The health ministry only learnt through media reports that the transfer of hospitals between Vitals and Steward Healthcare had been completed, according to statements Health Minister Chris Fearne made to the Auditor General.
That runs counter to former Prime Minister Joseph Muscat’s description of events as outlined in the auditor’s report.
Muscat had described the health ministry as “the key stakeholder” in the concession and part of a “tripartite structure” including the finance and tourism ministries.
On the other hand, Fearne argued that responsibility for the transfer lay squarely at the feet of the tourism ministry, at the time headed by Konrad Mizzi.
In his statements to the auditor, Fearne said that he and his ministry were never involved in discussions, only learning of key developments through third parties.
“The Ministry for Health corroborated that stated by the Minister for Health, maintaining that the ministry became aware of the change of control through the media”, the report says.
The report notes that the finance ministry failed to reply to questions on the matter.
Fearne has repeatedly claimed that he was kept in the dark throughout the concession period, with the auditor general describing his absence from key stages of a health-related concession as an example of the government’s “incoherent approach” to the deal.
The transfer of the concession from Vitals to Steward was eventually signed by Konrad Mizzi.
‘The real deal’
Fearne told the auditor general that he had “expressed his dissatisfaction” with the work carried out by Vitals in the months leading to the concession.
He was first informed of plans to transfer the concession by Muscat in October 2017, viewing the arrival of Steward as “a positive development, particularly in view of its reputation and track record”.
In the weeks following the transfer, Fearne described Steward as “the real deal”, publicly admitting that the original concession to Vitals had not worked out as he had hoped and reassured the public that the government had set up a specialised unit to ensure that "standards of these services remain high and, if possible, even improve".
Did the government consider aborting the concession?
The report explores the question asked by many when it became clear that the Vitals concession was unsuccessful – did the government consider aborting the concession altogether?
Key figures provide contrasting accounts. According to Joseph Muscat, “all options were considered”, although the government never took concrete steps to explore the impact of scrapping the deal.
Fearne, on the other hand, told the auditor general that it was “too early” in the deal to consider aborting the concession altogether and that his ministry was never involved in any discussions to abandon the concession.
Due diligence flags ‘substantial losses’
The report also outlines how the tourism ministry had engaged a local law firm to obtain an enhanced due diligence report on Steward’s parent company, SHC System LLC, in the weeks preceding the request for the concession to be transferred.
The due diligence report found that Steward’s financial health was on the decline, with the company posting “consecutive years of substantial losses”.
The report flagged “considerable concerns” about senior executives at Steward who were politically exposed persons, some of them with “close ties to the political class, including former Presidents of the USA, Governors, members of the Senate, congressmen, and other high-profile politicians”.
Other issues mentioned in the due diligence report included widespread negative media coverage in the US over Steward’s repeated failure to submit companywide financial statements to the state of Massachusetts and a resulting €253,000 unpaid fine for “lack of transparency”.
When asked whether he was familiar with the findings of this due diligence report, Joseph Muscat told the auditor general that he would not “as a general rule” review such reports himself, but lean on the outcomes being relayed to him.
Muscat also told the auditor general that he had “informally consulted” the American government at the time of the concession's transfer. It provided a “glowing endorsement” of the company.