'No fury like a minister scorned'

Investments Minister Austin Gatt last week claimed Sea Malta directors purposely withheld information that was crucial to the company's privatisation process, proposing to discipline the culprits. Former Sea Malta chairman Marlene Mizzi, who received a major share of the blame, calls this "preposterous" and says the board had been kept in the dark throughout the process. Massimo Farrugia spoke to her.

Sea Malta directors first requested information from Malta Government Investments Limited on developments related to the company's privatisation on June 21, 2004, according to the report on Sea Malta's asset valuation drawn up by Malta Investments Management Company Limited (Mimcol). But the first official reply the board of directors received since that date only reached the chairman's office nine months later - on March 24, 2005 when the directors were informed for the first time that Atlantica Spa di Navigazione and the government had started finalising a memorandum of understanding for the sale of the company's shares.

"The Mimcol report omits the number of unacknowledged reminders the board had sent while the Privatisation Unit (PU) and Malta Government Investments Limited (MGI) were busy negotiating the company's sale," Mrs Mizzi said.

In a letter sent to Prime Minister Lawrence Gonzi last week, Investments Minister Austin Gatt drew conclusions from the Mimcol report stating that the board of directors and Sea Malta officials had failed to inform the PU that the MV Maltese Falcon had been revalued.

The minister had called in Mimcol chief executive officer Mario Mizzi to investigate why the audited accounts for the year ending March 2005 gave the vessel's value at $5.5 million - an increase of over $1 million when compared to the price the government had agreed with the prospective buyers.

"What happened at Sea Malta is completely different from the impression that Dr Gatt is trying to give. As indicated in the Mimcol document, the valuation was done on the specific and written request of the auditors to satisfy international accounting standard IAS36 - which deals with impairment of assets. The valuation which was requested and done last year resulted in a negative impairment charge and a loss for Sea Malta of over Lm800,000 - yet the minister did not bat an eyelid! He only hit the ceiling when, this year, the same accounting principle benefited Sea Malta - as often happens in companies - turning the company into a profit-making situation" Mrs Mizzi said.

In his letter to the Prime Minister, Dr Gatt emphasises the importance of the reliance of the PU on the board during the privatisation process.

"The minister must practise what he preaches. During the crucial time of negotiations, the minister did not even bother to speak to the board of directors or the chairman. Our last meeting with him was in October of 2004! The Sea Malta board and the company management used to learn of developments through the grapevine. So why is the minister shifting the blame onto the board and management officials when the board was never involved in the privatisation talks? Till the day I resigned, I did not even know who sat around the negotiating table. Nor did I know details of what was being discussed.

"I learnt that a price was agreed on the Maltese Falcon with the buyers from a write-up in The Times some time in late June, after my resignation. How could I ever have imagined that prior to setting a price, the minister would not bother to find out the vessel's updated worth? Dr Gatt is trying to shift someone else's shortcomings, maybe his own, onto company officials and myself. This is really appalling and shows gross lack of accountability," Mrs Mizzi said.

Drawing conclusions from the Mimcol report, Dr Gatt blamed Mrs Mizzi, as well as Sea Malta general manager Joe Bugeja, board secretary J.T. Apps and assistant general manager finance M.L. Galea, saying that while being in full knowledge that the value of the Maltese Falcon had gone up, they failed to communicate this "extremely pertinent" information to the government's negotiators.

"Let me make it clear that what Dr Gatt wrote in his letter to Dr Gonzi were only Dr Gatt's own conclusions. The Mimcol report has no such conclusions at all. The Mimcol document is a chronological sequence of events with a series of annexes. It carries no comments or judgments," Mrs Mizzi said.

Indeed, a disclaimer in the early pages of the report makes it clear that the document was not the outcome of an inquiry into the events surrounding the valuations of the vessel.

The rapporteur also wrote that some documents contained within qualified as confidential information in terms of the non-disclosure agreement signed by the Maltese government and Atlantica Spa di Navigazione, pointing out that the report had been prepared for the ministry's exclusive use.

The Mimcol report was delivered to media organisations by hand on September 2 in the afternoon, soon after Dr Gatt's letter to Dr Gonzi was published on the ministry's website.

But why did Sea Malta ask for a valuation of the MV Maltese Falcon from Barry Rogliano Salles? One could conclude that the impression given in Dr Gatt's letter was that a revaluation was requested to somehow have a negative bearing on the negotiations.

"This is absurd! The company extended its full cooperation to MGI and the PU and responded to all their requests with efficiency and expediency. I invite any member of these two entities to state otherwise if this is not so.

"The updated valuation of the vessel was made on the specific request of the company's auditors, Grant Thornton, in compliance with international accounting standard IAS 36. The auditors had asked for it last year too. The minister called this international accounting standard 'monkey business', 'creative accounting' and 'window dressing'," she said.

Instead of being pleased that an asset belonging to the state was found to be more valuable than thought, the minister challenged this by announcing to the nation at large that value appreciation is impossible as vessels are like cars, Mrs Mizzi added.

"Had he consulted people in the business, he would have learnt that vessel market prices are subject to various factors like the size and type of vessel, demand and supply for the particular type and the going charter market rates. It is no coincidence that, in shipping jargon, vessels are often referred to as 'buildings'. Fortunately for the company and the nation and unfortunately for Dr Gatt's credibility, circumstances at valuation date caused the value of the Maltese Falcon to increase.

