Former More Supermarkets boss Ryan Schembri came across as a “rising star,” with widespread and strong business contacts and therefore a reliable person to invest with, a former associate testified in court. 

Schembri transmitted the feeling that “your money was safe with him,” Darren Casha, a local businessman with long-established ties in the catering industry, explained when testifying against Schembri on Friday.

Schembri, who is pleading not guilty to fraud and money laundering estimated to run into tens of millions of euros, has been under preventive custody since his arraignment in April. 

He was arrested in Scotland and extradited to Malta earlier this year, after fleeing the island in 2014, leaving behind a trail of debt.

Casha and Schembri struck up a friendship around 2009 when they came across each other at social gatherings organised by the close-knit Maltese community in Libya. 

At the time, Schembri was exploring the possibility of opening a supermarket in Libya, where Casha himself spent some three years, setting up a high-standard restaurant, cold storage facilities and light shows. 

Schembri agreed to supply Casha with products from his Palm City supermarket.

Then one day he asked Casha whether he was interested in financing a meat transaction since Schembri was tight on cash.

That was when Casha introduced Schembri to a certain Mohammed, owner of a company called Copacabana, who had the necessary cash.

That was the first investment that placed Casha in the role of ‘guarantor’ between Schembri and third-party investors.

A second investor, called Adrian Zammit, entered the scene at a later stage, explained Casha.

Schembri investors follow meat production process in Brazil

In 2012, Schembri invited Casha and his investors to Uberlandia in Brazil to follow the meat production process from start to finish.

They were “impressed” by what they saw and gained the confidence to invest more funds in his business ventures.

On another trip abroad, a fair in October 2012, Schembri greeted “this one and the other", giving the impression that he was “known by all.”

“He was the rising star,” said Casha, adding that Schembri gave the sense that “your money was safe with him.”

He eventually came up with “a very good idea,” went on Casha, recalling Schembri’s ‘brainchild’ of a “white label or private brand called ‘Sorriso".

He suggested sourcing food and beverages from other brands under the packaging of Sorriso. That would eliminate marketing costs and allow for much cheaper goods to be sold exclusively by More Supermarkets, said the witness, presenting a batch of documents to give a better idea of the proposal.

Less than 10% of goods 'materialise'

Despite over €3 million being channelled into Schembri's company to purchase the products, less than 10% of the goods actually materialised.

The court, presided over by magistrate Donatella Frendo Dimech was presented a long list of invoices, bank transfer documents and other paperwork. The magistrate was told that “nine years down the line, the goods had still never materialised”.

Never introduced investors to foreign suppliers

Although the investors and Casha used to have regular meetings with Schembri, he never put them in touch with the foreign suppliers and would always come up with some plausible excuse for the delay. 

They even set up a stand at an overseas fair to market the Sorriso brand and they noticed a demand. 

“Had there been good intentions rather than bad, the idea was good,” said Casha. 

At that fair, expenses for the stand were covered by Mohammed, but Schembri portrayed himself as “the big boy” and the stand as his own. 

'False' €11 million turnover at Ħamrun supermarket

Schembri then prepared a document illustrating “a More vision” designed to lure further investments to strengthen the company’s finances and pave the way for its public floating.

That document showed a "false" €11 million turnover at the Ħamrun supermarket, Casha claimed.

Schembri allegedly inflated sales and created false invoices stemming from ship-chandling services which he then put down as turnover on the supermarket accounts: "the supermarkets were said to make a profit when they were actually making a loss.”

Investors sense trouble in 2014

Investors began to sense trouble around April 2014 when Schembri would “disappear” for days at a stretch, only to turn up again, reassuring them that he was “making progress” with his problems in Croatia where he claimed that all his assets had been frozen by the authorities. 

“Everyone was on edge. Everyone would think that he had absconded.”

Around that time, Schembri suggested that Casha ought to take over as sole shareholder ad director of the business. 

A share transfer was signed in May.

But the deal that was meant to afford Casha “peace of mind” turned out to be a “double blow.”

Soon, a line of disgruntled suppliers began to turn up demanding immediate payment or else transfer of their credits to Casha’s personal business.

At that point, Casha was faced with over €2 million in unpaid debt, over and above unsettled bills with Enemalta and ARMS.

Creditors turn up for a total of €3.5 million

Then one fine day, Edmond Mugliett and Alexander Farrugia, informed him that they were More creditors for a total of €3.5 million, secured by a constitution of debt agreement that was later challenged in court.

But when those creditors obtained a garnishee order against the supermarket chain, court officials suddenly turned up at the outlets, “emptied cash registers, safes and switched off the electricity” while customers were still going about with their shopping.

That was when the supermarkets closed their doors, said Casha.

Asked by the defence about remaining stocks, he said that suppliers retrieved goods and issued credit notes, but frozen food had to be thrown away. 

Schembri’s lawyer also questioned why Casha had only presented “one document” to support his criminal complaint.

That document was undated and Adrian Zammit did not feature anywhere, he was told. 

Bail denied

Friday's hearing ended with submissions on a fresh request for bail which the prosecution objected to primarily because civilian witnesses were still to testify and because of the fear of absconding.

Schembri’s lawyer stressed that the accused’s partner and kids had settled in Malta, had Maltese passports and family relatives could step in as third-party guarantors.

Four months into the proceedings, “the case is now crying out for bail”.

The court later delivered a decree in chambers, denying the request.

The case continues in September.

Superintendent James Grech prosecuted, assisted by AG lawyer Francesco Refalo.

Lawyer Roberto Montalto was defence counsel.

Lawyers Stefano Filletti and Francois Dalli assisted Casha.