Updated 7.12pm with Mizzi statement

Konrad Mizzi has been accused by the Auditor General of "misleading" cabinet over a deal with Steward Healthcare that obliged the government to pay it €100 million if the hospitals contract was annulled.

In a strongly-worded statement, Auditor General Charles Deguara said the then tourism minister "engineered" the side deal through his misleading of cabinet. 

The deal offered Steward a €100 million payout should a court annul its contract with the government to run the St Luke's, Karin Grech and Gozo hospitals. 

That exact scenario played out in February, with judge Francesco Depasquale striking down the contracts on fraud grounds, including the €100 million agreement "engineered" by Mizzi. 

Control of the concession was centralised between then Prime Minister Joseph Muscat's office and Mizzi, to the "detriment" of Health Minister Chris Fearne, the latest National Audit Office report says.

"The delegation of responsibility for a health concession to the Minister for Tourism was deemed illogical by the NAO and provided a convenient opportunityfor the exploitation of Government, creating weakness where there ought to have been none, a weakness all to readily leveraged by the SHC (Steward Health Care)," the report reads.

The Auditor General said the €100 million agreement reached by Mizzi with Steward signed in August 2019 was the most evident "exploitation". 

It said matters were compounded by the fact that cabinet's authorisation was not sought by Mizzi when government acted as a guarantor in several financing agreements entered into by Steward and the Bank of Valletta. 

Mizzi pushed back through a Facebook post on Monday evening. 

"Lengthy discussions took place in Cabinet on the implications of both lender’s debt and a government’s event of default, and I answered all questions raised by my peers, as the then Prime Minister who chaired the meeting himself confirms," he wrote. 

"On the other hand, the NAO admits that it is not privy to discussions held by Cabinet. NAO’s conclusion is therefore pure conjecture, irresponsible and blatantly false."

'Limited disclosures' by Muscat

The Auditor General's probe was frustrated by "limited disclosures" from Muscat and "curt replies" by his chief of staff Keith Schembri, the report published on Monday said. 

It is the third and final probe by the hospitals deal and the first to focus on the concession to Steward in 2019, including the controversial €100 million clause. Its first report focused on the tendering process while a second dealt with the original 2015 concession to Vitals Global Healthcare. 

There were "conflicting accounts" and a lack of records about the crucial early exchanges between Steward and the government in 2017, when discussions began for them to take over the hospitals contracts from Vitals, the latest report reads.

Keith Schembri and Joseph Muscat only gave 'curt replies' and 'limited disclosure' to the Auditor General.

The Auditor General emphasised Mizzi's failure to cooperate with his office, and the "omission" of Fearne from any meaningful involvement in the fate of the hospitals concession. 

These factors, together with "allegations of duress" claimed by Vitals then director as well as the dual role as a VGH CEO and later Steward CEO by Armin Ernst corroborates the NAO's understanding that the concession remained one distant from "the standards of accountability and transparency expected of government". 

It described the limited timeframe that Steward Health Care were given to take over the concession as a "false sense of urgency", which "raises doubts on the conduct of those involved in the change of control of the concession". 

The Auditor General said that such was the haste of the government to push through Steward's takeover, that cabinet was only requested to endorse the transfer of the contracts after authorisation had already been given by Mizzi and Malta Industrial Parks to Vitals. 

€456m paid to Steward, Vitals 

Information on the precise amount paid by the government to Steward and Vitals has always been scant. 

The Auditor General says between 2016 and 2021, €52.7 million was paid to Vitals and €214.9 million to Steward. 

A further €188.5 million was spent by the government on salaries, taking the total payments under the contract to €456 million. 

The Auditor General said the first attempt to renegotiate the concession with Steward stalled due to the "political upheaval" that persisted in late 2019, resulting in Muscat's and Mizzi's resignation. 

There was an overall change in the approach towards negotiations following the appointment of Robert Abela as prime minister, the report observes. 

Further negotiations failed because the government and Steward sought to renegotiate terms that would fundamentally alter the nature of the concession, which was not permitted under the original terms. 

The Auditor General chided Abela's government for not seeking advice from the State Advocate and department of contracts earlier on this point, as it would have avoided "futile time and effort being expended by the parties".

It said that the belated verification as to the legality of the proposed restructuring of the concession was "an avoidable omission".  

Government, opposition disagree on parliamentary debate on the auditor’s report

Following publication of the report, the government and the opposition disagreed on when and how it could be debated in parliament.

Parliamentary Secretary Andy Ellul, who is responsible for public dialogue, suggested that the House pause its business for an hour and then discuss the report immediately.

But Opposition whip Robert Cutajar said this was a 400-page report which could not be discussed immediately.

He suggested a debate on Tuesday and Wednesday.No agreement was reached.

The Labour Party in a statement later observed that the PN had refused to have the report debated in the House today, but had called a press conference for 5.30pm.

It was clear, it said, that it was more convenient for the leader of the opposition to speak on his own and fire off allegations without anyone challenging him.