"Furthermore, it is also evident that Dr Gatt did not read the Mimcol report or he would have immediately realised that what happened with the Maltese Falcon is not some obscure plot to upset the Sea Malta sale. It is merely a reflection of the market, proof of which is found in page 30 of the Mimcol report. I quote: 'A profile of the ro-ro sale and purchase transactions at Annex 14 (Annex 14 is data collated by Mimcol) demonstrates that timing... is a factor that cannot be overlooked. Drawing on the data provided in Annex 14, it is noticeable how sale and purchase prices soared between June 2004 and July 2005, in contrast with the corresponding period of the previous year.' Unquote. Need I say more?"

Mrs Mizzi said that the auditing process was not to be confused with the privatisation process. "The minister is not making a distinction between the yearly audit exercise and its function and the exercise involved in selling the shareholding of a company. The two exercises are distinct and done for different purposes. In Sea Malta's case, the auditing of the company is the responsibility of one group of people - the board and management - while the privatisation was undertaken by another group of people - the ministry, MGI and the PU. This is quite normal. However, someone decided to make sure that these two groups were kept apart to the detriment of the company - as my communications in this sense warned. My written warnings went unheeded."

Mrs Mizzi said Dr Gatt was now trying to pin the blame for the omissions of whoever is responsible for the sale of the Sea Malta shares on people who have done their job 100 per cent.

"The prime target in all of this is obviously myself but other officials have been roped in as well. The other persons mentioned, and who according to the minister will also need disciplining, are very capable company officials who have executed their work with great professionalism. Refusal to accede to the auditors' request for new valuation would have meant breaching the law.

"There is no reason - legal or moral - to inform the PU or the ministry of the elements making up a yearly audit exercise. On the contrary, with the full knowledge that an audit exercise was under way, it should have been the minister who should have exercised more prudence in negotiating the sale of assets by waiting for the company's audited accounts. I suspect that if we had not obtained this valuation, the current reason for disciplining us would be for not having done so!" Mrs Mizzi said.

Yet, Dr Gatt also said the valuation was carried out on the vessel's theoretical price and not after the vessel was physically inspected. What is the usual practice? Do the shipbrokers have to check the vessel physically to valuate it?

"Again, we have Dr Gatt speaking of something he understands very little! Barry Rogliano Salles are shipbrokers of international repute and are neither in the pockets of Sea Malta nor of Marlene Mizzi. They safeguard their reputation by giving valid valuations. When asked for a market valuation, sale and purchase brokers do not inspect the vessel. Physical inspection is only carried out if and only when there is a specific request for this by the owner. Vessel inspection for valuation purposes is the exception and not the rule," Mrs Mizzi said.

Mrs Mizzi handed her resignation to Dr Gonzi on June 20 after having served under different governments for eight-and-a-half years, claiming she could not sign the process of sale with which she fundamentally disagreed. She had already offered her resignation to Dr Gonzi on June 8 but decided to give it another shot after the Prime Minister expressed the Cabinet's full confidence in her chairmanship and asked for some time to review the situation.

"When I spoke to the Prime Minister on June 8 - and I say this with all responsibility - I felt that even the Prime Minister was not convinced that selling off Sea Malta was the best way forward. He seemed to appreciate the consequences this may have on the economy and on employment. In fact, we parted with the understanding that he will re-consider matters. The rest is history."

Turning to the reasons for her resignation, Mrs Mizzi said she disagreed with the privatisation of a company which is of strategic importance to Malta. "It is not that I disagree with the concept of privatisation. On the contrary, I fully agree that the government should not have a say in commercial entities, which invariably means interference by politicians. However, state ownership of strategic entities, such as air and sea transportation as well as energy, are crucial for an island state."

Dr Gatt also asked the Prime Minister for an investigation to determine who was aware of the revised valuation of the Maltese Falcon and withheld information, also calling for disciplinary measures that should be taken against those responsible.

"Frankly, I cannot quite understand what the minister wants investigated! He has already been prosecutor, judge and jury! But I would welcome any investigation into my operations at Sea Malta, by knowledgeable, independent people of integrity who will investigate the issue 360 degrees and who have not been briefed to conduct witch hunts."

Mrs Mizzi said the investigation should go "into why the minister insisted on issuing statements, which undoubtedly damaged the company, before and during the negotiations for its sale. It should go into whether Dr Gatt, who has been openly hostile and negative towards the company, was the right person to handle the sale of the national shipping line. The inquiry should see why public assets are being sold for less than what they are worth, if this turns out to be the case.

"That the minister asks for disciplinary action against a chairman and company officials is really pathetic. What does he think a company chairman is? One of his employees? If he wanted to discipline me he should have asked for my resignation. I offered it to him twice in these last two years, with the last time not offering myself for re-appointment.

"In several interviews, Dr Gatt attached great importance to his authoritarian style and offered justifications for it. He seems to forget that authority does not come on its own, but tows along responsibility and accountability for one's actions. In this case, Dr Gatt has thrown all responsibility for this mess onto the Prime Minister, with precise instructions as to what he (the Prime Minister) should do and not to do! Unbelievable!"

Mrs Mizzi is convinced that had she gone quietly and used the usual euphemisms that she was resigning for "personal reasons" all this would not have come out.

"At times in these attacks, I feel like the student in front of the tank in Tiananmen square in Beijing. The minister wants to get back at me for having respected the public with an explanation for my resignation and for having uncovered cracks in this issue. If he were writing today, William Congreve would have written 'Hell hath no fury like a minister scorned'."

Mrs Mizzi continued: "The minister has his media and party machine behind him in this witch hunt. I have nothing of the sort. I only have my principles, the knowledge that I have done my duty well and the courage of my convictions. I need nothing else. So let the games begin!"