Edward Scicluna was not told about a side letter signed with Vitals Global Healthcare which provided for a €100 million termination clause in a deal to privatise state hospitals, the former minister testified on Wednesday.
Scicluna, who served a finance minister when the deal was negotiated and signed, told a civil court that he had not seen the side letter and had not been alerted to it by his staff.
The letter was signed on the government’s behalf by former minister Konrad Mizzi, whose ministry piloted the deal to privatise the management of three state hospitals.
Scicluna was testifying in a civil case brought by Nationalist MP and former Opposition leader Adrian Delia, in which he is seeking to revoke a 30-year deal to privatise St Luke’s, Karin Grech and Gozo General hospitals.
The tender initially went to a company with no medical background and an opaque ownership structure, Vitals Global Healthcare, which went on to sell its concession to US healthcare giants Steward.
The €100m clause, which binds the government to fork out that sum if it backs out of the deal, was described as a “contingent liability, not a guarantee” by finance ministry permanent secretary Alfred Camilleri when he testified in the case last month.
In his testimony on Wednesday, Scicluna said that it was standard practice for his permanent secretary to receive a note from cabinet about anything approved that concerns finance.
But he could not say what had happened in this instance, as there was no paperwork from cabinet about it.
“Perhaps it was mentioned verbally,” he suggested.
2016 presentation at Castille
Scicluna said that he and his ministry were peripheral to the hospital privatisation project as it was being put together. He recalled Konrad Mizzi’s ministry presenting an outline of the project at Castille in March 2016, but said the presentation was sparse on details.
“They told us that negotiations [about the concession] were ongoing. Not what they were negotiating,” he recalled, adding that he had also been told by the OPM chief of staff at the time, Keith Schembri, about ongoing negotiations.
By the time of that presentation, a number of agreements concerning the concession deal had already been concluded, Scicluna said.
“We got to know afterwards,” he said.
Scicluna said that cabinet was informed when Vitals Global Healthcare was selected as the winning bidder, but the finance ministry he led did not enter into the merits of the decision as service concessions were unregulated at the time.
Asked whether that meant that by the time he saw the service concession, it was a done deal, Scicluna replied “yes”.
Projects Malta kept out
Another witness, former Projects Malta CEO Adrian Said, told the court that the evaluation process for bids submitted to run the state hospitals was controlled by Konrad Mizzi’s ministry, as was the Request for Proposals for the project.
Projects Malta did not have a say, he told the court.
No word on MOU
Scicluna told the court that he was also not told about a memorandum of understanding signed in 2014 between the government and Vitals, before the project was opened up to bidders.
The MOU was signed by Chris Cardona on the government’s side. Cardona was Economy Minister at the time.
Malta's auditor-general concluded earlier this year that there was evidence of collusion between the government and Vitals and said the company should have been excluded from bidding for the privatisation project.
Scicluna was not overly concerned about not having seen the MOU, however, telling the court that, as a rule, the finance ministry did not enter into the merits of MOUs signed by Malta Enterprise, and that this one was no different.
Muscat abroad, Mizzi sick
The court was also due to hear testimony by two other high-profile witnesses, former prime minister Joseph Muscat and former minister Konrad Mizzi.
But neither of the two was in court on the day, with both seeking to postpone their testimony to later dates.
Joseph Muscat and Konrad Mizzi: neither man made it to court on Wednesday.Muscat told the court, through an application filed last week, that he was abroad on the day.
Mizzi, on the other hand, told the court that he was in quarantine with COVID-19 symptoms and awaiting a virus test result.
Both men are now due to testify in the case when it resumes in January. Mizzi will have to present a copy of the side letter featuring the €100 million clause.
As it happened
Live blog ends
12.49pm That's all from this live blog. Thank you for having joined us. We will have a summary of the day's key points of testimony available online shortly.
Muscat and Mizzi to appear in January
12.47pm Muscat and Mizzi will both appear before this court in January.
