Updated 2.55pm
Keith Schembri paid around US$5.5 million in backhanders to three men for the sale of printing machines to Progress Press, a court heard on Friday, using convoluted transactions to mask the corruption and defraud the company.
Schembri, who served as chief of staff to prime minister Joseph Muscat between 2013 and 2019, used a network of offshore firms to send the kickbacks to accounts belonging to himself, his business partner Malcolm Scerri, Adrian Hillman and Vince Buhagiar, an inspector told the court.
The sales of machinery pre-dated Schembri’s time at the Office of the Prime Minister but investigations focused on suspicious transactions stretching to 2015.
Hillman was managing director of Allied Group at the time, while Buhagiar was chairman of Progress Press. They pushed through the multi-million euro purchase of machinery from Schembri’s Kasco, giving the Progress Press board a presentation about the Kasco bid.
In total, a court heard, Progress Press paid around US$6.5 million more than it should have in buying machines from Kasco.
The $5.5 million which Schembri dished out in “commissions” was over-and-above the significant markup which Kasco applied to the prices of the machines it sold to Progress Press.
“It’s a clear case of bribery to buy machines from Kasco,” inspector Joseph Xerri told the court.
“Commissions’ were used as a word to cover up corruption.”
Police traced payments from Schembri-controlled companies that bought the printing machines to accounts which Scerri, Hillman and Buhagiar held at financial advisors MFSP, which has since rebranded to Zenith Capital.
Zenith’s owner, Matthew Pace, helped prepare documentation to conceal the fraud while Nexia BT directors Brian Tonna and Karl Cini served as “professional money launderers” for the men, the inspector said.
Inspector Xerri was testifying in the compilation of evidence against Schembri, his father Alfio, his business partner Scerri and accountant Robert Zammit. He also testified in the case against Vince Buhagiar, who is being tried separately.
He and fellow inspector Anne Marie Xuereb also told the court that:
• Hillman is believed to have received more than $1 million in all. A number of other suspicious transactions in his accounts related to the sale of paper - Kasco sold Progress more than €20 million worth of paper between 2010 and 2016 - and property development could also not be explained.
• Hillman worked as a “consultant” for Schembri starting from 2001, including work as a consultant for a locally-shot film, Agora. But Schembri said the consultancy gig was based on a verbal agreement, with no paperwork.
• Buhagiar received money for non-existent “consultancy” services, with paperwork to explain that drafted by Zenith Finance owner Matthew Pace. Other deposits he made into his accounts could not be explained.
• Schembri opened Pilatus accounts just weeks before he received two €50,000 payments into them from an offshore company named Willerby, which was owned by Nexia BT’s Brian Tonna, in 2015.
As it happened
Live blog ends
2.50pm After more than six hours of testimony, today's events in court are over. This live blog will end here - check back shortly for a wrap-up of the day's key points of testimony.
We will be back on Monday, when the case against Schembri resumes. Thank you for having joined us.
No comment from Buhagiar
2.48pm Our journalist Ivan Martin caught Vince Buhagiar and his lawyer Veronique Dalli as they left court, but Buhagiar was in no mood to answer questions.
Buhagiar case to proceed to trial
2.39pm Buhagiar is served with a bill of indictment, meaning his case will now move ahead for him to stand trial for the crimes he is accused of.
His lawyers note an administrative matter concerning the freezing of Buhagiar’s assets – he’d like to be allowed to withdraw the €13,000 he’s allowed to spend from the bank account he receives his pension into.
The case will continue on April 27 at 12.15pm.
Inspector ends testimony
2.30pm Inspector Joseph Xerri is done testifying.
Buhagiar's 'verbal agreement' for consultancy to Schembri
2.28pm Buhagiar told the police that he had a “verbal agreement” with Schembri for consultancy services (much like that which Hillman reportedly had).
Police found no documents to back Buhagiar’s claims of offering consultancy to Schembri or his companies Kasco or KTS.
This arrangement stretched from 2005 to 2012.
Buhagiar’s employer, Allied Group, did not know that he was offering Schembri consultancy services. The inspector is asked whether he was precluded from doing so. He says he does not not know but that Hillman was certainly precluded from doing so.
Kasco bid the cheapest
2.19pm Defence lawyer Veronique Dalli has some questions.
The inspector confirms that three bids were submitted for the machines, which the Progress Press board evaluated. Auditors PwC were also hired to evaluate the process. The Kasco bid for the two machines was the cheapest.
