A senior health ministry official flagged suspicions that funds meant for the running of three public hospitals were funnelled out of Vitals Global Healthcare.

The admission that the health ministry was suspicious that public funds were being misused emerges from a 460-page review of the VGH contracts carried out by the National Auditor General.

Former Vitals Global Healthcare director Ram Tumuluri. File photos

VGH crashed out of the concession after just two years, having registered losses of €27 million.

The decision to hand the running of the St Luke’s, Karin Grech and Gozo hospitals to a company with dubious healthcare credentials has been harshly criticised by Auditor General Charles Deguara.

In his report, he highlighted the “serious concerns” raised by the official, who was not identified.

These suspicions were based on the simple fact that, despite VGH being paid enough by the government to cover existing operations of the three hospitals, the company still accumulated a significant list of creditors, the report says.

“The observations made by the health ministry drew the NAO’s gravest concerns; however, this office is unable to delve further in ascertaining that alleged for such verification would require access to the VGH’s financial transactions, which analysis falls beyond the mandate of the NAO,” the auditor general said.

He noted that the allegation by the ministry official is lent credence by VGH’s dire financial state.

'If proven, public funds were misused'

Should it be proven, this may lead to the conclusion that public funds were misused, the report says.

The auditor general recommended further investigation by the “competent authorities” to establish if there was a misuse of public funds and financial mismanagement in connection with the hospitals deal awarded to VGH by the government.

The health ministry also highlighted to the auditor general how the concessionaire had failed to obtain financing and was late submitting its obligatory financial statements.

The report also delved into VGH’s financial situation prior to exiting the concession, based on its public accounts.

It notes how remuneration for former VGH directors Ram Tumuluri and Mark Pawley shot up to €6 million in 2017, a marked increase from the previous year.

Cash, bank reserves plummeted by nearly €1 million 

VGH’s cash and bank reserves plummeted by nearly €1 million between 2016 and 2018, from €1,152,509 to €156,686.

Mark Pawley

Its share capital of just €1,200 was a “matter of concern” that had been highlighted by the health ministry in a meeting held with the National Audit Office.

“The health ministry representatives questioned the award of a project of a value of hundreds of millions of euro to a company with a net asset value of €1,200,” the report says.

“Similar concerns were raised in terms of government’s acceptance of a parent company guarantee given this limited share capital.”

The same report also details how the finance ministry was never properly consulted about the hospitals contract, worth €4 billion.

Former minister Konrad Mizzi refused to meet the auditor general as part of the investigation.

The auditor general found a similar lack of cooperation from Malta Enterprise, which is now headed by Kurt Farrugia, a close associate of former prime minister Joseph Muscat.

The stance adopted by Malta Enterprise was deemed “dubious” as the information being sought from it would not have violated any secrecy requirements under the Malta Enterprise Act.

The National Audit Office was seeking documents about the setting up of a committee to oversee aspects of the concession, progress about certain contractual requirements on the part of the concessionaires and a lease agreement entered into between the government and VGH for the Barts Medical School in Gozo.

Former opposition leader Adrian Delia said on Wednesday there were grounds for a criminal investigation into deal.

Addressing a press conference, the Nationalist MP slammed the government for voting in parliament to give current concessionaires Steward Health Care more money on the same day that the report was released. The company will receive €69 million in taxpayer funding in 2022, a 40 per cent increase over the previous year. 

Delia, who is spearheading a legal bid to have the hospitals deal rescinded, said: “If the government was serious, it would not continue rewarding a corrupt contract.”

The government and Steward are reported to have hit a stalemate in negotiations to have the deal cancelled.