Around 60 instances of Vitals Global Healthcare breaching its service obligations under the €4 billion hospitals contract were identified by 2017, yet no action was ever taken, a report by the National Audit Office found.

VGH was awarded the running of the Karin Grech, St Luke’s and Gozo hospitals in a 2015 tender the NAO suspects was the result of “collusion” between the company and government officials.

A minute from the quality and assurance board set up to monitor the service offered by VGH flags how a health ministry consultant “noted around 60 breaches of the concession agreement” by the company.

The NAO flagged how a later assertion made by the Health Ministry about no breaches in the service ever being identified was “inconsistent” with the minutes from the November 2017 board meeting.

When confronted by the NAO about these inconsistencies, the health consultant whose concerns were documented during the meeting claimed the board minutes were “erroneous” and insisted no breaches existed.

According to the report, the health consultant told the NAO he had merely flagged “several complaints” about the health service under VGH, but maintained that these shortcomings did not constitute breaches since the service level remained the same.

The entire NAO report is replete with examples of conflicting versions of events and dysfunctional relationships between the various government bodies tasked with overseeing the contract.

A lack of coordination between the health and energy ministries, who were responsible for different aspects of the contract, “allowed for the concession to remain an unimplementable project, an insurmountable challenge and irreparable situation for the government to manage, whose administrative and political weaknesses were all too readily exploited by the VGH”, the NAO said.

In uncharacteristically strong language, Auditor General Charles Deguara said the belief that VGH could live up to its contractual obligations under the “dubious concession” was a result of “naivety” by certain government officials, and “gross negligence” in the case of others.

It noted how consistent changes to the original contract signed off by former Tourism Minister Konrad Mizzi solely favoured the interests of the VGH, with government rendered “impotent” in holding the concessionaire to account.

Instead of scrapping the concession after a financially crippled VGH crashed out of it in 2017, the government instead signed off the contracts being transferred to US company Steward Healthcare.

Times of Malta reported in November how former Prime Minister Joseph Muscat and key figures involved in VGH received payments from a Swiss firm that received million from Steward Healthcare when the concession was transferred to it.

Muscat has denied wrongdoing, maintain that the “consultancy payments” he received after leaving office form the Swiss firm were for legitimate work he carried out.

‘Abysmal accountability, transparency’

The entire negotiation procedure between VGH and the government remains steeped in mystery, as the negotiation committee failed to retain any documentation relating to its work.

“This reflects abysmally on the standard of accountability and transparency that ought to have characterised such an important process,” the NAO said.

It further noted that the steering committee tasked with overseeing the negotiating committee’s work was “negligent” in its failure to ensure appropriate records about the negotiations were kept.

“The NAO deemed this a severe failure in governance,” the report says.

The Tourism Ministry’s permanent secretary Ronald Mizzi confirmed to the NAO that no minutes were retained but contested the utility of such records.

Mizzi argued that the “salient points” of the negotiations had been presented to the steering committee and eventually referred to an endorse by Cabinet.

Beat LTD CEO David Galea, a member of the negotiations committee, as well as an unnamed partner from RSM told the NAO it was “not practical” to retain minutes of negotiations.

The report says that Galea, a close associate of Konrad Mizzi, did nevertheless concede that the lack of documentation “could be considered a shortcoming”.

It further transpires that another member of the committee, Mizzi’s then lawyer Aron Mifsud Bonnici, flat out refused to meet the NAO about his work on the negotiations, citing “professional ethics.”

Mizzi too declined multiple invitations by the NAO to be probed about the controversial concession.

Failure to pay NI

In yet another instance of VGH reneging on its obligations, the NAO report says the company failed to pay national insurance and pay-as-you-earn contributions for its employees in accordance with its contractual terms.

These payments were found to be in arrears for the year 2018 and prior years.

Several meetings were held between the health ministry, commissioner for revenue and VGH to resolve the issue, however this was to “no avail”, the report says.

VGH claimed the payment had not been made due to the significant amounts owed to it by the government in relation to disputes between the two parties.

The NAO reviewed correspondence between the ministry and VGH, in which concern was expressed regarding the “suspicions” that the budget allocated for payroll of the Karin Grech and Gozo Hospital by the government was being used by VGH to pay other invoices unrelated to payroll.

Under the agreement, the government committed itself to pay upwards of €50 million yearly to cover payroll costs for employees at the three hospitals, the majority of whom remained on the government’s books.

The NAO has called on the “competent authorities” to investigate concerns that funds meant for the running of three public hospitals were channelled out of VGH.

CORRECTION:  A previous version of this article erroneously identified Tourism Ministry permanent secretary Ronald Mizzi as sitting on the negotiations committee. The error is regretted.

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