Updated 2.45pm with Repubblika's comments

A dysfunctional negotiation committee, finger pointing over which government entity initiated the disposal of prime public land in St George's Bay and “misleading” information from the Tourism Ministry.

These characterise the circumstances under which the former Institute of Tourism Studies (ITS) site was given to Silvio Debono's db Group in 2017 - and the subsequent investigation into it. 

In a 200-page report about the deal, the National Audit Office (NAO), Malta’s public spending watchdog, slammed the “unorthodox disposal” of the land. 

The NAO said in its report that the government’s failure to identify who issued instructions to dispose of the site is a “gross shortcoming in governance”, with the tourism ministry indicating it was the prime minister's office who initiated the disposal. 

It in turn negated its involvement in the process, the NAO said. Mr Debono was known to have been eyeing the site for years and the government has faced accusations that the deal was tailor-made for him. 

The auditor general’s office noted how the 2015 request for proposals made no reference to the residential component of the project, which significantly upped its value and attractiveness to investors. 

Apart from the Hard Rock hotel, the development will see the building of a residential tower in which units are already being sold for up to €1.4 million.

A decision by the government to classify the proposal as a concession rather than through the normal procurement channels meant the process was subjected to far less scrutiny, the NAO found. 

‘Misleading’ information

The auditor general went as far as accusing the Tourism Ministry’s permanent secretary of “misleading” his office by stating that the decision to classify the land disposal as a concession was discussed with the Attorney General’s office. 

 “The latter [the Attorney General’s office] affirmed that no such advice was sought or given by his office in this regard. The NAO deemed the information provided by the PS [permanent secretary] MOT [Ministry of Tourism] as misleading”, the report reads.

Former Tourism Minister Konrad Mizzi, who was also responsible for Projects Malta, the government entity that led the land transfer, declined to meet the auditor general about the deal. 

This failure to attend a meeting with the NAO despite numerous attempts, was of “grave concern”, the auditor general said. 

Current Tourism Minister Julia Farrugia Portelli also appears to have played a role in managing “elements of the project”, back when she was a communications and stakeholder coordinator at Projects Malta. 

Failure to document negotiations

The NAO also hit a brick wall when it tried to obtain more documentation about the negotiations carried out between government officials and the db Group after it won the concession, for which it was the sole bidder. 

Instead, the NAO had to rely on records provided by a private company that had been advising the government on the deal. 

“This office maintains that the obligation to lead and manage the process of negotiation rested squarely with the negotiation committee, and overseen by Projects Malta.

"In this office’s opinion, reliance on third-party documentation for a process that was to be entirely administered by a government entity is unjustified, and severely curtails any subsequent process of review”, the auditor general said.

The report said the chairman of the negotiation committee was “conspicuously absent” in the committee’s workings, and input from another member, an architect, was “absent”.

“The balance and oversight that ought to have been provided by a properly functioning committee was entirely lacking in this process, with the OPM advisor assuming a disproportionately prominent role in view of the gaps left by the other members of the committee”.

In contrast to the “many shortcomings” evident in the work of the negotiation committee, the auditor general said it was the input of government consultants Deloitte that helped push up the value of the ITS site from the €17 million proposed by Seabank to €56 million. 

“This office maintains that the approach adopted in establishing this value was well-reasoned and sound in terms of the methodology adopted, which factors contributed to the safeguarding of government’s interests in securing a fairer return for the site”, the NAO said of Deloitte’s work. 

Nexia BT’s role

Even establishing the precise role of Nexia BT, an advisory firm that set up secret offshore structures for Konrad Mizzi and former OPM chief of staff Keith Schembri, was not an easy task for the NAO. 

The firm has played a role in nearly all the major privatisation initiated by the government, including the building of a new power station and the transfer of three public hospitals to an entity with no prior healthcare experience. 

According to the report, Projects Malta’s former chairman indicated the “possible involvement” of Nexia BT in drawing up the bid bond in the request for proposals, whereas the OPM advisor for the project said the firm helped draft the request for proposals issued by Projects Malta. 

The decision to involve Nexia BT in the project was once again the subject of finger pointing between the Tourism Ministry and the Prime Minister’s office. 

The report states that the Tourism Ministry told the Auditor General that OPM had appointed Nexia BT to draft the request for proposals. 

When the Auditor General put this to the OPM, the Principle Permanent Secretary maintained that OPM was not involved in this matter and no records were traced regarding the engagement of Nexia BT. 

The NAO said that in view of this “conflicting evidence”, the NAO was unable to categorically determine the extent of the involvement of all parties in the drafting of the request for proposals. 

Moving campus

As part of the NAO’s analysis, the Auditor General sought to understand whether the land was disposed of because the ITS needed to move to a bigger campus.

The NAO concluded that the fact the government had to spend €2 million to temporarily relocate ITS to a Luqa campus was due to its failure to prioritise the relocation over the disposal of the land. 

It said the absence of any documentation or studies showing the need to relocate ITS from its St Julian’s campus casts doubt on whether the relocation was driven by the Institute’s requirements for a more suitable premises. 

This lends credence to the view that the decision to dispose of the site was prioritised over and above all other considerations, according to the NAO. 

No date has yet been set for the permanent relocation of the ITS campus to Smart City, which is set to cost an estimated €80 million, the NAO said. 

Why is Prime Minister silent? - Repubblika

Why has the Prime Minister remained silent and done nothing about the scandal concerning the handing over of public land in Pembroke to the DB Group, the NGO Repubblika asked in a statement. 

"Repubblika will not allow Abela to avoid shouldering his responsibility with regard to this filthy corruption. We are going to continue insisting that this land belongs to the Maltese people and has to be given back to the people. This land belongs of all of us. We demand a public inquiry so that the whole truth may finally emerge and we can stop witnessing Joseph Muscat and Konrad Mizzi's game of blaming each other."

The prime minister could not use COVID-19 as an excuse to sweep "this filth under the carpet", the group said, adding that corruption was "also a serious illness which breaks the moral fibre of a country and sickens the economy".