Keith Schembri advised Konrad Mizzi to use Nexia BT as his auditors after the then-minister approached him in the hope of emulating his Midas touch, the former chief of staff testified on Tuesday.
Schembri told parliament’s Public Accounts Committee that both he and Joseph Muscat used Nexia BT as their respective auditors, and that it was therefore “obvious” that Mizzi would do likewise.
Nexia BT, which is now struck off as a financial service provider, opened offshore structures for both Schembri and Mizzi while they were in office. Those structures were exposed in 2016 through the release of the Panama Papers.
Schembri initially said that Mizzi must have known of Nexia BT himself. But he later acknowledged that he had directed the minister to the Brian Tonna-led auditing firm.
“He told me ‘I want to do what you do, because everything you touch turns to gold’,” Schembri recalled as he testified before the committee.
Schembri said he knew Tonna since his teens and had used them as his company’s auditors. Muscat had also used Nexia BT as his auditors when he (Muscat) was an MEP, Schembri said.
The PAC is digging into a 2018 National Audit Office report into the Electrogas power station deal which flagged several concerns with the way in which that project was awarded to the consortium.
Suspicions linked to the deal also prompted the US to issue a travel ban against Schembri and Mizzi, citing “credible information of a corrupt scheme” in the Electrogas contract.
Schembri arrived at parliament shortly before 1.50pm but did not answer any questions from the media. He also ignored journalists as he exited the parliament building.
On Brian Tonna and Nexia BT
Tonna and another Nexia BT partner, Karl Cini, were both involved in awarding the Electrogas consortium the power station deal.
But Schembri insisted he had no idea they served on the power station deal’s evaluation committee (though he also said at one stage that he “couldn’t remember”) and said no alarm bells went off when he discovered that fact, after Electrogas was awarded the deal.
Times of Malta had revealed in 2018 that an offshore company owned by one of Electrogas’ shareholders, Yorgen Fenech, had listed Schembri and Mizzi’s Nexia BT-opened offshore firms as the intended recipients of funds.
Schembri has acknowledged that his offshore company, Tillgate, was due to do business with Fenech’s firm, 17 Black. But he says the business was a private venture related to recycling – something he reiterated when testifying on Tuesday.
“I had so many offshore companies,” Schembri said at one stage.
At another, Schembri said that “it was a coincidence” that he and Mizzi happened to open offshore structures, using the same auditors, at the same point in time.
On Yorgen Fenech and Electrogas
Throughout his testimony, Schembri insisted he only played a peripheral role in the Electrogas deal, learning of progress through updates given to cabinet but otherwise uninvolved.
"I think they (shareholders) were well served by the minister," he said, referring to Konrad Mizzi, who was politically responsible for overseeing the power station project.
Schembri insisted he never met Yorgen Fenech - who he knew as a child but "had lost contact with" - or other Electrogas directors to discuss their bid for the project, save for a single meeting in which he (Schembri) acted as an observer.
That denial prompted PAC chair Darren Carabott to read Schembri an email from Electrogas’ CEO which Schembri was copied in on.
In the email, the CEO made reference to “your meeting with one of our directors, Yorgen Fenech".
Schembri said he could not recall the email.
George Fenech 'never wanted the power station'
Schembri’s insistence that he never discussed the Electrogas project with Fenech was also called into question by PN PAC member Graham Bencini after Schembri said that Fenech’s father, George Fenech, told him that “he never wanted the power station project.”
“I thought you said you never discussed the power station,” Bencini told the witness.
“Our main talking point was reducing tariffs. Of course, that would come up in conversation,” Schembri replied.
Earlier in the session, Schembri was unable to provide clear answers when asked repeatedly about Labour's pre-2013 plans to build a gas power station.
He said his health problems had affected his memory and it was now difficult to remember events that happened over a decade ago with precision.
Schembri will continue his testimony on Tuesday, April 4.
Live blog ends
4.25pm Keith Schembri ignored journalists as he exited parliament, just as he did as he entered the building.
That wraps up today's proceedings - we've updated the top of this article with a summary of the key events from Schembri's testimony.
Thank you for having joined us, we will be back next week when Schembri's testimony resumes.
4pm That’s all for today’s session – Schembri will continue testifying today week, at 2pm.
