Former Vitals Global Healthcare (VGH) director Ram Tumuluri walked away from Malta with a €10.5 million golden handshake despite Steward Healthcare accusing him of fraud, leaked documents show.

Details of the “confidential” deal Tumuluri reached with Steward have been kept a closely guarded secret, with both sides agreeing to bury allegations of wrongdoing as part of the February 2019 settlement.

A cache of 300,000 leaked Steward documents obtained by OCCRP provide insights into how Tumuluri reached the deal by threatening to expose “evidence” of wrongdoing by the US healthcare company during its takeover of the “fraudulent” government hospitals concession from VGH.

In the lead-up to the settlement, Tumuluri warned he would file lawsuits in the US, UK and Malta alleging to have been forced out of the concession because of threats and intimidation by Steward.

Steward, meanwhile, had compiled its own ammunition against Tumuluri and others from the VGH “old management team”, alleging they were complicit in drawing up “manufactured” or “artificially” created VAT invoices with the aim of defrauding the government. 

The healthcare provider claimed in a letter to Tumuluri’s lawyers that the ex-VGH director’s “fraud, gross negligence and wilful misconduct” cost them at least €50 million. 

Steward further alleged the VGH management team had hidden certain liabilities and breaches in the concession agreement prior to Steward’s takeover in February 2018. 

Turning to Keith Schembri

Tumuluri’s name is synonymous with VGH, a company that, in 2015, secured a controversial concession from the Maltese government to manage three public hospitals.

A slew of former government officials, including ex-prime minister Joseph Muscat, his right-hand man Keith Schembri and ex-minister Konrad Mizzi face corruption charges over the hospitals concession following the conclusion of a magisterial inquiry last year.

They deny the charges.

E-mail correspondence reveals how Tumuluri turned to Schembri and Mizzi in a bid to mediate the acrimonious dispute in the aftermath of Steward’s takeover from VGH.

“There is no value for anyone in dragging this in legal courts... I do hope that no one takes advantage of my kindness and mistakes it for weakness,” Tumuluri wrote in a June 2018 e-mail. 

Among the recipients was ‘Frank Pillow’, a fake e-mail identity investigators allege was used by Schembri for backchannel discussions about the hospitals concession. 

Tumuluri said in the e-mail that he only agreed to the “forced sale” to Steward to appease Schembri. 

“While I was certainly disappointed with all the pressure and insistence to comply with the forced sale to Steward I still understood the political pressure PM, you and Konrad were under and complied to the sale reluctantly.

“With the limited choice and not to disrupt political motivations behind your decision I went with it as you made a promise to me that all the liabilities of VGH will be paid by Steward and you will make sure that happens.

“I clearly remember you saying to keep you as a friend not as an enemy. And on the basis of the latter I am now writing to you as a friend,” Tumuluri said. 

Responding to questions by Times of Malta, Mizzi said he is unable to provide substantive replies due to ongoing court proceedings.

“I would like to reaffirm that throughout my tenure, all decisions and actions were carried out in full compliance with the law, and there was no instance of wrongdoing or impropriety,” Mizzi said.

Schembri did not respond to a request for comment.

I do hope that no one takes advantage of my kindness and mistakes it for weakness- Ram Tumuluri

‘Steward wanted to bury evidence’

The e-mail was subsequently forwarded to Ernst by Vitals consultant Shaukat Ali, who was also on the recipients list. 

Ali too faces corruption charges over the concession. He denies the charges.

At the time of the exchange, Schembri was already aware of allegations that Tumuluri had misused government money to finance private deals.

A magisterial inquiry into the deal traced an e-mail Ernst sent to Schembri in January 2018 drawing his attention to the alleged misconduct.

Rather than immediately reporting this to the police, investigators say Schembri appeared to have instead used the knowledge as “leverage” over Tumuluri.

Speaking via his lawyer, Tumuluri told Times of Malta that Steward agreed to settle as they did not want the evidence he had to be made public in court.

“In contrast, Mr Tumuluri was ready and willing to go to court but accepted a settlement so that he and his family could safely rebuild their lives,” his lawyer said.

The lawyer said the settlement was paid from Steward’s US company but subsequently the transaction appeared as a “bonus payment” to Tumuluri in VGH’s audited accounts.

“This was another attempt at smearing Mr Tumuluri,” the lawyer claimed.

(The lawyer’s statement is reproduced in full at the end of this article.)

The audit of VGH’s account was commissioned by Steward following Tumuluri’s departure.

Former Steward Malta director Armin Ernst declined to comment when contacted by Times of Malta via his lawyers.

‘Ram’s bad acts’ 

In the lead-up to the settlement, Steward had compiled a three-page document called ‘Sri Ram Tumuluri – Bad Acts’. 

The document detailed alleged VAT offences, ‘suspicious’ contracts, ‘improper’ payments to Tumuluri and former VGH partner Mark Pawley, ‘diversion’ of funds and ‘improper and excessive’ expense claims. 

It further claimed ‘favoured employees’ were awarded contracts, board meetings were held irregularly, loans and transactions were unsupported by documents and records, as well as ‘mismanagement’ of the concession contract with the government.