Mizzi will be served with a summons and told to present a copy of the side letter with Vitals concerning the €100m contingent liability which was so often cited during today’s testimony.
Delia irked by Muscat, Mizzi no-shows
12.43pm The court was due to hear from Joseph Muscat and Konrad Mizzi today, but neither of the two will be testifying.
Adrian Delia is irked by the men’s excuses.
“The court devoted three hours to the sitting today, lawyers are all here… people are not animals!” he says.
Delia also recalls Mizzi’s scramble to appear before the court this time last year.
[On November 26, 2019, as the country underwent political upheaval, Mizzi rushed to court from Castille to avoid a contempt of court citation. He would go on to resign as minister later that day. Revisit that historic day.]
Projects Malta had no say in evaluation criteria
12.34pm Said says all members of the evaluation committee were chosen by Mizzi’s ministry and the evaluation report went straight to the minister.
The choice was not made by Projects Malta, he says, and the agency never told the evaluation committee what to focus on or ignore. The committee reported to the negotiating team.
The witness is asked about Projects Malta's involvement after the negotiation and evaluation stage. He says he was no longer with the agency at that stage and had been succeeded by William Wait.
[Wait testified in this case last month]
That's all from Said, who is done testifying.
Sheen of respectability
12.31pm Said says Projects Malta was appointed to publish the RFP, which prompts lawyer Edward Debono to ask whether the agency was used to give the plans a veneer of respectability.
Said says Projects Malta paid legal consultants to work on the RFP, as it did not have the necessary specialisation in-house.
Projects Malta CEO had no idea about MOU
12.29pm Said says he did not know of the 2014 MOU with Vitals and only got to know of negotiations through public sources.
He’s asked if he was suprised to find out about them.
“Yes,” he replies.
Projects Malta was not involved in drafting the RFP, he says, which reached Projects Malta done and dusted.
“Aaron Mifsud Bonnici told me that had started before Projects Malta came into being,” he says.
Said reads an email from Mifsud Bonnici, dated May 30, 2015, to that effect.
Former Projects Malta CEO testifies
12.26pm With Joseph Muscat abroad and Konrad Mizzi at home in quarantine, the judges move on to other witnesses.
First up is Adrian Said, who served as Projects Malta CEO until 2015.
Konrad Mizzi has COVID symptoms
12.24pm Konrad Mizzi has also been summoned to appear, but has told the court he has COVID-19 symptoms and is in quarantine as he waits for test results.
He’s just submitted an application asking to postpone his testimony to a later date.
“He’s caught it just as we’ve started this case,” someone remarks.
Edward Scicluna ends testimony
12.21pm That’s all from Edward Scicluna for today.
No talk about €100m
12.20pm Scicluna is pressed about the €100m clause in the deal.
He says he does not recall discussion about it and cannot remember how or where he first heard of it.
“I leave it up to my people, and as far as I know they did not flag it,” he says.
Delia: How is it possible that there was not even a single meeting with the prime minister to check about that €100m contingent liability? Did it raise a single red flag?
The judge stops all parties. He says he will not allow any further questions about this €100m side letter until he has seen the agreement himself.
“Who has this side letter? Who signed it?” judge Depasquale asks.
Scicluna again pleads no knowledge of it.
“Unless my staff flag it to me, I would not know. I don’t recall an issue concerning €100m.”
A €10m rejection
12.12pm Scicluna mentions, in passing, that his ministry had refused a request, based on an approved MOU, for an additional €10m to be pumped into the project.
A 'new chapter'?
12.10pm Scicluna says that Steward’s entry into the scene heralded a “new chapter in the truest sense of the word”.
Delia is unimpressed: “Three years have passed since that new chapter. Has there been any improvement at St Luke’s? Was one euro invested?”
Scicluna says he has no inside knowledge into progress.
“I don’t know. I know that [Health Minister Chris] Fearne is monitoring the contract."
