• Suspected bribery fund linked to potential ‘doubling’ of payments to Steward by Joseph Muscat’s government;
• Konrad Mizzi signed MoU for annual 9% payment increase to Steward three weeks after ‘slush fund’ was set up;
• Health officials had ‘grave concern’ about the impact increased payments would have on public finances;
• Fund terminated soon after Muscat, Mizzi and Schembri resigned.

Payments into a suspected political bribery fund were linked to Steward Health Care negotiations with the government to receive more money, new leaked documents suggest.

Internal records from the healthcare provider indicate payments into the alleged €1 million bribery “fund” were to be terminated if financial increases being negotiated with ex-prime minister Joseph Muscat government failed to materialise.

Those increases could have led to Steward’s income “doubling” over a seven-year period.

A secret contract setting out the alleged fund’s aims was negotiated between Steward Malta director Armin Ernst and Wasay Bhatti, the owner of Swiss payroll firm Accutor.

Despite the central nature of the alleged bribery fund in the case against Muscat, investigators were unable to trace the consultancy contract used to set up the fund.

Times of Malta found copies of it among nearly 300,000 internal Steward documents obtained by the Organized Crime and Corruption Reporting Project (OCCRP).

Drafts of the contract listed various conditions which would cause payments into the ‘slush fund’ to be terminated.

One of them was a 9% annual hike in Steward’s €73 million budget which health ministry officials noted could “double” the amount paid to Steward by the government within seven years.

Then Tourism Minister Konrad Mizzi signed a memorandum of understanding committing the government to the 9% budget hike in August 2019, just three weeks after the suspected bribery fund was set up.

Investigators allege the fund was used by Steward to secretly pass on kickbacks via Accutor to Muscat, Mizzi and former OPM chief of staff Keith Schembri. 

All three men face corruption charges following the conclusion of a magisterial inquiry into the hospitals’ privatisation deal.

Bhatti has been separately charged with bribery and money laundering.

They all deny the charges.

Investigators probing the concession suspected the secret contract to set up the ‘slush fund’ was important.

“If it exists, it is presumed to have remained in Switzerland and/or the US. In our opinion that would not be surprising given that such a contract would likely have laid bare a highly sensitive relationship between Steward, Accutor and some link to Maltese politics,” investigators wrote in the inquiry report.

Through his lawyer Charlon Gouder, Muscat told Times of Malta he is not allowed by court decree to make any statements on the case. 

“Furthermore, he does not have access to the documents you refer to and cannot ascertain the interpretation you are giving. We can only say that your questions give away the fact that you are once again being selective and partial in what you quote. Nevertheless, if anything, what you say proves that Steward did not get what you allege they paid for.  This despite the fact that you always claim that as Prime Minister, Dr Muscat had some sort of absolute discretion.”

The other ex-government officials did not reply to a request for comment by Times of Malta.

Inside the hidden agreement

In one draft of the consultancy agreement marked as being “final”, Steward assigned Accutor a number of “responsibilities”.

In return, Steward agreed to pay Accutor €100,000 monthly for its “consultancy services”.

One of Accutor’s tasks was to obtain increases in government payments “as per yearly budget”. Investigators have zoomed in on how Muscat, Mizzi and Schembri all went on to benefit from financial relationships with Accutor once the fund was set up.

Leaked e-mails and various drafts of the consultancy agreement used to create the fund make reference to Steward’s bid to secure an increase in government payments to make the hospitals contact more “bankable”, or profitable.

One draft of the agreement listed six conditions that could lead to payments into the alleged bribery fund being terminated.

These included payments from the government concession in 2019 not being received expeditiously, or “the 9% budget increase” not being obtained.

The ‘final’ version of the consultancy contract simplified the termination conditions, removing explicit mention of the 9% increase and instead stating that the agreement could be terminated if the “concession and finances are not implemented in full as agreed upon prior”.

The MoU signed by Mizzi on August 22, 2019 appeared to line up with the alleged bribery fund’s aims.

Apart from the 9% annual increase, it states new financial terms for the hospitals concession would be created based on a “fair and reasonable package” for Steward’s healthcare services.

Payments to Steward were to be “on time and reliable” due to the company’s intermittently negative cashflows, the MoU says.

The former Steward Malta director declined to comment when contacted by Times of Malta via his lawyer.

Despite the MoU “committing” the entire government to the increases, health ministry officials had “grave concerns” about the impact the new financial package would have on public finances.

In submissions to the Auditor General, the ministry said the proposed increase would lead to a “doubling” of the money paid to Steward within seven years, due to the compounding effect of the yearly 9% rate.