Using Nexia BT
3.59pm Schembri says he did not advise anyone else in politics (other than Konrad Mizzi) to use Nexia BT.
3.58pm Schembri says he does not know who owns Egrant. He says he informed Muscat that Yorgen Fenech owns 17 Black and that the company was linked to their private business.
A defensive Bedingfield
3.57pm Glenn Bedingfield gets hot under the collar, saying that if a member cites a news report about an email, they must also present the original email.
It’s an odd request to come from a committee member – if anything, you would expect Schembri’s lawyers to make that sort of point.
17 Black and Tillgate
3.52pm Schembri denies there being any connection between Electrogas, Yorgen Fenech’s company 17 Black and his company Tillgate.
He also denies there being any projected transactions between those companies.
Times of Malta revealed in 2018 that Schembri and Mizzi’s offshore company were listed as ‘target clients’ of 17 Black.
Schembri says the plan was for his company Tillgate and 17 Black to transact on recycling-related activities.
Schembri's Midas touch
3.44pm Schembri trips himself up.
He first says he thinks Konrad Mizzi used Nexia BT to set up his offshore company because he already knew the company.
But he later says he suggested Nexia BT to Mizzi, because they were his auditor’s and Joseph Muscat’s, “when he was an MEP.”
Schembri says Mizzi approached him and told him “I want to do what you do, because everything you do turns to gold.”
The Mizzi 'coincidence'
3.42pm Bencini: Was it a coincidence that your company and Konrad Mizzi’s company were opened at the same time?
Schembri: “It was a coincidence.”
Carabott: “Did you know that Brian Tonna and Karl Cini were involved in the Electrogas evaluation?”
Schembri: “I don’t know, I don’t remember”
Carabott: “You don’t know, or you don’t remember?”
Schembri: “Aren’t they the same thing?”
Carabott: “No, they’re not”.
Schembri consults his lawyer.
Schembri's offshore structure
3.41pm Questions turn to Schembri’s offshore company Tillgate.
“I had so many offshore companies,” he says.
Schembri says he opened the company after details of his BOV-held trust were leaked to the PN. So he wanted to move his assets.
No party animal
3.36pm Schembri says he did not attend a party to celebrate the launch of the Electrogas project.
“I never attend these events,” he says.
Carabott notes that Schembri attended Pilatus Bank owner Ali Sadr Hasheminejad’s wedding abroad.
3.32pm The hearing has been somewhat sidetracked – it appears Carabott doesn’t have a copy of the email which he cited in his question to Schembri.
Schembri’s lawyers are asking for a copy of the email being cited. But they are only given a transcript of Schembri’s testimony at the Daphne inquiry. He was asked about this email during that marathon session.
Schembri denies discussing government guarantee
3.23pm Schembri denies ever discussing a €360m government guarantee for Electrogas with Yorgen Fenech or anyone else, other than cabinet.
He is categorical about that.
Carabott reads Schembri an email from Electrogas' CEO, in which he refers to "your meeting with one of our directors, Yorgen Fenech". Schembri was among the email recipients.
Schembri says he cannot recall.
His lawyers - and Labour members of the PAC - complain that they have not been given a copy of the email.
Electogas' excise tax
3.19pm Carabott asks Schembri if he ever met Electrogas owners to discuss the power station project.
He says he only met regarding the project once, at a meeting during which he did not speak. They never spoke to him about it.
“I think they were well served by the minister (Konrad Mizzi),” he says.
Schembri says he never got involved in Electrogas’ issue with pending excise duties, and says that would have been (Finance minister) Edward Scicluna’s patch.
But Scicluna told the PAC that he did not get involved in that, members note. Schembri says he doesn’t know who did, then.
Did he or didn't he?
3.13pm Schembri says he met the Fenech family during the electoral campaign, but that they never discussed the power station.
He later says George Fenech (Yorgen Fenech’s father, now deceased) “never wanted the power station”.
That pricks up Graham Bencini’s ears.
“I thought you said you never discussed the power station,” Bencini says.
Schembri changes tack. “Oh, we spoke about many things. Arriva, too. It doesn’t mean anything. We were talking about reducing tariffs. Of course that would come up in conversation.”
'The name rings a bell'
3.09pm Schembri says he thinks he met (Vitals Global Healthcare) shareholders Ram Tumuluri and Mark Pawley.