No cause for suspicion
12.05pm Scicluna says he gave more details about the PPP in his Budget 2016 speech, given on October 12, 2015. That note was sent to him by the Health Ministry. At the time, Konrad Mizzi was Health Minister.
Scicluna says the slide presentation at Castille [which he cited earlier in his testimony] was given on March 21, 2016.
“They told us that negotiations were ongoing. Not what they were negotiating.”
Scicluna recalls plenty of lawyers and consultants being involved in the deal and says he had no reason to doubt that things were not being done well.
Net costs
12pm Scicluna says that at the time, the concession foresaw a €30 million annual payment. As of next year, that should go up to €49 million.
He says that expenses in 2014/15, when there was no PPP in place, have to be compared to what is being paid net of refunds now.
“We pay much more, but salaries are refunded and so we calculate the net payments,” he says.
"Money covers nurses, doctors, medicines etcetera," he says.
"We’re not exactly at par, but what we were told was that we would not fork out more than we were doing before."
Ignorance is bliss
11.57am Scicluna again tells the defence team that the finance ministry did not enter into the merits of MOUs signed by Malta Enterprise, and that this one was no different.
“It didn’t raise eyebrows and we didn’t expect to have copy of it,” he says.
“Nothing can raise your eyebrows if you don’t know about it,” Delia quips in reply.
The birth of an idea
11.53am Adrian Delia asks the former minister when the idea of privatising three state hospitals was first formulated.
Scicluna: The idea was built step-by-step. On November 17, 2014 I had read out a budget speech which mentioned St Luke’s [hospital].
Scicluna goes over his papers and reads out from the relevant section of his speech. It mentioned plans for a public-private partnership and masterplan for the hospital.
Delia notes that the MOU with Vitals was signed one month before Scicluna gave that speech. He shows the witness the MOU, dated October 10, 2014.
Delia: Who signed that document?
Scicluna: There are many signatures here, but there is also [Chris] Cardona’s.
Delia: Not the health minister’s. Had Cardona sent you a minute [about this]?
Scicluna: No.
Delia: Was Gozo hospital functioning at the time?
Scicluna: Yes.
Delia: Were there plans for it at the time?
Scicluna: There were plans in the electoral manifesto in 2012. You can check.
Minutes from cabinet
11.45am Scicluna says there is disquiet within the Health Ministry about the arrangement, but adds that this is his opinion, not fact.
Debono: After this lawsuit began, Konrad Mizzi signed a €100m obligation. This was not part of the original concession. Wasn’t your ministry informed about it?”
Scicluna: “The way our ministry works is that the permanent secretary acts once he receives a minute from cabinet about something approved that concerns finance. That’s how it’s done.”
Debono asks whether there was any such minute from cabinet.
Scicluna: I have no information about that. I don’t recall. There was definitely no cabinet paper, perhaps it was mentioned verbally.
Mizzi's side letter
11.41am Scicluna recalls urgently asking Mizzi, in June or July of 2016, for a copy of the agreements, with the prime minister copied in.
“Konrad Mizzi replied, telling that the agreements would be handed over to his permanent secretary.”
Debono asks about a side letter signed by Konrad Mizzi about that €100 million. The judge interjects.
“I still don’t have a copy of that side letter. I just read about it on the media.”
Scicluna says he did not see that side letter.
“I cannot say anything about something I did not see,” he says.
Scicluna says that while the MOU was approved by cabinet, his ministry had insisted that no money would be handed over unless the agreement was altered and they saw that black on white.
'Deal was already signed when we saw it'
11.35am Debono: "When Konrad Mizzi agreed to a €100m clause even if the government lost this case, what was the Finance Minister’s position?"
Scicluna: "The answer is in the question. The agreement was already signed when the presentation was given at Castille. We got to know afterwards."
"We wanted to have it in hand to check it, clause by clause. But we didn’t get it. We did not have them in detail before they were signed."
Ask the Health Minister
11.32am Lawyer Edward Debono asks about plans for 450 hospital beds at Gozo hospital, to be used for medical tourism, and which has so far not materialised. Did cabinet do anything to take back this property?
