Allied Newspapers had a "convoluted’" system of accounting but the company's workings were ultimately correct, a high-ranking PriceWaterhouseCoopers representative testified on Friday. 

PwC partner Simon Flynn was testifying at the ongoing compilation of evidence against former Allied Group managing director Adrian Hillman, who faces charges of money laundering, fraud and other financial crimes stemming from the purchase of printing machinery from Kasco Ltd.

Prosecutors are claiming that the €5.5 million purchase, partially funded through a €1.5 million investment aid from Malta Enterprise, resulted in a convoluted system of accounting by Allied’s sister company Progress Press to allegedly mask inflated prices that covered up backhanders.

Allied Newspapers is the publisher of Times of Malta.

Earlier, the court heard prosecutors explain that although financial aid from the State entity was only meant to cover capital investments on fixed assets, Allied Newspapers had included unspecified amounts of “consumables” in their application. 

Testifying against Hillman on Friday, Flynn explained that since consumables were to be accounted for separately from capital expenditure, the matter had been flagged to Progress Press.

Advice was given during a meeting with a financial committee at Progress Press consisting of Louis Farrugia, Adrian Hillman and Henry Hornyold-Strickland as well as Claude Licari as financial controller. 

The company then made the necessary corrections to its accounting, said the witness.

Consumables were invoiced at the outset en bloc at €1 million, but subsequently they were invoiced again item by item, causing invoices to pile up, explained the auditor.

That was why the company set up a system of credit notes from Kasco Ltd to cancel out the double invoicing.

“But it was a slow process,”said Flynn. 

Asked by defence lawyer Stefano Filletti whether he had noted any criminal fraud in those accounts, the auditor replied, “fraud is a big word.”

Whilst drawing a distinction between accounting and auditing, pointing out that his role as auditor was to oversee accounted financial statements, he said that he had seen no evidence of fraud.

On the basis of those audited documents, “it was done well, as it should be,” said Flynn, adding that it was, however, rather a convoluted system.

“Why?” intervened the court, presided over by magistrate Donatella Frendo Dimech. “Did you see any wrongful documentation?” the magistrate probed.

“No,” Flynn replied, amplifying further that although there had been delays in the issuing of invoices and the relative credit notes, in the end they cancelled each other out. 

The whole list of consumables originally invoiced at €2.5 million matched the value of the credit notes which were checked by the auditors and which also totalled €2.5 million.

It was only in 2016, when Allied Newspapers decided to terminate its relationship with Kasco Ltd, that the issue was finally settled, the court was told. 

“We checked that all the amount due to Kasco was settled and the relationship ended there,” explained Flynn, pointing out that the matter had taken three and a half years and could have been avoided administratively. 

It had taken long for the company to claim what rightfully was due, “but it got there in the end,” said Flynn, confirming that the accounting was correct and that there had been full disclosure to Malta Enterprise.

“It was not hidden, never, always showing as due,” the witness said. 

Earlier at the sitting, a Malta Enterprise official testified that the State entity had effected payments on the basis of invoices issued by Kasco.

Asked by Filletti how come this was so Dorianne Debattista Grech said that the claim actually came from Progress Press. 

The case continues on Wednesday.

Inspector Joseph Xerri prosecuted, assisted by attorney general lawyers Antoine Agius Bonnici, Andrea Zammit and Sean Xerri de Caro.

Lawyers Stefano Filletti and Mark Refalo were defence counsel.

Lawyer Maria Claire Ellul appeared parte civile for Allied Newspapers and Progress Press.

Lawyer Chris Cilia appeared parte civile for Malta Enterprise.