“The name rings a bell,” he says of Pawley.
Carabott cites reports that Fenech was soliciting Tumuluri and Pawley to step in instead of Electrogas shareholder Gasoil, which was in financial trouble.
Schembri says he knows nothing of that.
Schembri excludes any shareholder pressures
3.07pm Schembri says he knew Yorgen Fenech as a child, but the two had lost contact. They reconnected through the Electrogas project.
None of the Maltese shareholders – Fenech, Paul Apap Bologna or Mark Gasan – ever approached him before or during the tendering process, he says.
A German request at the UN
3.05pm Schembri recalls a top Siemens executive pulling him aside at a UN session in 2013 to ask him to “please be fair” with the tendering process.
He then corrects himself to say that it was a German government representative, asking him to be fair with Siemens. Siemens is a part of the Electrogas consortium.
Nobody else from the Electrogas consortium approached him, he says.
OPM in the dark
3.03pm Schembri says OPM was not informed that a board member at Enemalta (Lara Boffa) voted against the Electrogas bid.
He has no idea when they learnt of that. Perhaps when the media reported it, he says.
Meeting Brian Tonna
3.01pm Schembri says he’s known Brian Tonna (from the now defunct Nexia BT) since he was 17 years old. He was his business auditor. He got to know Karl Cini when he joined Nexia.
No involvement in evaluation
2.58pm The OPM “never” had any information from the project’s evaluation committee, Schembri says. Nor was he ever involved in the evaluation stage.
'Times of Malta attacked me'
2.56pm Carabott reads from the Daphne inquiry report, which concluded that Schembri had a “free hand” in running government.
The board of inquiry had questioned whether this style of government “allowed a small clique to abuse the power granted to them to enrich themselves to the detriment of the country they were duty-bound to serve.”
Schembri says he disagrees with that, and then complains about how he has been treated.
“The police turned my house inside-out and found nothing,” he says. “And every time there was a meeting of the PAC the Times of Malta attacked me and my family.”
Decision on Electrogas getting deal
2.49pm A decision on the preferred bidder – the Electrogas consortium - was taken at a meeting held on October 11, 2013. It was a Friday.
Schembri is asked if he was informed of the meeting outcome.
“I assume there was a press conference,” he says. He is told there wasn’t.
“Well then I don’t know. But I think the prime minister would have been informed.”
Schembri's meetings on Electrogas
2.45pm Keith Schembri says his only involvement in the deal was to attend cabinet meetings, when Konrad Mizzi would provide an update on progress in the project.
In follow-up meetings with Mizzi, himself, Louis Grech and Mario Cutajar would accompany the PM.
PAC chair Carabott notes that Schembri testified in the Daphne inquiry that he had attended another meeting.
Schembri acknowledges that there was “one” other meeting, when he stepped in as an observer. But he can't remember who was there.
'I was a part-timer'
2.42pm David Agius notes that the NAO spoke to the Energy World CEO, who claimed the company had a deal to assist with the project.
Again, Schembri says he has no knowledge of that.
“I was a part-timer,” he says. “I had a business to run.”
Why is Schembri being asked these questions?
2.37pm A key issue concerning the power station deal is whether Labour had sealed a secret deal with a bidder to build the power station, before it was elected.
That would breach public procurement laws, as the project was ostensibly opened up to a public tender, with all bidders on a level playing field.
But with Schembri's memory failing him, the PAC moves on to other questions.
'I can't remember, it's been a long time'
2.32pm PN members of the PAC are pushing Schembri to divulge the names of people involved in Labour's pre-electoral decision to go for a gas power station.
But Schembri cannot remember. "It's been a long time," he tells the committee. They ask him if 'Energy World' rings any bells. It does not.
Schembri says his health problems have impacted his memory.
"I sometimes need to write things down to remember them," he says.
'I'm no expert'
2.25pm Says Konrad Mizzi was not involved in the electoral manifesto.
He insists it was technical people who suggested to the party to go for a gas-powered power station, rather than nuclear power or an interconnector.
"I'm no expert in the matter," he tells the committee.
An electoral pledge
2.20pm Schembri says that as soon as the Labour Party was elected to government, his remit was to ensure that electricity bills are slashed by 25% as promised in the manifesto. He says it was right to appoint Konrad Mizzi as minister responsible for energy since he was the expert in the matter.