Some €2.4 million remained “unaccounted for” in the books of a company formerly co-owned by More Supermarkets boss Ryan Schembri, who had taken loans from various creditors, including murdered hotel tycoon Hugo Chetcuti a court heard on Monday.

Details of Schembri’s business dealings emerged when a former associate testified in the proceedings against the owner of the now-defunct supermarket chain, who denies fraud and money laundering estimated to run into tens of millions of euros.

Etienne Cassar recalled how he first dealt with Schembri as a client in the late 1990s when Cassar was a wholesale supplier of restaurants.

Sensing the need to partner with someone who had a better knowledge of finances, Cassar had suggested Schembri who had the necessary technical know-how. 

That was how Cassar and Schembri Limited was born in 2002.

The company later branched out into transport and the meat industry.

Around 2010, when the opportunity cropped to set up a supermarket at Palm Residence in Libya, with the Corinthia Group, Schembri had seized the opportunity, putting in much work and personal sacrifice into the venture, the witness said. 

The business in Libya, operating under the company Intera, was run by Schembri, who headed a team consisting of his parents and other employees.

The Libyan venture grew until the Arab Spring unrest broke out in 2010.

Business had reached “an apex and showed no signs of regression,” pointed out Schembri’s lawyer, Roberto Montalto, when cross-examining the witness.

“We were doing well. The initial work bore fruit. Ryan himself invested much work and personal sacrifice, spending long stretches in Libya,” replied Cassar. 

When war broke out, the company changed its business model to wholesale supplies. Things picked up again and business was doing quite well up until 2013.

The company set up a distribution centre operating from a warehouse, with vans and Libyan staff to sell to wholesalers and supermarkets.

But civil strife in Libya dealt a second blow.

Their premises were shut down, staff was arrested and business came to a standstill. 

Asked why that happened, Cassar explained that the militias had turned up on some pretext that the meat they were selling was not up to standard.

However, someone who worked there at the time, subsequently told Cassar that he “could not understand how things went wrong because there was a lot of stock.

“Matters evolved very quickly on a daily basis. It was a very complicated. Very risky business. There were lots of assets and money there,” said Cassar.

He handled sales, distribution and staff on the Malta front, while Schembri focused on finances, the More supermarket chain and Libya.

Around 2011, the first More supermarket was opened in Ħamrun - a joint venture with other businesspeople including Ta’ Maksar Adrian Agius.

Five outlets in two years

Five outlets in the supermarket chain were opened in quick succession over a two-year span. 

“I used to tell him that we were rushing. But he insisted on beefing up sales. The more the sales, the better he could settle matters,” Cassar said.

At the time, “everything appeared to be okay,” explained the witness, adding that he saw “nothing that was not normal.”

Schembri had gained experience, made several contacts and also acquired a Spanish trademark.

“The foundations were good. There was also an efficient management team.”

Average annual turnover of €13 million

The business was registering an average annual turnover of around €13 million.

But Cassar sensed that something was amiss when Schembri was hospitalised in 2014.

“Something happened. Issues started surfacing,” said Cassar, recalling how Schembri’s father had one day approached him saying that while his son was in hospital, he had received visits from many people asking for their money back.

“Ryan was under pressure at the time. He was suffering from high blood pressure,” added Cassar.

'Chased by loan sharks'

Schembri was chased by “loan sharks” and after being discharged from hospital, creditors started turning up at his business offices.

Although during his last year before fleeing the island, Schembri did not meet Cassar much, his business partner did recall occasionally coming across such creditors at the office.

Darren Casha and Adrian Agius, partners in the More chain, a Qormi warehouse and the Libyan venture, were the two he knew most.

On one occasion, he recalled seeing Hugo Chetcuti there too. Another creditor was "a certain Difesa" who claimed to be owed some one million euros by Schembri.

Cassar also learnt through third parties that Regina Autodealers were allegedly owed around €3 million.

After Schembri’s disappearance, while clearing out his office, Cassar had come across a list of names and nicknames, together with figures and outstanding balances.

Cancelled cheques

He also discovered a file containing a number of Cassar and Schembri cheques, written out to various persons, mostly in blank, then cancelled and not cashed.

The amounts on those cheques varied from a few thousand euros to bigger sums.

Before fleeing Malta, Schembri’s attitude and character changed.

High standard of living

“His standard of living was far above my own,” said Cassar, explaining that Schembri would change his car every three months or so. 

“If I bought one, he bought three [cars].”

“What sort of cars,” asked AG lawyer Karl Muscat.

“Not mini minors,” replied Cassar, pointing out that Schembri loved cars. 

He had also acquired an apartment at Vittoriosa, another at Gżira and a villa. 

But after his disappearance, the company’s financial auditor said that “the wound ran too deep.”

Missing €2.4 million

Some €2.4 million were “missing” on Cassar and Schembri’s books, and there were no traces of those funds.

Since early 2014, Cassar had sensed that “things were changing.”

Schembri appeared to be avoiding him, not taking his calls. 

Then when he once chanced upon him at the Żebbuġ supermarket, Schembri had come up with the rather “unpleasant story” about a suspected “stomach cancer”.

“My anger somewhat subsided. But the situation degenerated within months. [Schembri] constantly promised to honour payments but he kept avoiding me.”

“I’m very angry. We could have handled things differently. Had I been involved I could have preempted matters… Things developed too fast. He later told me that things got out of hand. But it was too late.”

Schembri had even come up with a suggestion of “funds in Croatia”, to give creditors some hope.

“But he later admitted that there were no such funds,” concluded the witness.

The case continues.

Magistrate Donatella Frendo Dimech presided over the hearing.Inspector Anthony Scerri prosecuted, assisted by AG lawyers Francesco Refalo and Karl Muscat.Lawyer Francois Dalli appeared parte civile for one of the creditors.