The Prime Minister’s chief of staff Keith Schembri tried to conceal his identity when creating a Panama company and associated bank accounts. Kurt Sansone asks why.

Shortly after the 2013 general election, Keith Schembri resigned all directorships in his companies, a move intended to quash potential conflicts of interest.

He was now chief of staff in the Office of the Prime Minister, a very sensitive role that put him at the centre of the government’s decision-making process.

Real and perceived conflicts of interest had to be eliminated and although Mr Schembri retained his shares in Kasco Holdings and associated companies, he withdrew from the driving seat.

What seemed to be the correct thing to do now transpires to have been only half the picture.

At around that same period, Mr Schembri’s financial advisors at Nexia BT were taking steps to create shell companies in Panama. The companies were to be set up through Mossack Fonseca, a Panamanian legal firm. Mr Schembri’s shareholding was to be concealed behind nominee shareholders and directors.

According to the Australian Financial Review, a media organisation with access to the Panama Papers, just five days after the election Karl Cini, a partner at Nexia, e-mailed Mossack Fonseca’s Panama office seeking details on setting up Panama companies.

In subsequent exchanges, Mr Cini gave an indication that the Panama companies were being created with somebody in mind. The ultimate beneficial owner “will be an individual and I will speak to Luis on Skype to give him more details”, Mr Cini wrote.

So far no documented evidence has emerged that Mr Cini was referring to Mr Schembri. However, it is a strange coincidence that from the three Panama companies registered in August 2013 for Nexia, two ended up belonging to Mr Schembri and Energy Minister Konrad Mizzi.

The companies, Tillgate Inc. and Hearnville Inc., were formally acquired by Mr Schembri and Dr Mizzi respectively in the summer of 2015. They have denied any knowledge of the companies prior to their acquisition.

But back in 2013, Mr Cini had also instructed Mossack Fonseca’s British Virgin Islands office to consider him as the “person of contact” for three companies held in the jurisdiction, one belonging to Mr Schembri.

Mr Schembri’s financial adviser went to great pains to keep his client’s name hidden when trying to open bank accounts for Tillgate

Roll forward to 2015 and e-mail exchanges fished out by the Australian media house show how Mr Schembri’s financial adviser went to great pains to keep his client’s name hidden when trying to open bank accounts for Tillgate.

Until December 2015, there is no recorded evidence that any bank account was opened – the Panama Papers do not go beyond this month – although Mr Schembri and Dr Mizzi have insisted no accounts were opened.

Banks that were approached would not touch Nexia’s clients when it became apparent they were politically exposed, unless, in one case, a substantial $1 million was put up as initial deposit.

The secrecy sought by Nexia for Mr Schembri jars with the situation in Malta where his shareholding in Kasco is publicly available for viewing.

When explaining the source of prospective funds for Tillgate and Hearnville, Mr Cini told his counterparts at Mossack Fonseca the companies would receive profits from recycling and remote gaming activities.

“The companies will act as a vehicle of [for] extracting the profits from this venture [recycling and gaming], since from commercially sensitive perspective they cannot appear as direct shareholders, either personally or via holding entities,” Mr Cini wrote, confirming the utmost secrecy that was required.

The Nexia adviser also told Mossack Fonseca the activities were not linked to Mr Schembri’s current line of work. Mr Cini was presumably referring to Mr Schembri’s role as chief of staff – in which he is privy to all government workings, projects and contracts.

On April 13, in his most detailed public statement to date since the Panama affair erupted last February, Mr Schembri justified the references to recycling and remote gaming by pointing out these were activities linked to an expansion of his Malta companies.

He defended this course of action, insisting his companies had every right to grow their business.

But Mr Schembri failed to clarify why he was the one appearing in the e-mail exchanges if the whole affair was linked to Kasco, where he no longer held executive power.

In earlier statements Mr Schembri had reiterated that his companies were being managed “by a team of professional executives”, insisting he did not get involved in decisions taken by his companies’ directors.

If Kasco was to grow into these new sectors, the related efforts to create a holding company for profits should have typically been handled by the company and not its shareholder.

However, Mr Schembri’s April 13 statement also failed to point out why Nexia had been insisting on anonymity throughout the process. If there was nothing wrong, why was Nexia trying to shield Mr Schembri from scrutiny?

This is a question only Mr Schembri can answer but the chief of staff has kept a rather low profile since the whole Panama debacle started.

In his first statement in February, Mr Schembri had said he would be commissioning an independent audit of his financial affairs to prove there was no corruption.