Scicluna: “Since this is a service concession under the Health Ministry, it’s not the competence of [the] Finance [Ministry]. It’s not that we are shirking.”
The former minister says the decision was always to give the concessionaire breathing room [nifs].
Debono: Ground rent is still ongoing, can’t the government pull the rug on the deal?
Scicluna: The issue was overtaken by new events. The new concessionaire [Steward] will hopefully put the house in order. No other piecemeal developments, no more delays.
Debono: But they did not deliver either, even when it came to the two other hospitals. Don’t you feel they should deliver?
Scicluna: As Finance Minister, the [financial] sum must be clear and approved. But it is up to the Health Minister to see that the agreement is being respected.
"I'm not trying to pass the buck," he adds.
A fait accompli
11.27am Scicluna is asked whether cabinet was informed about a temporary emphyteusis on a property linked to St Luke’s.
He says he cannot exclude that cabinet was told, but that he saw no paperwork and does not recall any.
“So you saw concession first time when it was fait accompli?”
Scicluna: “Yes. The service concession normally carry some risks for which government gives some land for an attractive price in return. In theory it’s a win-win situation, as are all service concessions with private entities”.
St Luke's hospital, one of three facilities given to the private sector as part of the deal.Konrad Mizzi's ministry presents
11.25am Scicluna recalls being given a presentation about the project in March 2016.
“We were given an outline of the project concept by Konrad Mizzi’s ministry. But they did not give us the impression that expenses would be more or less those budgeted by the Government for the existing hospitals” he says.
“The bottom line was that published in the budget estimates that November/December. €16 million.”
Presenting to cabinet
11.23am Following the MOU and the RFP, a tender was issued and a bidder selected. Was this put to cabinet?
The former minister says many things were discussed and that there was a memo sent out to approve the setup of an appeals board, which was needed “urgently” after the RFP.
He says cabinet was informed of the winning bidder.
Scicluna is asked whether this was presented as a fait accompli.
“We did not get into it,” he says. “At the time, there were no regulations for service concessions. I introduced those afterwards. Today, there are many obligations for service concessions. It was not so before that.”
Projects Malta and Malta Enterprise
11.18am Scicluna confirms that the Request for Proposals was issued by Projects Malta. He says the entity did not fall under his portfolio, or that of Cardona, but was instead Konrad Mizzi’s responsibility.
“Malta Enterprise had many such MOUs and we would not interfere. It does not raise eyebrows,” he says.
Malta Enterprise was Chris Cardona’s responsibility, he says.
Understanding the MOU
11.16am Note: The MOU in question was signed six months before a call for proposals was ever issued. Times of Malta had revealed that back in January 2018.
'I did not know about MOU'
11.13am Scicluna is asked about a memorandum of understanding which was signed, on the government's side, by former economy minister Chris Cardona.
He says he did not know about it.
"I wasn't informed," Scicluna says.
Was cabinet informed?
"From what I know, in November 2014 I had said in my budget speech that there were plans to rehabilitate St Luke’s [hospital]. That MOU concerned the Gozo hospital, which was not mentioned in the budget.
"As a member of cabinet, it was not on the books. And there was no request for approval," he says.
Edward Scicluna testifies
11.11am Scicluna is called into the courtroom and takes the witness stand.
Joseph Muscat is abroad
11.05am The court crier calls out Joseph Muscat's name, but there is no sign of the former prime minister. And with good reason: judge Francesco Depasquale tells the court that Muscat filed an application on December 3 to inform the court that he would be abroad today.
He will testify another time.
Still no word about the third man summoned, Konrad Mizzi.
Welcome
10.55am Good morning and welcome to this live blog. A court will today continue to hear a case seeking to erase the controversial hospitals privatisation deal.
Edward Scicluna, who quit politics last month and is due to become Central Bank governor in January, is in the law courts, waiting to be summoned.