Steward Health Care has accused Joseph Muscat and Keith Schembri of intentionally misleading the company to convince it to take over the contract to run the three state hospitals.
Muscat and Schembri emphasised the “urgency” of the deal as a reason to bypass due diligence processes, Steward has argued in court filings, and promised to renegotiate the deal to make it “bankable” once it took over from Vitals Global Healthcare.
The company says it now believes that the urgency argument was a pretext used by the Muscat government to “cover its tracks and to find a seamless fix to a failed concession”.
“Had Steward been made aware of the full picture, it would not have taken over the concession from VGH,” lawyers argue in a 100-page appeal filed by Steward Malta Assets Ltd, Steward Malta Management Limited and Steward Malta Limited this week.
Steward is seeking to overturn a ruling which nullified the concession granting three state hospitals to VGH and subsequently Steward. Judge Francesco Depasquale concluded the deal had been fraudulent from the start, with Steward stepping into a deeply flawed deal and seeking to “enrich itself at the expense of the government and its citizens”.
The company's appeal runs the gamut of legal arguments against that decision.
It submits that the ruling far overstretched the court’s remit, assuming fraud without requiring proof, while also wrongly applying a law concerning public land transfers to a concession agreement.
It argues that the plaintiff – PN MP Adrian Delia – should have been disqualified from presenting the case, and that his application should in any case be nullified due to a lack of clarity.
And it takes exception to the court concluding that it only invested in an air ambulance for Gozo and a toilet for a phone operator, saying it spent €60 million on capital investments during its five years in Malta.
But at the heart of its appeal are two major claims: that it was first hoodwinked and then misled by the Maltese government, and that it was then lumped with the blame by a “biased” court that sought to “cover and forgive any shortcomings of the Government of Malta and impute fraud to Steward – the ‘foreigners’”.
“If there is anyone in this matter who has been defrauded, it is none other than Steward at the hands of the Government of Malta”, it argues in its appeal, according to an English translation of it made available to Times of Malta.
In it, three negotiators on the government side - Muscat, his chief of staff (Schembri) and the "minister of health and tourism" (Konrad Mizzi) - are singled out as the people who played a key role in convincing Steward to set up shop in Malta.
Negotiating to take over the deal
A significant part of that document is dedicated to an account of its negotiations with the government, which began in the final months of 2017 and would continue until mid-2021, when it says talks to renegotiate the deal broke down for a final time.
Steward’s lead man in Malta, Armin Ernst, served as CEO of the original concessionaire, VGH.
While the company acknowledges that Ernst introduced the company to VGH and the Maltese government, it downplays his VGH role, saying he only worked there for two months before going on long leave and resigning in August 2017.
Steward says company representatives told Muscat and Schembri at a December 2017 meeting that the company had concerns about taking over the deal without adequate due diligence of VGH – something the government argued would take too much time given the “urgent circumstances”.
The company says it knew that the existing contract could not be profitable, but assumed that the government – an EU member state – had adequately assessed VGH when granting them the contract.
So when the government promised Steward that the contract would be renegotiated to ensure the company was “made whole”, that it would be compensated for any unknown VGH liabilities and not be liable for any unpaid tax bills VGH left behind, the company says it moved ahead with what would be its first investment in the EU.
Renegotiation never saw light of day
Steward says it has “extensive documentation” to prove that the government had promised to renegotiate the deal, from e-mails to a memorandum of understanding signed by then-minister Konrad Mizzi in 2019.
In one such e-mail it cites from April 2018, Health Minister Chris Fearne told the company “Guys ‒ we absolutely need to close this week. I am being told that MAM [Medical Association of Malta] are once more being pushed to go to industrial action. That will damage all of us.”
However, the timing and subject line of the email - 'Re: GOM-MAM Agreement' - indicate that Fearne was referring to negotiations with the doctors' union, not the transfer of shares to Steward.
Steward says Eurostat representatives were also promised by government representatives that the deal was to be rewritten.
It tells the appeal court that it is presenting the documentation to prove that claims that the government was somehow "misguided" by Steward through "fraudulent means" are wrong.
In any case, the concession renegotiation never saw the light of day.
An initial attempt in late 2019 fell apart as Muscat’s government crumbled under the pressure of anti-corruption protests, and two further attempts to negotiate with Robert Abela’s administration were called off at the last minute by government representatives, the company claims.
Steward’s lawyers contend that this was a government tactic, intended to string the company along while at the same time “saving face”.
They also present a handful of hypotheses to explain why the government has decided not to appeal the court judgment.
Perhaps the government was in collusion with VGH, lawyers say. Perhaps arguing against those “clear indications of government collusion” would end up backfiring against it. Or, perhaps, the government is happy to walk away with just a light reprimand from the court.
That, Steward contends, “may be the best option for government in the circumstances.”