“I am also circulating this to Armin [Ernst], who I believe may have additional items to add,” a Steward staff member said in an internal e-mailed dated November 2018.  Around three months later, Steward, Tumuluri and Pawley signed the secret settlement, agreeing to keep all allegations of wrongdoing “confidential”. 

Details of the settlement show it was signed to “avoid costs and uncertainties of litigation” by both Steward and the two ex VGH partners.

While Tumuluri walked away with €10.5 million, Pawley got €5 million.

The agreement further stated that the €15 million settlement, which would be paid over a three-year period, was being made in an effort to compromise and amicably resolve differences, without any admissions of guilt.

It further stated the very existence of the settlement, and any negotiations leading up to it, must not be disclosed to unauthorised third parties. 

The ex-Vitals partners and Steward also agreed not to publicly criticise each other about the hospitals concession. 

An uneasy peace 

E-mails and legal letters exchanged between Steward and Tumuluri’s lawyers in the years after the settlement suggest an uneasy peace. 

Just one year later, Tumuluri accused Steward of violating the agreement not to criticise one another as details emerged about the €36 million debts incurred during the two years Vitals ran the three public hospitals. 

They accused Ernst of intentionally making public statements to disparage Tumuluri for the purpose of deflecting criticism about Steward’s own management of the hospitals. 

Tumuluri’s lawyers said they were consulting their client as to what steps should be taken to publicly respond to “incorrect statements” by Steward.

Steward’s own lawyer claimed in internal correspondence that he had calmed the situation by reminding Tumuluri’s representatives that there was a financial incentive for the ex-Vitals directors to keep silent. 

“I concluded by saying that I couldn’t help but note that there are approximately 5,000,000 reasons (a reference to the last payments under the settlement agreement) why their clients would not want to create a dustup in Malta... that would allow us to suggest that they have breached the settlement agreement,” the lawyer said in an e-mail to Ernst and others. 

On another occasion in 2022, Tumuluri accused Steward of passing on financial records from Vitals to Times of Malta. 

The accusations came following revelations that government money was being shifted out of the hospitals concession by Vitals to its parent company Bluestone Limited.

Tumuluri’s lawyers claimed that by allegedly passing on the records, Steward had caused Times of Malta to “criticise and disparage” Vitals, in breach of the settlement agreement. 

Even Tumuluri’s conversations with a government spending watchdog were discussed within the context of the settlement agreement. 

When the ex-Vitals director told Steward that the National Audit Office was seeking information from him, it sparked a debate within the healthcare provider about what course of action to take. 

“It may look bad (for us) if the other side goes to the NAO and says ‘Steward is objecting’. Those optics may be something we want to avoid; and it may open a can of worms about the settlement agreement, which we would prefer not to open,” a Steward lawyer said. 

Ernst agreed that trying to block Tumuluri from speaking to the NAO would be unwise. 

“Don’t see grounds and optics would be really bad,” the Steward Malta director said. 

In his submissions to the NAO, Tumuluri repeated claims he was forced to transfer his shares to Steward “under duress” that “forced him to leave Malta”. 

Tumuluri expanded on these allegations in a 463-page whistleblower filing with the US government last year.

The ex-Vitals director claimed he was the victim of a plot by ex-prime minister Joseph Muscat’s government to boot him out of Malta in favour of a pre-ordained deal with Steward. 

Both Ernst and Steward US CEO Ralph de La Torre are reportedly the subjects of corruption investigations in the US.

Responding to questions by Times of Malta, Konrad Mizzi said he is unable to provide substantive replies due to a ban stemming from ongoing court proceedings.

This article was produced with support from OCCRP and the Daphne Caruana Galizia Foundation.

 

Full statement by Ram Tumuluri's lawyer

“The evidence shows that the healthcare concession was only transferred to Steward Health Care because of a campaign of corporate espionage and intimidation, including threats to Mr Tumuluri’s family.  Steward agreed to settle with Mr Tumuluri because, as the leaked e-mails show, Steward did not want that evidence to be made public in open court.

“In contrast, Mr Tumuluri was ready and willing to go to court but accepted a settlement so that he and his family could safely rebuild their lives. The settlement was paid from Steward’s US company but subsequently the payment appeared as a bonus payment to Mr Tumuluri in the Maltese company’s audited financial statements. This was another attempt at smearing Mr Tumuluri.

“Steward has not stopped attacking Mr Tumuluri and has relentlessly disseminated false allegations through the press to cover up and distract attention from its own wrongdoing.  

“In contrast, while Steward officials have made every effort to evade justice, Mr Tumuluri has voluntarily offered his full cooperation to the authorities in Malta and the United States authorities. He has nothing to gain from this other than to ensure the truth is known, and those responsible are held accountable.  

“Regarding Steward’s allegations surrounding inherited liabilities, including VAT payments, before taking the concession by force, it was fully aware of VGH’s assets and liabilities, including any outstanding VAT payments. During its concession management, VGH engaged licensed accountants and VAT specialists in Malta to ensure adherence to all applicable laws, rules, and regulations, including accurately filing all requisite returns. On taking the concession, it was then up to Steward to fulfil its responsibilities.”