$5.5m in kickbacks over-and-above mark-up
2.15pm Lawyer Joe Giglio, representing Allied Group, asks the inspector if the police had calculated the total amount lost as a result of the corruption.
The inspector tells him that the $5.5m in "commissions" they had uncovered was over-and-above the markup that Kasco had applied to the cost of the machines it sold to Progress Press.
Hillman introduced Buhagiar to Kasco
2.10pm Police arrested Buhagiar and searched his home.
He told the police that he had various investments, had retired in 2012 but remained a consultant until 2015. He received €1,000 a month as a Progress Press consultant and had an annual salary of €70,000 when he was managing director.
Buhagiar said that Hillman had introduced him to Kasco in 2000 and the company had then started buying paper from it.
He told the police that MFSP’s Matthew Pace had not needed to ask about transfers into his account because he knew the money was coming from Kasco.
On March 8, Buhagiar was released on police bail. He was arrested again on March 20.
Vince Buhagiar, who served as chairman of Progress Press and managing director of Allied Group, walks into police offices on March 20. Photo: Matthew Mirabelli'Clear case of bribery to buy machines from Kasco'
2.04pm As he testified earlier, the inspector tells the court that Hillman received well over $1m in total. Both he and Buhagiar also deposited substantial amounts which could not be explained.
“It’s a clear case of bribery to buy machines from Kasco,” he says.
There were also transfers of $436,000 and $25,000 to Hillman and $240,700 and $50,000 to Buhagiar.
'Commissions' a word to cover up corruption
2pm All deposits into MFSP accounts held by Schembri, Buhagiar and Hillman were related to the sales of these machines, the inspector says.
Experts found around $5.5m in payments to Schembri and these three men and concluded they were backhanders. There was no sign of any services provided – “commissions” were used as a word to cover up corruption.
Other suspicious payments which Hillman received could not be explained, and Kasco’s sale of paper to Progress also merits investigation, the inspector says.
Schembri's backhander spreadsheet
1.55pm The inspector continues: in 2009, Progress Press applied for a subsidy with Malta Enterprise. It wanted to buy another printing machine. Malta Enterprise approved the application in July of that year.
Investigators found that Schembri had created a spreadsheet that detailed how himself, Scerri, Hillman and Buhagiar would all receive payments as part of the deal.
Progress Press paid $3.3m for this second machine, which Schembri bought for $2m.
Hillman’s offshore company Lester Holdings received $125,000 from one of Schembri’s offshore firms, Malmos.
The inspector runs through more details he provided in testimony earlier today - how Buhagiar's payments, received into his MFSP account, were listed as "consultancy fees".
Buhagiar continued to serve as a director of Progress Press until 2015.
Payments to Hillman, Buhagiar
1.52pm The inspector reiterates details of the payments which police homed in on, among them ones Schembri made of $130,000 to Hillman’s account at Curmi and Partners and $135,855 to Buhagiar’s account at MFSP.
There were other payments of $185,000 to Hillman and $105,000 to Buhagiar, declared as consultancy fees in May 2011.
Machine sale
1.47pm The first machine cost US$13.8m and was commissioned in 2008. Hillman and Buhagiar signed the deal on Progress Press’ behalf, which Schembri and Scerri signed on behalf of Kasco Technical Services.
Kasco was to make $5m on the sale, and the machine was purchased from an American supplier called GWS using offshore companies owned by Schembri.
Invoices were issued by Schembri, Scerri, Robert Zammit and Nexia BT’s Brian Tonna and Karl Cini.
Hillman and Buhagiar
1.42pm The inspector explains some of the background to the case.
Adrian Hillman had joined the company in 1998 and became managing director of Progress Press in 2003. He would go on to become managing director of the entire group.
At the time, Buhagiar was managing director of Allied, a company he worked for for 40 years. He would then go on to become chairman of Progress Press.
The inspector says it was these two men who led negotiations to buy new printing machinery for the company. A 2007 tender by invitation attracted three offers (which he cited in his testimony in the Schembri case – they were by Demajo, Sado and Kasco).
Who are the lawyers?
1.38pm Buhagiar is represented by lawyers Veronique Dalli and Dean Hili.
Elaine Mercieca Rizzo, Sean Xerri de Caro and Andrea Zammit are prosecuting.
Lawyer Joe Giglio is appearing parte civile on behalf of Allied Group.
