Keith Schembri and Konrad Mizzi are suspected of having planned to secretly own a company that exclusively supplied the Vitals and Steward hospitals with medicines and medical equipment.

Schembri and Mizzi, who face multiple charges in connection with the hospitals concession, are suspected of being two out of four intended secret owners of Technoline Limited.

Investigators believe Technoline’s stated owner, Ivan Vassallo, effectively served as a front for the two politically connected figures as well as their associates Adrian Hillman and Pierre Sladden.

Schembri, Mizzi, Hillman and Sladden are believed to have planned to secretly acquire Technoline without spending a cent of their own money.

"They were to acquire 100% of Technoline using government of Malta funds fraudelently channelled via the VGH concession," investigators probing the hospital deal said.

Instead of forking out their own capital, Technoline was purchased through a €5 million “loan” provided by Vitals, using Maltese taxpayer money.

Vassallo is alleged to have acted as a “professional money-launder” for those seeking to illicitly profit from the hospitals deal, according to investigators. 

Diary entries reveal plans

The concession terms forbade the company from using the payments for anything other than the operation of the three state hospitals leased to them – St Luke’s, Karin Grech and Gozo General Hospital.

Investigators built their case after sifting through hundreds of emails, documents and diary entries related to Technoline and its business plans.

They suggest the plan to take over the highly lucrative hospital procurement process was years in the making and was already in the works before Vitals had even been awarded the 30-year contract to run three state hospitals.

For years, Technoline Limited was a medical equipment supplier that competed with other firms in the sector for government contracts.

Then, in 2017, it was sold to a company called Gateway Solutions for €5 million.

Within weeks of the sale, Vitals made Technoline the exclusive supplier of medical equipment and pharmaceuticals to its three hospitals managed by Vitals.

Technoline would procure equipment and pharmaceuticals, add an 8% markup, and sell them on to Vitals. It made €5.5 million in revenue through such sales in just 2017 and 2018, with turnover increasing by roughly 10% each year in subsequent years.

It remains unknown why Vitals, a private for-profit company, opted for such an arrangement. When Steward took over from Vitals, it sought to end the exclusivity deal but continued to favour Technoline when doing business.

On paper, Gateway Solutions was owned by Vassallo. Prosecutors, however, believe that was just a façade.

'K and K'

In notes dated July 2015 – roughly two years before Technoline was sold to Gateway, and before Vitals was even awarded the hospitals tender – Vassallo listed four other Gateway shareholders, other than himself: “PS”, “AH”, and “K and K”.

Each of those four was to get a 22.5% slice of the company, with the remaining 10% potentially going to Vassallo himself, his notes suggested.

Vassallo’s notes did not spell out who those initials represented. But an analysis of his communication patterns provided clues as to the identities of PS, AH, K and K. 

Vassallo was close to businessman Pierre Sladden and had looped him into correspondence about Technoline. And it was Hillman, an associate of Sladden’s, who introduced him to Vitals director Ram Tumuluri.

When Vassallo was planning Gateway Solution’s business plans in late 2015 and early 2016, he did so by emailing Hillman.

Hillman would then forward those emails to Keith Schembri who would, in turn, send them to Konrad Mizzi.

Some of those emails concerned bank financing of the company. Others were sensitive company documents. Others were proposed structures drafted by Nexia BT, Schembri’s trusted auditors.

The men allegedly involved had pre-existing business relationships: in April 2016, the Panama Papers data leak exposed their secretive offshore dealings. Schembri, Hillman and Sladden even shared ownership of a Cypriot company through firms registered in the British Virgin Islands.

The scandal forced Hillman out his job as managing director of Allied Newspapers, Times of Malta’s publisher.

Schembri and Mizzi were retained in government by Muscat. Hillman, Schembri and others are now facing separate criminal charges for having defrauded Allied’s sister company out of millions.

Peeling the layers

The Panama Papers leak also potentially scuppered a new plan to add a new layer to Gateway Solutions’ corporate structure.

As the scandal broke, work was under way to set up two holding companies that would, in turn, own Gateway.

Their shareholders would be the same four sets of initials – PS, AH, K and K – as well as a ‘B’ and a mystery entity listed in notes as ‘?’. Those plans were subsequently dropped.

Initially, the plan was to finance Gateway’s purchase of Technoline through the sale of expensive equipment to Vitals, investigators found.

But that deal proved too complex and it was replaced by a more straightforward arrangement – Vitals would simply loan the company the €5 million, using taxpayer funds and through an offshore company.

Vassallo, ostensibly Technoline’s owner, and its chief financial officer Mario Gatt were given €100,000-a-year salaries, through employment contracts drafted before the sale went through.

Shaukat Ali Chaudry, a Pakistani businessman believed to be the secret owner of Vitals, was kept abreast of Technoline developments throughout. In late 2017, as work to turn Vitals into Steward accelerated, one of Ali’s nephews was made a director of the company.

One of Ali’s former employees told investigators that they believed the Technoline setup was yet another way in which the Ali family extracted money from the concession.

Steward was aware of the Technoline deal: as it negotiated a deal to take over Vitals, Armin Ernst – who first served as Vitals CEO before resigning and leading Steward’s Malta operations – told Steward owner Ralph de la Torre that Vitals shareholders believed the Malta hospitals deal was worth €200 million.

That valuation, he told de la Torre, was based on the assumption that the buyer would not just be getting three Maltese hospitals to operate; they would also get control of lucrative hospital procurement.

Fraud never reported

Ernst would also reach out to Keith Schembri to discuss Technoline’s future. Steward, he told the then-OPM chief of staff, either wanted to fully own the procurement firm or else wanted to be repaid the €5 million forked out to purchase it.

A third option – that of reporting the suspected fraud to the police – was never discussed, investigators noted.

Steward would gradually unwind Technoline’s exclusivity deal, after a report it commissioned calculated that the deal had led to roughly €1.2 million in overcharging over a 10-month period between 2017 and 2018.

It would continue to provide Technoline with business, however, and paid the company around €5 million during its time as concessionaire.

Technoline used dividends from its profits to gradually pay back the secret loan that had funded its purchase.

As uncertainty around Technoline’s arrangement mounted, Vassallo wrote to Shaukat Ali directly, addressing him as “Mr S”. Separately, he also suggested that the Ali-linked Accutor Consulting become a private shareholder of the company.

Accutor, a Swiss-based company providing payroll services, was the company Steward used to set up a €1 million “political support fund” in 2019. The following year, both Joseph Muscat and Konrad Mizzi signed consultancy deals linked to Accutor.

Preliminary work to bring Technoline under Accutor’s control got underway, documents show, but the plan never came to fruition. The move would have triggered banks to request due diligence of the Switzerland-based Accutor, investigators have hypothesised – something its owners would have been keen to avoid.

Vassallo, Hillman and Sladden did not respond to a request for comment. Schembri and Mizzi have long denied any wrongdoing in connection with the concession.