Emails made public by Steward Health Care indicate Keith Schembri played a leading role in securing the company’s takeover of a deal to run three state hospitals.

The emails, submitted to court by Steward as part of its appeal against a judgment that annulled the hospital concession contracts, show that the company’s top man communicated directly with Schembri throughout negotiations.

In one email dated January 27, 2018, Steward president Armin Ernst listed the problems they faced to take over from VGH.

“Chris has called me asking for an update. Haven’t said anything yet, but need to get back to him,” he told Schembri, in an apparent allusion to Chris Fearne, the health minister.

Ernst pitched his plan to move the project forward, and told Schembri 'Chris' was chasing him.

In another email sent one month before that, Ernst told Schembri that Steward would not be pursuing “ANY” [his emphasis] due diligence before taking on the concession.

“This whole issue needs to be off the table as it is an impossible position for us to be in,” Ernst wrote to the then-OPM chief of staff, sending the email from his personal Gmail account rather than his Steward address, and to Schembri's personal, rather than government, email address.

Joseph Muscat would announce Steward as new investors in the deal the following morning. 

Ernst reached out to Schembri on December 21, 2017, to clarify their due diligence position.

And on February 15, 2018, it was Schembri who Steward’s lawyers contacted, to inform him that they were signing the concession paperwork. 

The minister responsible for the project, Konrad Mizzi, received official letters from Steward formalising its commitment that same day.

Schembri has been a largely hidden character in the hospitals saga so far.

He refused to speak to the National Audit Office when it probed the deal that brought Vitals to Malta – he subsequently denied playing any part in that – and did not feature in last month’s landmark court ruling.

That judgment concluded that the hospitals deal was fraudulent from start to finish, and said Steward had sought to take advantage of the situation in order to “enrich itself”.

Steward has appealed that decision and compared it to “a work of fiction” by a biased court.

Among its legal filings are a set of emails and documents which seek to bolster its claim that it was tricked by the Maltese government into rushing headfirst into a rotten deal. 

The emails are not comprehensive – it is often not clear if recipients such as Schembri ever replied, for instance.

They indicate that Steward was clearly unsatisfied with the concession terms it was inheriting from VGH and wanted the deal renegotiated.

On January 26, 2018, as work for Steward to acquire VGH’s shares intensified, Ernst told Mizzi that Steward would need the government to commit to “adjust[ing] a few necessary points in the concession agreements” after the deal was concluded.

“Otherwise we acquire a company that puts us in default on day one on numerous fronts, milestones and timelines,” he wrote.

Steward’s push for revised concession terms also made it into another MOU – this one non-binding – with the government, dated August 2019, which pledged to “make practical adjustments to the concession terms”.

Steward has argued that it waived due diligence requirements in good faith, because the government emphasised the urgency of the situation.

It cites an email by Fearne as further evidence of the government’s eagerness to wrap things up.

“We absolutely need to close this week,” Fearne wrote on April 3, 2018. However, the email’s timing and subject line – ‘GOM-MAM agreement’ – both suggest the minister was referring to negotiations to sort out a collective agreement with the doctor’s union, rather than the share transfer to Steward, which had already taken place at that stage.

Steward's concern about losing 'lead position'

But the emails indicate Steward also had its own reasons for agreeing to bypass due diligence checks.

Ernst told Schembri on December 20, 2017 that the pressing timeline was among a “variety of reasons” it took that decision.

And in another email sent on December 12, one of Steward’s lawyers told his colleagues that if the company didn’t waive the due diligence requirement, “the government has said they will terminate the concession and then Steward potentially loses its lead position”.

At that point, Steward’s MOU with the government gave it a 60-day exclusivity guarantee to take over the contract. If the concession were to be terminated, then Steward risked having to compete with other bidders.

Ernst was keen to seal the deal and appeared to be under pressure to do so.

“Ralph does not want to wait,” he told a company lawyer on January 27, 2018, in an apparent reference to Ralph de La Torre, the president of Steward's US parent company. 

'Lack of competence' at VGH

Earlier that day, Ernst told Schembri, VGH shareholder Shaukat Ali and Ali’s son Asad that the process was being held back by a “lack of competence and experience” by “Ram/Debbie” – a reference to VGH frontman Ram Tumuluri and the company's lawyer.

It was “probably the messiest situation I have seen in my professional lifetime”, he wrote.

Ernst served as chief executive of VGH until five months before he sent that email. Asad Ali was also with VGH before transitioning to Steward. Asad Ali would go on to receive payments as a consultant to the VGH-linked Accutor AG, much like Joseph Muscat did.

Despite the multiple problems, Ernst proposed “a way forward, so we can close this week”.

Ernst blamed a 'lack of competence' at VGH - which he previously led - for unresolved issues.

His plan was to issue a performance guarantee in the form of a letter, rather than through banks; getting a government guarantee that Steward would only have to pay up to €3 million in VGH liabilities; and momentarily withholding an initial €2.5 million payment to Tumuluri.

At that stage, Steward also appeared to be willing to assume VGH's liabilities. One day before he laid out his plan to Schembri, Shaukat Ali and Asad Ali, Ernst wrote to Mizzi to note that Steward wanted the deal adjusted after it was completed but also told him that the company would “obviously” settle any VGH liabilities, including pending tax bills.

The deal went through in February, with Steward taking ownership of Vitals and starting to run the three state hospitals.

Failed attempts to close a renegotiation

Problems persisted, however: then-opposition leader Adrian Delia filed his court case to annul the deal just weeks into Steward’s official takeover, and meanwhile the company kept pushing to have the concession renegotiated.

It appeared to be close to doing so in December 2020 and June 2021, only for the government to pull out at the last minute.

But it arguably came closest to wrapping up that renegotiation in the final days of Muscat’s disgraced government.

Steward top management led by Ralph de La Torre meet with Joseph Muscat in 2018. Photo: Steward

On November 22, 2019, a lawyer representing Steward wrote that the renegotiated deal is in its final stages.

“We are assuming we will meet on Sunday at the Minister of Tourism’s offices or at the OPM offices,” the lawyer wrote. It was a Friday afternoon. The plan was to have a final deal ready to present to cabinet the following Tuesday.

But meanwhile, Malta was in turmoil: Yorgen Fenech had just been arrested, Melvin Theuma was busy negotiating a pardon and the Muscat government was falling apart.

That Tuesday, Keith Schembri, Konrad Mizzi and Chris Cardona all resigned.

Amended March 21, 2023: Article updated to note that Ernst's email noting that the company would not do "ANY" due diligence was sent to Schembri's personal email account, not his government one.