the government by that point.

That €26 million calculation does not include millions more paid to key players through deals structured as consultancy payments or success fees.

Investigators’ work has led to prosecutors filing criminal charges against dozens of people involved in the deal, including Muscat, Schembri and Mizzi, Ali and other Vitals and Steward shareholders, managers, lawyers, accountants and civil servants.

All those alleged to have taken money have insisted they are innocent of charges. Muscat has called the investigation a “political vendetta”.

“The institutions are working – working against Labourites,” he said last month.

Mizzi has called the charges he faces based on “pure conjecture” and said he received no money through the deal.

Schembri described the prosecution as “lies and presumptions” and also denied “ever receiving any money from any person mentioned in the inquiry [into the hospitals concession”.

Steward has argued that it was the one defrauded, saying it was duped into taking over from Vitals on the back of false promises by the Muscat-led government.

Money flowed in two main directions.

Huge amounts moved to companies linked to, or controlled by, Shaukat Ali Chaudhry or his family, lending credence to investigators’ suspicions that the Pakistani businessman was the secret owner of Vitals.

Money also moved from Vitals to another group of Ali-linked companies in Switzerland. These companies also disbursed money to Ali and his associates. But they also paid others linked to the deal, like Joseph Muscat, and served as the vehicle for a “political support fund” that Steward established.

Cash injections from the Maltese government generally triggered a flurry of financial activity. Vitals habitually made seven- and eight-figure payments to its parent company Bluestone within days of receiving Maltese taxpayers’ money.

In all, over €21 million was transferred from Vitals to Bluestone between 2016 and the first two months of 2018.

A 2023 Times of Malta investigation shed light on some of the things that money bought: luxury hotel stays, cars, private school tuition and even Netflix subscriptions. Vitals director Ram Tumuluri said that money came from “investor sources”, not Maltese concession funds.

Bluestone would also make payments of its own. In one case, it sent a company called Mount Everest a €3 million ‘success fee’ for having won the Malta deal. Mount Everest is linked to Shaukat Ali Chaudry, a Pakistani businessman who was based in Gaddafi’s Libya before shifting focus to Malta after the Libyan dictator was killed.

Ali has also denied any wrongdoing, telling Times of Malta he was never a Vitals shareholder and that claims to the contrary come from “untrustworthy, unreliable and unstable people and sources”.

1. How the money flowed: Consultancies

Ali was not a Vitals shareholder – at least not on paper. But he was the single largest beneficiary of the hospitals deal. His companies, sons and wives received millions from Vitals and companies linked to it, while other companies linked to him sent money to others involved in the deal, including Joseph Muscat.

Consultancy work can be legitimate. But it is also a known method for laundering money and masking illicit payments, as the value of consultancy work is subjective.

Vitals and Steward paid some eye-watering figures for nebulous consultancy work.

Ali was engaged as a ‘senior consultant’ on a €100,000-a-month deal. One company linked to him, STE Health, got a €400,000-a-month consultancy deal with Vitals. Another Ali-controlled firm, Global Asset Holdings, charged Vitals €340,000 over 14 months. In theory, that money was to provide a ‘procurement consultant’. Investigators found nothing to justify that expense.

The money flows continued when Steward Health Care bought out Vitals, investigators concluded.

Eurasia, owned by one of Ali’s sons, charged Steward €400,000 to carry out ‘global healthcare feasibility studies’ to run hospitals in Ghana and Macedonia. Steward also paid yet another Ali-linked company an €80,000-a-month fee for consultancy work, investigators found.

Consultancy also looms large in this case with regard to another defendant facing criminal charges – Joseph Muscat.

Muscat received four payments of €15,000 each over a four-month period from an Ali-linked company, Accutor AG, shortly after he resigned as prime minister. The payments were flagged as suspicious by banks and stopped suddenly. The deal was meant to run for 36 months, for a total of €540,000. 

Muscat says the money was for legitimate consultancy work that had nothing to do with the Maltese hospitals. Investigators believe the payments fit the modus operandi adopted by Ali and his business network and note that no evidence of Muscat’s work has been found.

Just as Muscat started receiving payments, another man facing charges in connection with the deal, Konrad Mizzi, was also engaged as a consultant by a company linked to Accutor AG, Ikons Global.

Mizzi says he never received any payments from Ikons and denies wrongdoing.

Keith Schembri also had a relationship with the Accutor group. Unlike Muscat and Mizzi, his ties appeared to be longer-term: he was in extensive contact with Accutor chairman Wasay Bhatti about various international projects the group appeared to be planning, in places like Tunisia and the Philippines. 