Inspector Joseph Xerri, who testified a short while ago in the case against Schembri, will be the first witness.
Vince Buhagiar in court
1.34pm Buhagiar is in court, seated in a chair behind the dock. Proceedings against him will begin any minute now.
Case to resume on Monday, Buhagiar up next
1.04pm Today's court session is over and proceedings will resume on Monday, March 29 at 1pm.
But there's more to come - former Progress Press chairman Vince Buhagiar will be appearing in court next. He is the last of the 11 people arrested last week to appear in court. We will be live blogging that too - proceedings should begin in around 10 minutes.
Agreement by the bench
1.03pm Prosecutors and defence lawyers confer at the magistrate’s bench, and reach some sort of agreement out of earshot of anyone else in the courtroom.
A forensic report
12.59pm Defence lawyers also want a copy of a report made by forensic auditors, which inspector Xerri quoted from during his testimony.
Prosecutors say it’s too early for them to do so.
Weekend in jail
12.48pm The court upholds the defence’s request. That means Schembri and his co-accused will remain in jail for at least one more weekend.
Defence lawyers will also receive a copy of a recording of today’s testimonies, to allow them to prepare for cross-examination of the witnesses.
Bail or not
12.42pm After some legal tussling between the prosecution and defence over details which the inspector is testifying about, the case moves on to the accused men’s request for bail.
But defence lawyer Edward Gatt asks the court to hold off issuing its decree. The defence wants to make submissions on Monday, when it will cross-examine the two inspectors who testified today.
MFSP did not ask for source of funds
12.34pm Scerri told the police that he was also a consultant to Vince Buhagiar for newspaper vending machines. Adrian Hillman also gave consultancy services for the film Agora (which was filmed in Malta in 2009).
When asked about cash, he said that his parents had given him the money, for his children.
Scerri repatriated more than €900,000 from accounts overseas between 2010 and 2015 and paid more than €300,000 in tax.
He told the police that he had no paperwork to explain his source of funds and MFSP had never asked him for any.
Scerri was granted police bail and returned to face further questions on March 20. He did not answer any questions on that occasion.
Scerri's statement
12.28pm Scerri told the police that Vince Buhagiar had helped with the design of the machines. There was no agreement on payment.
He told investigators that the first machine was bought for $10m and sold for $13m. The second was bought for $2m and sold for $2.8m. He said he was not involved in bringing the machines to Malta or obtaining Customs clearance for them.
Brian Tonna introduced him to Matthew Pace of MFSP (now Zenith), Scerri said.
Malcolm Scerri enters the Financial Crimes Investigation Department last Saturday. Photo: Matthew Mirabelli'People had to get paid for their work'
12.25pm The inspector exhibits statements given by Scerri to the police.
He confirmed his name and address, said he earned €55,000, that his wife made €16,000 and that he had €680,000 at Zenith and other investments.
He told the police that he was an engineer with Kasco. He and Schembri had set up a company and agreed that Schembri would focus on the paper side of operations while he would handle the machinery.
Scerri told the police that he had spoken to Vince Buhagiar regarding the printing machines and that in 2007 Hillman was serving as a consultant for Schembri for the sale of paper internationally.
He told police he and Schembri had opened Kasco Recycling and also worked on bringing films to Malta. They had plans to venture into online gaming but those never came to fruition.
Scerri said that he was responsible for the purchase of the printing machines for Progress Press and oversaw their installation.
He told the police that people who worked on the project had to get paid for their work. He received payments into his accounts at MFSP and Curmi and Partners.
Scerri's arrest
12.12pm Inspector Xerri tells the court of the men’s arrests.
Malcolm Scerri was arrested at his Birżebbuġa house at 7.05am. Police searched his home and seized a number of items – an Asus laptop, Samsung mobile phone, various documents, and €18,950 in cash.
"Clear case of bribery"
12.09pm Between 2010 and 2016, Kasco sold €21m in raw materials to Progress Press.
It appears investigators suspect foul play here too: the inspector tells the court that Hillman’s accounts also feature suspicious transactions related to property development and the purchase of paper.
They say that it appears Hillman received well over €1 million in all.
Buhagiar and Hillman received money into their personal accounts, even though the deals were made on behalf of Progress Press. The two also deposited more money. It is unclear where it came from - the inspector describes it as a "clear case of bribery".
