A pensioner who lost €150,000 to Ryan Schembri when he fled Malta in 2014 told court he had been assured the former More Supermarkets boss had "a lot of power" since his cousin Keith worked at Castille.

Ryan's cousin Keith is the former chief of staff of the Office of the Prime Minister.

Thomas Gravina, an investor in Schembri's supermarket business testified on Tuesday that he handed some €150,000 to Schembri in cash.

Then the businessman "fled, money and all".

"It drove me insane," Gravina told court. 

Gravina was originally introduced to Schembri by a friend, Joe Difesa, who told him that Schembri was a meat trader.

“Since his cousin was Keith Schembri who worked at Castille, he said that Schembri had a lot of power and could get contracts with cruise liners,” the witness explained.

Gravina was testifying in criminal proceedings against Ryan Schembri, who stands accused of money laundering, misappropriation, fraud, making fraudulent gain, offering financial investment services without a licence and knowingly making use of forged documents.

Court on Tuesday heard how audited accounts between 2001 and 2011 showed that Schembri’s company was growing in sales and profits.

But by 2013 the business strategy had failed and funds from his ‘cash cow’ in Libya totally dried up, a former banker testified. 

'No red flags between 2001 and 2011'

Over that ten-year span, there were no “red flags” about Cassar and Schembri Limited, the company owned and operated by Schembri and his partner Etienne Cassar, said Dennis Francalanza when taking the witness stand.

The former banker explained that when the opportunity came along for Schembri to expand his operations by setting up the supermarket chain, he was asked to step in as a financial consultant.

Francalanza joined a pre-opening team working on the project and liaising with banks to get facilities for the new business venture. 

In June 2012 he was requested to draw up a business plan, complete with a feasibility study, to be presented to two local banks - Banif and APS.

Audited accounts for the year ending December 2011 showed that Schembri’s business was registering growth in sales as well as profit, Francalanza confirmed.

Based on those accounts, he prepared a business plan to justify the request for banking facilities which were later granted in the form of a general banking facility and a substantial overdraft in favour of More Supermarkets Ħamrun.

Located in a new shopping complex, within a residential area with a good catchment range, along with parking facilities and competitive prices, the “very, very big supermarket” presented positive prospects.

Outlets in Ħamrun, Mosta, Paceville, Fgura, Żebbuġ

Soon, four other outlets followed in Mosta, Paceville, Fgura and Żebbuġ, each with its own company, memo, articles and different shareholders as well as separate bank accounts, explained the witness. 

Funds were channelled from Cassar and Schembri to More supermarkets, although in 2014 the idea of a bond issue was also being mooted. 

Schembri's lawyer questioned where were the alleged fraud and money laundering. Until 2014 the business was “a great success” and everything was being done properly, he said.

“Was Ryan doing anything behind anyone’s back,” asked defence lawyer Roberto Montalto.

“Not that I know of,” replied Francalanza, adding that the first time he heard of the businessman’s troubles was through newspapers. 

'Won't make it to the year’s end'

“So what changed in 2014?” persisted Montalto.

After the first quarter, management realised that the forecast and strategy were not good, gross profits were “immensely low” and pricing was “ridiculous”, explained the witness. 

The situation had first appeared to worsen in June 2013 and Francalanza himself believed at the time that “they would not make it to year’s end”. 

In fact, he was under the impression that around that time, Schembri tried to generate more sales to save the supermarket chain by shifting sales to Libya to beef up the turnover.

“Other shareholders did not like that idea, but I did.”

By the end of 2013, the situation “was not looking good at all,” what with high rents on the Paceville store and a €10,000 monthly bill for parking costs shouldered by the Ħamrun supermarket alone. 

When political turmoil broke out in Libya, the flow of funds from that direction which gave “good gross profits,” totally dried up, leaving Schembri’s business without its ‘cash cow.’

'Person of great integrity and a great businessman'

The company’s success up to 2012 was likewise confirmed by Patrick Camilleri, a professional who audited Schembri’s business accounts until 2013 and who described Schembri as a “person of great integrity and a great businessman”.

It was only in 2013 that Camilleri flagged to shareholders “certain issues which were not to his liking.

Around that time, Schembri entered into a share transfer agreement, a copy of which was not provided to the auditor.

Suddenly the More Supermarkets balance sheet went from positive to negative and the “carpet was pulled from under the company’s feet.”

€2.9 million shortfall in cash

Loans owed to the company were not repaid.

The company was to receive some €3.9 million from its subsidiaries, but it never did, and there was also a €2.9 million shortfall in cash.

Coming across those figures while auditing the company’s accounts, Camilleri had sent questions by means of a letter to Schembri and Cassar, but he never got a reply.

A copy of that letter was presented in court on Tuesday. 

Faced with that situation, the auditor had no option but to resign.

“So that share transfer was the ‘finish line,’ and the new owner, Darren Casha, provided new people to handle company accounts. Was he the one who divested More of everything it had,” asked the defence.

“Correct,” Camilleri replied. 

Former banker invests €150,000

Another witness was Ian Azzopardi, a pensioner and former banker who had invested some €150,000 after checking the records of Schembri’s company on the Malta Financial Services Authority's database.

“I was impressed. Which company in Malta would register such a profit? It seemed solid,” said Azzopardi.

But a few months later, Schembri “disappeared” and Azzopardi had no clue as to how he was to get his money back. 

He filed a criminal complaint and also sought civil remedy when Ryan’s business partner challenged the signatures on the bills of exchange in Azzopardi’s possession. 

He had won that case after Judge Lawrence Mintoff ruled that those signatures were genuine. 

However, he had paid dearly for his investment in Schembri’s business.

Back then, he worked for a local bank and was sacked on grounds that he had done business with one of the bank’s clients.

Eventually, he sued the bank before the Industrial Tribunal and won his claim of unjustified dismissal.

'Not much of a talker'

Another investor, also a pensioner, Gravina referred to Schembri as "not much of a talker".

He told court he would simply write out a post-dated cheque when Gravina handed over the cash, telling him to return a month later for payment of interest.

“I only saw him for three months. On the fourth month, he fled.”

Bid for bail

After Tuesday’s lengthy session, the defence made a fresh bid for bail, producing Schembri’s father and partner as third-party guarantors. 

“Ryan Schembri does not fall under the definition of ‘fugitive at large’,” argued Montalto, insisting that the accused deserved to be treated no differently to others who had also left Malta and were brought back.

Given that now the Attorney General’s main concern was the risk of flight, Montalto stressed that neither the accused nor his family had any intention of leaving Malta and were willing to bind themselves under all court conditions.

The court, presided over by magistrate Donatella Frendo Dimech, directed the prosecution to check the criminal record sheet of Schembri’s parents and partner for the bail issue to be considered during the next sitting.

The case continues.

Superintendent James Grech prosecuted, assisted by AG lawyer Francesco Refalo. Lawyer Roberto Montalto was defence counsel. 

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