Other key figures, like Bluestone’s official owners Ram Tumuluri and Mark Pawley, also allegedly received millions, though investigators believe those two were essentially figureheads who were obliged to then pass money on to others.

2. How the money flowed: Kickbacks

More broadly, investigators believe that public money was also extracted from the concession through a network of kickback arrangements with Vitals’ various suppliers.

Companies contracted to provide all sorts of services – from cleaning to construction, IT to medical procurement, catering to payroll – all seemed to have arrangements in place that allegedly required them to pay 10% backhanders to key players in the concession.

There appeared to be a boilerplate structure for such arrangements, with a Tunisia-based company, Incorp, playing a major role.

Incorp was established in 2009 with Ali’s two sons, Asad and Wajid, as its majority shareholders. In early 2017, just as Bank of Valletta asked Vitals for details about Incorp’s shareholders, the Ali brothers vanished from the company’s official structures. Yasar Zafar, a Tunisian involved in other Ali family companies, became Incorp’s sole shareholder.

Contracts unearthed by investigators indicate construction, cleaning and catering companies hired by Vitals were to pay a 10% kickback on those contracts to Incorp.

They estimate that the company received well over €1 million in such payments.

3. How the money flowed: Procurement

There was a third, more creative way in which the hospitals deal is alleged to have churned out money for its architects: by controlling hospital procurement. 

One way it allegedly did that was relatively straightforward: it engaged a company owned by Ali’s sons, Eurasia, as the hospitals’ suppliers of IT equipment. Eurasia is the same company that charged Vitals €400,000 to carry out feasibility studies.

Another method was far more complex.

Investigators believe key players quietly bought two companies contracted to supply the hospitals, without using a cent of their own money.

The first, Mtrace, was a medical equipment company developing an expensive cancer treatment device called a cyclotron.

The second, Technoline, had a broader remit: that of exclusively supplying the three privatised hospitals with medicines and medical equipment.

Prosecutors believe that in both cases, Maltese taxpayer funds were used to secretly buy the companies, on behalf of hidden shareholders that would then profit from the companies’ advantageous positions.

Vitals spent €2.3 million of concession money on Mtrace and its cyclotron project. But the project went nowhere, the cyclotron languished unused for years, and Steward eventually pawned the company off to Malta Enterprise for €2 million.

That suggests the concessionaire first used Maltese public money to secretly purchase Mtrace and fund cyclotron development, then charged Maltese taxpayers a second time to sell the company and failed cyclotron project back to them.

Technoline cost more to purchase – roughly €5 million – and documents suggest that money came from a Jersey-based, Vitals-linked company in the form of a loan note.

Literally weeks after Technoline came under new ownership, Vitals handed it a contract to act as the hospitals’ exclusive procurement partner. That meant all medical procurement had to go through the firm, rather than the open market.

Technoline’s bottom line revved up 20% in its first year after the deal, then continued to see average year-on-year growth of 10%. A Steward-commissioned report calculated that the exclusivity deal led to €1.2 million in overpayments in just 10 months.

Steward gradually wound back that deal, and Technoline’s parent company, Gateway Solutions, used its hefty annual dividends to rapidly pay back the loan that funded its purchase.

On paper, the benefits of the lucrative deal flowed to the company’s stated owner, Ivan Vassallo. But investigators believe Vassallo was just a front for other, secret shareholders.

The Muscat government’s role

Maltese government officials were aware that not all was well with the concession, documents indicate.

In June 2016, before Vitals started operations, Muscat received an e-mail warning him about the company’s legitimacy. He forwarded that e-mail without comment to Schembri, who passed it on to Mizzi.

Three weeks later, a private analysis group engaged by Malta Enterprise concluded that Vitals’ parent company did not have the experience or capital to manage the hospitals concession.

The deal went ahead anyway.

Schembri and Mizzi often exchanged e-mails with key players like Tumuluri on their private e-mail addresses. Schembri used six different e-mail addresses to discuss the deal – including one using the alias ‘Frank Pillow’.

The Muscat-led government consistently pushed back financial deadlines to ensure Vitals and Steward were not deemed in default. Schembri knew from late 2017 that Vitals believed its own director, Tumuluri, had misappropriated millions of euro. Mizzi arranged for Steward to get a €100 million payment if it lost the hospitals deal.

All those alleged to have profited from the hospitals concession deny wrongdoing, and say the charges they face are based on investigators misinterpreting or misrepresenting facts. Some of those, including Muscat, Schembri and Mizzi, will be arraigned in court next week. Vassallo, Sladden and Hillman will also be charged this week.

Others, including Shaukat Ali, Armin Ernst, Ralph de la Torre, Ram Tumuluri and Mark Pawley, are also expected to face charges.