Nexia BT’s Brian Tonna and Karl Cini gave advice on how to use the offshore companies, effectively serving as professional money launderers to conceal and launder money, the inspector says. Matthew Pace, Cini and Tonna helped prepare documentation.
Schembri paid $5.5m in bribes
12.01pm The inspector says they believe Schembri paid out a total of $5.5m in backhanders.
'Hillman profited on Progress-Schembri deals'
11.57am Schembri, Hillman and Buhagiar all opened accounts with MFSP (now Zenith Finance), he says.
The company’s owner, Matthew Pace, was unable to explain why Malmos Ltd had sent money to Hillman.
Inspector Xerri says Hillman’s offshore company Lester Holdings was set up in 2011. It was given to Nexia BT in 2013 to start winding down.
The company received $100,000 and $125,000 from Malmos, with Hillman profiting from the deals between Progress Press and Keith Schembri, the inspector testifies.
Testimony resumes in open court
11.52am Inspector Xerri is done testifying behind closed doors and his testimony resumes in open court.
Court orders ban on names
11.45am The court also ordered a ban on the names of people who have not been charged. We are therefore removing names which were mentioned in open court during testimony.
Testimony is continuing behind closed doors.
Money to Hillman, Buhagiar
11.36am Hillman’s offshore company Lester Holdings received US$125,000 from Kasco Engineering, plus a further $100,000.
Buhagiar received €50,000 from Malmos into his MFSP account. MFSP director Matthew Pace had emailed Nexia BT’s Brian Tonna to show that this payment was for consultancy. The documents were fabricated, the inspector says, because there was no consultancy.
The inspector asks to give further testimony behind closed doors. The magistrate obliges, and orders everyone out of the courtroom.
Progress Press overpaid by $6.5m
11.30am In March 2009, Progress applied for a subsidy on a loan through Malta Enterprise, as part of a $25m investment. It had paid €13m for the initial machines and wanted to invest in another.
Investigators found a document prepared by Schembri which listed who was to receive payments for this machine. The list included Scerri, Buhagiar and Hillman.
Progress paid $3.3m for this machine, which Malmos had bought for $2m.
In all, Progress Press paid $6.5m more than it should have, the inspector says.
“What should have been a simple transaction became a complicated system of transactions. In our opinion, machines were coordinated by the same people to conceal the true profit.”
How the money moved
11.21am The inspector tells the court how money was moved through offshore companies to buy the machinery.
A company called Malmos Ltd paid for the machines.
Schembri, his employee Robert Zammit and Nexia BT’s Brian Tonna and Karl Cini were behind the invoices, which were amended according to requirements.
A Credit Suisse account belonging to Schembri received money from Malmos Ltd. From there, money moved to others: US$300,000 to another account of Schembri's, and US$168,000 to an MFSP (now Zenith) account of Hillman's.
There was also a payment of US$350,000 to Malcolm Scerri from Malmos Ltd and another US$135,000 payment to Hillman.
Malmos Ltd made a separate payment off US$105,000 to Buhagiar for "consultancy fees".
Four men to split US$5m profit
11.14am The inspector testifies about the printing press deals.
Vince Buhagiar was chairman of Progress Press and Adrian Hillman was managing director, he says. In 2007 the company had issued an invitation-only call for new printing machines. Board minutes showed that Demajo Group, Saco Group and Kasco Engineering had submitted offers.
Hillman and Buhagiar had given the board a presentation and a US$13 million offer by Kasco Engineering was accepted.
Those machines arrived over a six-month period in 2010. Invoices were issued in 2008 and paid for between 2008 and 2011. A document prepared by Schembri which the police found on a Kasco server showed how the machine was purchased using offshore companies to avoid tax.
Kasco made a US$5 million profit on the deal. The profits were to be distributed between Schembri, Scerri, Hillman and Buhagiar.
Progress and Allied
11.09am The inquiry looked into the purchase of three different printing machines.
A managing director of Allied Group and board member had testified before the inquiry, the inspector says.
They explained that Progress Press is responsible for printing while Allied Newspapers is responsible for the running of Times of Malta.
Hillman resigned in 2016 and the company had reached an out-of-court agreeement with him, they said.
Inspector Xerri testifies
11.05am Inspector Xerri begins testifying.
He works for the police’s anti-money laundering unit and got involved in this case on March 1, as he analysed the findings of the Demicoli inquiry.
