A man targeted by US law enforcement over an alleged $50 million fraud walked out of a Maltese court on Monday after a magistrate discharged him from arrest.
Frank Salvatore Rafaraci, a 68-year-old with both US and Italian passports, is alleged to have defrauded the US Navy, issuing fake invoices and bribing a US government official in the process, sources told Times of Malta.
He was arraigned on Monday afternoon, hours after being arrested in Malta on Sunday evening, in a joint operation by the Maltese and US authorities.
Prosecutors told the court that they are seeking to have him extradited to the US.
But while Rafaraci will face extradition proceedings next week, he will do as a free man after his lawyers flagged a series of procedural shortcomings in the way he was arrested and arraigned.
How the alleged racket worked
Sources familiar with the case said that in 2015 Rafaraci had been a key player in a scheme that used falsified invoices and receipts for equipment and supplies provided for the US Navy.
He is also alleged to have paid a US government official tens of thousands of euros in cash bribes in exchange for insider information on upcoming navy contracts.
US authorities believe Rafaraci and his known associates then laundered illicit funds using a series of bogus shell companies, evading millions of dollars in US taxes.
He was flagged to the Maltese authorities by their US counterparts earlier this year when they learnt that he was planning to fly to Malta for a short time period.
Arrested and arraigned in Malta
Inspector Omar Zammit testified that on September 24 the attorney general's office informed him that American authorities were seeking an arrest warrant against Rafaraci.
A local arrest warrant, signed by magistrate Donatella Frendo Dimech, was issued the following day, on Saturday. The inspector told the court that their window of opportunity was limited, as Rafaraci was due to arrive in Malta on Sunday and leave the following day.
Police traced him to a St Julian's hotel and seized two mobile phones and a laptop.
No conviction in the US
Prosecutors presented the court with an arrest warrant issued by a district court in Columbia, USA.
But defence lawyer Giannella de Marco noted that under local law, a person wanted to face charges overseas could only be arrested if they were wanted to face criminal charges, or had been convicted of a crime and at large.
In this case, the defendant was the subject of a criminal complaint made by a US law enforcement agent named 'De La Poena'.
A complaint is not a charge but similar to a request for a magisterial inquiry, the lawyer went on.
Defence lawyer Stefano Filletti said that while the US Department of Justice had requested the man's arrest on the basis of a criminal complaint, extradition in Malta is governed by local legislation
Any such request received by a local authority, such as the attorney general, could only be executed if it complied with local laws, he said.
Accuser in courtroom
Prosecutors told the court that the De La Poena was present and could confirm his complaint.
But it turned out that the US agent was seated in the courtroom and had heard everything discussed in court, and could therefore not step forward as a witness in the case.
Documents not authenticated
Defence lawyers also noted that documents presented to the court in the case were neither originals nor authenticated, as required by law.
The prosecution argued that this was due to the urgency of the case, given that Rafaraci was only in Malta for a 24-hour period.
“If you don’t have time and don’t have the necessary documents, don’t arrest people,” defence lawyer Stefano Filletti shot back, arguing that documents had to be properly authenticated to prove they were originals.
After lengthy and sometimes heated submissions, magistrate Yana Micallef Stafrace concluded that Rafaraci was to be discharged.
A request to have him extradited to the USA will start being heard on October 4, the court ruled.
Rafarici was represented by Giannella de Marco, Stefano Filletti and Mark Refalo.
Inspectors Omar Zammit and Robinson Mifsud as well as attorney general lawyer Meredith Ebejer prosecuted.