Although the 9% increases were only meant to last for a five-year “transition period”, the MoU signed by Mizzi “did not clearly specify the period of applicability of this increase”, the health ministry said.

Ex-Health Minister Chris Fearne told the auditor that he raised alarm within the government when he discovered that Mizzi was negotiating potential increases in payments to Steward without any corresponding increase in health services.

Fearne, who has been charged with fraud over the hospitals deal, told the Auditor General that he went to Muscat to object to the “unacceptable” situation.

‘Ralph is aware’

Ernst wrote in an August 11, 2019 e-mail that the first €100,000 monthly invoice from Accutor under the “consulting agreement” would arrive at the end of August.

That agreement was for “supporting political and government activities and interactions”, the Steward Malta director told a Steward finance executive.

Ernst said he would need to approve all bills linked to the Accutor payments, adding that Steward Health Care Systems LLC’s CEO Ralph de la Torre “is aware” of the arrangement. Steward and the government were aiming to finalise negotiations on the improved financial package by the end of 2019, leaked documents and public records show.

In parallel with the consultancy agreement, Accutor was also secretly handed a 30% cut on Steward’s future profits from the Gozo, Karin Grech and St Luke’s hospitals.

By November 2019, a 32-page “private and confidential” document detailing the new financial arrangements had been drafted by Steward, pending final approval by the government.

Apart from the 9% budget yearly increase, the document indicates Steward was  to receive €1.4 million annually over 30 years for leasing the Barts Medical School – built on public land – to the government.

Steward was also to be given “free” use of drugs and medical consumables up to a maximum of €5 million yearly for a five-year period.

Investigators, who did not have access to the Steward/Accutor consulting agreement, speculated that plans to transfer Barts to a US real estate company and lease it back to the government could have been the reason why the alleged bribery fund was set up, as the plan would have needed cabinet approval.

‘Let’s talk after election results’

Plans to sign the renegotiated financial package for Steward were cancelled when Muscat, Mizzi and Schembri were all forced to resign in the wake of the Daphne Caruana Galizia murder scandal at the end of 2019.

In a January 2020 e-mail exchange between Ernst and Bhatti, the Steward CEO appeared to be calling time on the “political support fund” agreement following the failure to sign the new concession contract.

“It has gone to a place beyond return and as such it is my assessment that termination of this specific agreement is the better part of valor.

“Frankly, I do not want to exert the pressure to make them stay in a contract they are uncomfortable with and make this a hill I am willing to die on...We should talk once the Malta election results are out.”

The e-mail was sent on January 11, hours before Robert Abela beat Fearne to become Labour leader and Muscat’s successor as prime minister.

In a reply the same day, Bhatti urged Ernst to reconsider: “I believe in the healthcare it is very important for us to keep this account alive [sic]. I give you my personal guarantee to give us 1 month and see that all has improved extraordinary, [sic]”.

Ten days later, Bhatti signed Muscat up as an Accutor consultant on a €15,000 monthly contract.

‘For introductory purposes’

Muscat showed up at a Steward meeting at the prime minister’s office with Abela and Fearne that same month.

Internal Steward emails indicate that the meeting was an attempt to revive negotiations with the government on the improved financial package.

Ernst told his staff that Muscat was present “for introductory purposes only”.

Muscat received payments from Accutor and an affiliated company between March 2020 and June 2020.

The consultancy agreement between Steward and Accutor was terminated two months later, therefore halting payments into the alleged bribery fund.

Talks between Steward and the government on the improved package collapsed a year later following resistance from Fearne and other government members.

Fearne, who is facing fraud charges over the hospitals deal, would later be subject to a smear campaign financed by Steward.

When Steward’s payments to Accutor later came under scrutiny following revelations by Times of Malta, Ernst linked the Swiss firm’s role to the concession agreement negotiations.

“We had managed to come to substantially finalised agreement on the initial concession agreement amendments, but could not get it over the finish line to be circulated within GOV and get to cabinet sign-off, just to be derailed by the minister resignation due to the GOV crisis.

“We then obviously terminated that agreement [with Accutor] - but they seemed to have been effective.”, Ernst wrote in an internal e-mail dated April 2022.

The following year, an appeals court upheld a decision to terminate Steward’s contract with the government on fraud grounds.

The court found that “senior government officials” were complicit in the privatisation fraud and the Maltese government had failed in its duty to protect the national interest, defending Steward throughout the process, the court said.

This investigation was produced with support from The Daphne Caruana Galizia Foundation and OCCRP.