That inquiry concerned allegations of €650,000 in kickbacks between Schembri and Hillman between 2010 and 2015.
Magistrate in court
11.02am After a 15-minute break, the magistrate returns to the courtroom and proceedings can resume.
Analysing documents
10.46am Cini, Tonna and Castagna were called in for questioning on March 12 and asked for more time to review documentation.
The three, as well as Schembri, were summoned again on March 20 (last Saturday) for questioning before they were charged in court. Schembri collaborated with the police, the inspector says.
That’s all from inspector Xuereb, who is now done testifying.
The court will be taking a 10-minute break. When proceedings resume, inspector Joseph Xerri will testify.
'Donations' from dad
10.42am The inspector tells the court that the police found an email from Robert Zammit saying that cheques would be issued in Alfio Schembri’s name. He would then pass them on to his son, Keith.
But Schembri claimed that the money his father gave him were “donations” from him and that he had done nothing wrong.
'Verbal agreement' with Hillman
10.39am When asked about consultancy fees due to Hillman, Schembri said there was no contract and it was a verbal agreement.
Schembri was interrogated again on March 15. He told the police he could not find any documents related to Hillman's consultancy services.
Additional printing machines
10.37am Schembri told the police that later, Kasco Engineering was approached about a second printing machine. This time another company board member joined the group of people who had gone up to Brussels previously. This time, they went up to Switzerland to see the machine.
He told the police that at the time, Kasco had given the company a €1 million loan, payable over four years. But the company took longer than that to pay it back.
Then Progress Press had wanted a digital printing machine. Schembri told the police that he had taken a step back by then, as in the meantime he had become OPM chief of staff. Kasco put in a bid to buy the machine from Israel.
They used offshore companies to buy the machine to avoid tax.
Relationship with Hillman
10.33am The inspector continues: Keith Schembri’s father, Alfio, was called in for questioning on March 8.
Keith Schembri was called in again three days later, on March 11.
He was asked about his relationship with Adrian Hillman and told them it began in 2001. He described Hillman as a “very valid” person who had helped him in various projects as a “consultant”.
Schembri told the police that he had had trouble supplying Progress Press with paper until some board members changed.
When Hillman told him that they wanted to buy a printing press, Schembri helped. They went to see the Financial Times in Brussels to see their setup.
His business partner Malcolm Scerri and Vince Buhagiar, Adrian Hillman and others from the company were all there.
They then signed a letter of intent with Kasco Engineering, with the offers audited by PwC. Strickland House, in St Paul’s Street Valletta, served as a guarantee.
Two overlapping inquiries
10.28am The inspector tells the court that when both inquiries (one into IIP kickback claims by magistrate Natasha Galea Sciberras and one into Adrian Hillman kickback claims by magistrate Josette Demicoli) were wrapped up, the police joined the two inquiries together as the people involved overlapped.
Tonna's help from his friend
10.25am Tonna told the police that he and his wife were in the process of separating and that he was worried that her lawyers would freeze his assets. So he asked Schembri for money “just in case”.
Since they were friends, Schembri willingly helped him out.
Tonna said that he was doing up an apartment at the time and could not remember details about the loan agreement.
What Karl Cini said
10.22am On March 1, the police interrogated Nexia BT directors Brian Tonna and Karl Cini.
Cini told investigators that he prepared templates for the company. Pilatus had asked for the documents in question, he said.
Cini also said that Tonna had never mentioned the loan from Schembri.
When asked about the €100,000 payment to Schembri from Willerby, Cini told the police that he had testified about that to the inquiring magistrate.
Preparing documents for Schembri
10.19am Inspector Xuereb says Katrin Bondin Carter (Nexia BT’s financial controller) was interrogated on February 26.
She was asked about a backdated document that had been created. She said that she was obeying orders by the firm’s partners, who needed the document as Pilatus Bank was asking for documentation.
Brian Tonna’s personal assistant, Caroline Dingli, was asked about documents prepared for Schembri about a BOV account. She told investigators that she had been told to do so by Tonna, but could not recall why.
Schembri on Pilatus
10.15am Schembri told the police that he used his BOV accounts as savings accounts and for financial planning, and that it had taken him two months to open the Pilatus accounts because of all the due diligence he underwent.
He told the police that he became a Pilatus client through the bank’s owner, Ali Sadr Hasheminejad.
When asked why he had received €100,000 in deposits into his Pilatus account, Schembri referred the police to his testimony to the magistrate. He told the police Nexia BT were his auditors and “took care of everything”.