Whether the audit has started is unclear. What it will show depends to a large extent on the letter of engagement, which has not been made public. Whether it will cover only Mr Schembri’s Panama company or include also his interests in the British Virgin Islands is unknown.

But one thing is certain: the audit will not pass judgement on whether Mr Schembri acted in a politically correct way. This is a judgement reserved for the Prime Minister and one he evidently is not rushed to make.

Three companies in the British Virgin Islands

The British Virgin Islands

Three companies were created in the British Virgin Islands at different times in 2011 for Keith Schembri, Adrian Hillman and a top official at the Kasco Group.

The common thread was the financial intermediary used to create the companies and the commercial link between Mr Schembri’s Kasco business and Allied Newspapers, the company run by Mr Hillman.

Colson Services Ltd was created for Mr Schembri in January, while Selson Holding Corporation was created for Malcolm Scerri, who runs Kasco’s industrial arm.

In May 2011, Lestor Holding Group Ltd was set up for Mr Hillman, then managing director at Allied Newspapers.

Daphne Caruana Galizia has alleged on her website that the companies were used to hide kickbacks which Mr Schembri paid Mr Hillman to acquire business from Allied.

Both men have strenuously denied the allegations. Mr Hillman resigned his posts at Allied last month as the company kick-started an independent inquiry into the allegations.

According to Panama Papers, in 2013, shortly after the election, Nexia was asking Mossack Fonseca’s British Virgin Islands branch to appoint nominee directors and shareholders for the three companies.

The Australian Financial Review said this would remove Mr Schembri’s and Mr Hillman’s name from the records, making them even harder to find.

The reason why this was being done is unknown.

However, Panama Papers have also shown Nexia asking Mossack Fonseca to open another company in the British Virgin Islands, Blue Sea Portfolio, for contractor Pierre Sladden.

Mr Sladden is very close to Mr Schembri and Mr Hillman. His Maltese company, Redmap, carried out construction works at the new premises of Allied Newspapers in Mrieħel. Redmap also formed part of a company that bought Canberra House in Valletta from Allied last year.

The contractor also carried out various works on the property of Nationalist Party deputy leader Mario de Marco since 2011. These works remained unpaid until Dr de Marco asked for an invoice this year when the Panama affair exploded and Mr Hillman resigned his posts at Allied.

From contingency plan to caring for his family

Keith Schembri has maintained a low profile throughout the Panama affair but his statements, sent via his personal gmail account, have progressively evolved from one-liners to multi-paragraph explainers.

February 28

Schembri says all his companies “are being managed by a team of professional executives” and insists he “does not get involved” in decisions taken by his companies’ directors.

He says a New Zealand trust and any attached company were opened as “a contingency” since his bankers in Malta were transferring their trust business to third parties.

March 13

In a short statement denying “all accusations” that he was involved in graft with Allied Newspapers’ Adrian Hillman, Schembri reiterates that prior to entering office he relinquished all executive posts of his commercial interests.

April 10

In a letter to Australian Financial Review, circulated to the Maltese press, Schembri insists he only acquired Tillgate Inc, a Panama company, on July 2, 2015 and this was “solely for the purposes of its settlement into Haast Trust, the New Zealand trust”. He said it was intended “solely” for estate planning.

April 13

In his most detailed statement to date, Schembri says his resignation from director of his commercial companies did not mean his commercial interests would not continue to expand. He says, however, this would be done through the Group’s board of directors.

Schembri says he wanted to consolidate his commercial interest into a trust and on March 14, 2015 asked Nexia BT to set the ball rolling.

He says the advice was to place his “past, current and future commercial interests in a company that would be settled in the trust”.

Schembri insists Tillgate was registered by Mossack Fonseca on July 15, 2013 after being acquired by Nexia BT “as a shelf company” on August 9, 2013.

He denies knowledge of the company before it was acquired by him in the summer of 2015.

Schembri says the money that would have been passed on to Tillgate would have come from his “personal patrimony and the commercial activity of his companies”.

He says the money that was to be deposited in the eventual bank account linked to his Panama company was to come from waste recycling, something the Kasco Group was already involved in, and remote gaming, a line of activity the company wanted to expand into.

Schembri plays the sympathy card, insisting every father would want to see his children living better off and all he did was to consolidate his wealth, built over a number of years.

April 18

Schembri says the Australian media house is “confusing facts, making false links between unrelated events and contriving a scenario to try to give colour” to the mistaken claims. He says the journalist was “erroneously” attributing communication between Nexia BT and Mossack Fonseca to himself.