An internal Enemalta audit into the Montenegro wind farm scandal has found due diligence omissions and a lack of professional scepticism by Enemalta’s board about the deal.
Times of Malta and Reuters last year exposed how 17 Black owner and murder suspect Yorgen Fenech walked away from the deal with a €4.6 million profit after secretly financing an intermediary used to sell the wind farm project shares to Enemalta.
The intermediary, Cifidex, was owned by Turab Musayev, who was on the Electrogas consortium board along with Fenech.
Musayev has denied any wrongdoing.
The audit report recommended Enemalta should draw up policies about how the company goes about investing in new projects or existing ones, including safeguards against money laundering attempts on the part of potential business partners.
It said due diligence processes should cover not only the project being invested in but the potential business partners involved.
The investigation found a failure to carry out proper due diligence on Cifidex and a lack of professional scepticism by Enemalta’s board at the time of the project acquisition.
At the time Enemalta’s board gave the go-ahead to enter the deal with Cifidex, in January 2015, the intermediary company did not even own the shares in the wind farm project.
Enemalta went on to buy the shares from Cifidex for €10.3 million in December 2015, weeks after the intermediary had finally acquired the shares itself from the actual owners, the Spanish consortium Fersa, for €2.9 million.
Enemalta then passed on the shares to a consortium set up for the project, which included Enemalta shareholders Shanghai Electric Power (SEP).
'Passive stance' by Enemalta
The “passive stance” taken by Enemalta during the negotiations was highlighted by the internal audit.
It found that early negotiations with Cifidex and fellow project promoters London-based Vestigo Capital were led by Accenture representative Chen Cheng, who was acting on behalf of SEP.
Vestigo Capital would go on to become members of the project consortium along with Enemalta, SEP and Envision Energy.
We are not trying to kick off the ladder, as it is a firm legal requirement
The report highlighted how Nexia BT, the company at the heart of the Panama scandal in Malta, was contacted by Accenture to carry out an acquisition fee evaluation report about the project to ensure the price being paid was a fair one.
Accenture’s request highlighted that a report was needed with a conclusion clearly pointing out how much the project was worth, given the conditions provided.
The internal investigation was unable to get its hands on the ultimate report by Nexia BT, as it was claimed that the document was sent directly to Accenture and SEP, even though the Nexia BT engagement letter was addressed to both Enemalta and SEP.
Chen Cheng used the services of Nexia BT to set up a company in the British Virgin Islands and a Pilatus Bank account with expected cash flows of €1 million in 2015. No cash was ever paid into the account.
Konrad Mizzi, the former minister who was responsible for Enemalta at the time, also used Nexia BT’s services for secretive offshore structures, along with former OPM chief of staff Keith Schembri.
Their Panama structures were, according to a leaked Nexia BT e-mail, set to receive up to €2 million from Fenech’s company 17 Black.
Profits from the Montenegro wind farm deal were wired to 17 Black by Cifidex. Chen had written an e-mail to Cifidex in December 2014, asking for evidence clarifying the company’s ownership of the wind farm project.
'Not trying to kick off ladder'
“We hope you could reply to us no later than tomorrow and provide PROOF that clarifies your ownership of the project.
“In case you haven’t obtained full ownership yet, we will request your introduction to the actual owner (the Spanish Company, right?).
“Please understand that we are not trying to kick off the ladder, as it is a firm legal requirement. Actually, we can talk to you and the actual owner together to move things forward,” the e-mail quoted by the report states.
The internal probe did not trace any further reference to due diligence on the seller following the December 2014 exchange.
A month later, Enemalta’s project director Kevin Chircop, now chairman, was minuted in a board meeting as saying Cifidex was the present owner of the project, along with Fersa.
At the time, the board was chaired by Fredrick Azzopardi, who now heads the roads agency Infrastructure Malta.
The internal report notes that while due diligence-related tasks were assigned to SEP, Enemalta should still have commissioned separate and independent legal and financial due diligence exercises on both the project and its sellers and owners before paying out any money.
Former Prime Minister Joseph Muscat travelled to Montenegro to inaugurate the wind farm project in November 2019, weeks before his resignation. He has denied any involvement in the deal or knowledge of wrongdoing.
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