Schembri was then released on police bail and called for another interrogation on December 9, 2020. He was shown his testimony before the inquiring magistrate and said he stood by what he had said then. He was interrogated once again on December 20.
Schembri pleaded ignorance of PEP
10.12am Then Schembri was interrogated, with his lawyers present. He was given copies of the alleged loan agreement he had with Tonna.
When asked about his relations with Tonna, Schembri referred the police to the testimony he gave the inquiring magistrate (Natasha Galea Sciberras).
Asked about Pilatus bank, he said that he had opened accounts there to spread his assets. He told investigators that when he was appointed OPM chief of staff, the role was new to him and he did not know what it meant to be a PEP (Politically Exposed Person).
Nexia directors interrogated
10.10am Interrogations started the next day.
Nexia BT director Manuel Castagna was the first person interrogated, followed by Karl Cini and Brian Tonna. All three refused to reply to questions.
Searches and seizures
10.05am The inspector says she went to Schembri’s house with a search and arrest warrant, and searched his house. Neither he nor his wife objected to the search. Nothing was seized there.
The police then searched the Kasco factory in Bulebel and seized an HP laptop and PC from Schembri’s office.
Schembri and Pilatus
10.03am The inspector moves on to Keith Schembri.
Schembri opened a bank account at the (now shut down) Pilatus Bank in June 2015. He received an initial transfer of €50,000 that same month, on June 25.
In August of that year, he received a second €50,000 payment.
Schembri also had a second account at Pilatus, linked to a Mastercard credit card, the inspector says. Using that same account, he paid €19,000 for shares in an offshore firm named Tillgate (That’s Schembri’s Panama company, as exposed by the Panama Papers).
More than €800,000 in the bank
10am Notes from a meeting of Nexia BT partners indicated that Willerby was to receive dividends from Nexia BT and serve as an investment vehicle for any of the company’s surplus proits.
The inspector says Tonna’s personal account at Lombard Bank held €624,000. KBT Holdings, which Tonna ran, had more than €224,000 in deposits.
Double invoicing for IIP payments
9.55am Payments made by the three Russian IIP applicants were double invoiced, the inspector says, with invoices issued by both BT International [Nexia BT's IIP agency] and Willerby – even though Willerby did not offer such services.
Willerby, the inspector explains, was intended to receive commissions from BT International for IIP referrals.
Backdated documents
9.50am The inspector says that the magisterial inquiry also found several documents that had been backdated. Experts concluded that the documents were only created after the Panama Papers leak.
For instance: a document created in 2016 referred to a transaction that happened in 2015. Minutes of a 2013 meeting were drafted in April 2016.
Nexia BT auditor Pierre Fiornetino emailed Bondin Carter (the company’s financial controller) seeking an explanation for a transaction. A document was then created to back the explanation up.
Repaying that loan
9.47am The inspector continues where she left off: had Tonna really wanted to pay back the alleged loan, he could have transferred the money from other accounts of his (rather than from Willerby), she notes.
A court heard yesterday that Tonna had more than €600,000 in various bank accounts - more than enough to cover the alleged loan repayments.
Evidence can be declared inadmissible later
9.43am Mercieca Rizzo argues the prosecution’s side – the police are obliged to testify on all the facts. The inspector is testifying about testimonies made under oath.
Magistrate Frendo Dimech listens to both sides and says that the court can declare particular pieces of evidence inadmissible at a later stage.
The inspector can continue her testimony.
Defence wants 'limited' mention of Tonna testimony
9.36am Defence lawyer Edward Gatt argues that the prosecution’s testimony about Tonna is not admissable as evidence – the Nexia BT director is facing charges of his own and could choose not to testify in these proceedings, he says.
Gatt says that while the inspector can give an overview, mention of Tonna must be “limited”.
The magistrate tells the defence that the police must provide details of its investigations.
Brian Tonna being driven to prison following his arraignment last Saturday. Photo: Matthew MirabelliNo proof of kickback, but a 'not credible' explanation either
9.29am The inspector says that the inquiring magistrate (Natasha Galea Sciberras) found no prima facia evidence that the Willerby payments were kickbacks.
But she also found that Nexia BT Brian Tonna’s claim that the money was repayment of a loan from Schembri was not credible, and that a loan agreement presented to back up that claim had been falsified.
