The Fairmount ship conversion contracts which cost the Malta Shipyards more than €36 million were a loss-making venture before they even started, according to an audit report into the handling of the contact.
The contracts for the two conversion jobs were worded in a way that gave the client the "upper hand" in most situations, the report drawn up by Pricewaterhouse Coopers says.
Despite the complexity of the two ship conversions and the money involved (the contracts were described as some of the biggest conversion jobs the yard ever undertook), the legal vetting of the contract was left to an in-house lawyer who was not likely to have possessed the required expertise to flag the risks the 'yard was taking on.
"Instead, MSL (Malta Shipyards Ltd) chose to place legal due diligence responsibility on its in-house lawyer who was primarily tasked to advise the 'yard on employment-related issues."
One of the contract's clauses - not drafted by the shipyard - even bound the 'yard to ensure the vessels were up to the required standard.
More worryingly, the report says, the executive management "may have misled" the board of directors, and its shareholder, by focusing excessively on the revenue generated by the two contracts (€19.8 million and €13.2 million respectively), while providing unrealistic "expectations of profit-contribution" when it was very unlikely that there would have ever been profit at the negotiated price.
It was bad enough that there was misjudgement on one high-risk project, the auditors said, but the management "bet the bank" and took on the second job for an ever lower price (€13.2 million).
The Fairmount projects, which involved work on two semi-submersible barges, the Fjel and the Fjord, were acknowledged by the government last year as the main reason for the reversal of the progress which the Malta Shipyards had been seeing since restructuring took place in 2003.
The Infrastructure Ministry, which published the 161-page report last Friday, said losses on the contracts showed that while the company had to diversify its activities, it lacked the necessary contractual, planning and productive abilities.
Yesterday, the ministry attacked the Labour Party and the General Workers' Union for turning the 'yards into a political football - which had led to their downfall over the years.
But at a press conference yesterday, Labour deputy leader Anglu Farrugia said the audit report commissioned by the government clearly showed this "shameful mess" had nothing to do with militancy or the workers.
The fault was laid squarely on the shoulders of the executive management, he said, pointing out that the key players, marketing manager Graham Couser and CEO Chris Bell, had been allowed to leave the company without being held accountable.
Mr Couser, in particular, jumped ship and resigned well ahead of his contract's expiry date and could not even be traced by PWC to be interviewed, Dr Farrugia said.
In this context, he requested for the resignation of Infrastructure Minister Austin Gatt, insisting that there should be political accountability.
But the ministry dismissed the call, saying that going by the same yardstick, how many resignations should there be on the PL's side for the losses made at the 'yard under the Labour government.
The Sunday Times asked the ministry and police whether there would be a criminal investigation into the actions of the executive management.
The police did not reply while the ministry said it could not interfere with this decision, which rests with police and the Attorney General. Nor did the ministry say whether it intends taking any civil action against those involved.
mmicallef@timesofmalta.com