Tonna, who kept notes even for very small expenses, had no notes concerning the loan.
Schembri said he could not remember details about signing the loan agreement. Tonna said he could not remember who had prepared the agreement.
The kickback claims
9.25am Police inspector Anne Marie Xuereb will testify first. Xuereb works with the police FCID.
She says investigations started after former Opposition leader Simon Busuttil sought an inquiry into allegations concerning Schembri.
Allegations concerned money transfers involving Willerby Trade Inc (a company we heard plenty about yesterday in the case against Nexia BT directors) and among other things a €166,831 payment made by three Russian nationals who had applied for Maltese passports through the IIP scheme.
Busuttil alleged that Schembri was making illegal commissions from passport sales. Schembri had received two €50,000 payments from Willerby into it.
Defence and prosecution
9.20am The men in the dock are being defended by three lawyers: Edward Gatt, Mark Vassallo and Ismael Psaila.
Elaine Mercieca Rizzo, Sean Xerri de Caro and Andrea Zammit are prosecuting.
Magistrate Frendo Dimech reenters the courtroom. Proceedings can now begin.
Schembri in court
9.15am Keith Schembri, Alfio Schembri, Malcolm Scerri and Robert Zammit are all in the courtroom, waiting for the criminal case against them to begin.
All four have spent the past six nights in jail, after they were denied bail following their arraignment last Saturday.
Their lawyers subsequently filed a second request for bail, which we expect the court to decide on today. They are also, like Pace and Falzon, seeking a reference to the constitutional court, arguing that their rights are being violated.
Brief pause in proceedings
9am The court is done handling the case against Pace and Falzon for today. Keith Schembri and his co-accused are next. The case against them will begin in a few minutes.
Pace, Falzon placed under bill of indictment
8.55am The two Zenith Finance directors are formally placed under a bill of indictment – in effect meaning they will stand trial for their alleged crimes – with their lawyers Edward Gatt and Mark Vassallo saying they will not object to that, for practicality’s sake.
The case against Pace and Falzon will resume on April 27.
Missed Thursday's court hearing? Catch up on what prosecutors allege about Pace and Falzon.
Lorraine Falzon granted bail
8.48am The magistrate switches focus to Pace’s co-accused, Lorraine Falzon.
Falzon has a clean criminal record, cooperated with the police and there is no fear of her absconding. The evidence against her is preserved.
She, like Pace, is granted bail against a €25,000 deposit and €50,000 personal guarantee.
She must abide by the same conditions imposed on Pace. She must sign a bail book once a day, cannot leave her house at night and stay away from the airport and coast.
Lorraine Falzon.Matthew Pace granted bail
8.41am The magistrate notes that Pace cooperated with the police, has a clean criminal record (save for a 1998 traffic violation), is not at risk of absconding and that the evidence against him is preserved.
Pace is granted bail against a €40,000 deposit and €60,000 personal guarantee.
He will have to deposit his ID card, driving licence and passport with the courts, sign a bail book at the Qawra police station once a day and be at home between 8pm and 7am.
Pace is also forbidden from being within 100m of the airport or 10m from the coast.
Matthew Pace. Photo: Matthew MirabelliConstitutional reference denied
8.39am Apart from bail, Pace and Falzon were also seeking to refer their case to the constitutional court. The magistrate dismisses that request, saying it is vexatious.
Magistrate Frendo Dimech in court
8.36am Magistrate Donatellla Frendo Dimech is presiding.
As expected, the magistrate begins proceedings by tackling the bail request filed by Pace and Falzon yesterday.
What crimes is Keith Schembri accused of?
8.28am Schembri stands accused of 11 different crimes, ranging from corruption to money laundering, forging documents, perjury and making money to the detriment of Progress Press and Malta Enterprise.
It's a long list of accusations - here's a list of the crimes Schembri is accused of.
Bail decree expected
8.24am It was a busy day in court yesterday, with prosecutors laying out their case against four top Nexia BT staff members [Brian Tonna, Karl Cini, Manuel Castagna and Katrin Bondin Carter] and two Zenith Finance directors [Matthew Pace and Lorraine Falzon].
Pace and Falzon are seeking bail - they've been in jail since last Saturday - and that request is likely to be the first thing on the court's agenda this morning.
Welcome
8.22am Good morning and welcome to this live blog. We're in the Valletta law courts for the first sitting in the compilation of evidence against Schembri and three others.