The government has been silent over several aspects of its deal with Vitals Global Health, the company granted a concession to run three public hospitals for up to 99 years. Several independent media houses have been investigating. As Steward Health Care takes over from Vitals, The Sunday Times of Malta and The Shift News have collaborated to present a summary of their findings so far.
What was the Vitals-government deal meant to deliver?
The government had tried to sell the idea of a public private partnership for St Luke’s, Karin Grech and Gozo hospitals by saying it did not have enough cash for a €200 million investment to upgrade them. VGH was meant to undertake the necessary investment in the first few years, with the government hiring back the services and beds from the concessionaire.
According to concession ‘milestones’ in the contract (blacked out by the government but revealed by this newspaper) Vitals had to deliver a new medical school for Barts in Gozo by July 1, 2017, 50 additional beds at Karen Grech and St Luke’s by January 1, 2017 and 80 new rehabilitation beds for St Luke’s Hospital by September 30, 2017. However, none of these have been delivered and work on them, except for some excavation in Gozo, has not even started yet.
How much has Vitals been paid so far?
For the first six months of the contract in 2016, VGH received more than €16 million in payments.
In 2017, it received €18 million. However, on the last day of Parliament for 2017, the government won approval for an additional €17 million to be passed on to VGH for the same year. The doubling of funding came just a day before the government made the announcement that VGH was being sold to Steward Health Care.
There is little to show for these millions. Salaries to the overwhelming majority of healthcare professionals in the three hospitals, amounting to many additional millions a year, are still coming out of government coffers.
Who owns Vitals?
The owners of Vitals Global Healthcare were hidden behind a complex web of company structures (mainly in British Virgin Islands and Malta). The set-up was designed to avoid detection and deter any real scrutiny, financial analysts have told The Shift News (theshiftnews.com).
The hidden parties started setting up the companies just one day before the government signed a secret agreement with them on October 10, 2014, five months before any call for proposals on the hospitals concession was made. That November, the investors signed an agreement among themselves which showed they knew exactly what they were getting, court documents show.
The Memorandum of Understanding between the investors referred to their having an agreement with the government “in hand”. They agreed to the establishment of Maltese companies to operate the concession and acquire the hospitals. “Seventy per cent of the equity” was to be held equally by Ambrish Gupta, Ashok Rattehalli, Mark Pawley and Ram Tumuluri.
The Shift News has established that the other 30 per cent is beneficially owned by a company called Pivot Holding Limited, set up in Malta, whose shareholders are Shaukat Ali Abdul Ghafoor (Chaudhry), Asad Ali Shaukat and Mohammed Shoaib Walajahi, all originally from Pakistan.
The individual investors and Pivot subsequently sought to raise financing for the venture.
Who exactly are the owners?
Mark Pawley: a director, along with Ram Tumuluri, of Bluestone Investments Malta Limited, which is owned by Pawley’s Bluestone Special Situation #4 Limited in the British Virgin Islands. This is an investment fund owned by another BVI company, Asia Harimau Investments Ltd, which, again, is owned by Pawley.
Ram Tumuluri: the second director of Bluestone Malta and the president and managing director of Vitals Global Healthcare. Daphne Caruana Galizia revealed he had a track record of insolvency, debt and failed businesses in Canada.
Ambrish Gupta: a US-based medical professional and businessman with links to Harvard Medical School. The last to join the group, Dr Gupta provided a significant amount of funding to the investors in the form of loans to Bluestone. Dr Gupta was actively involved in introducing Partners Healthcare to Vitals and in fact signed the Services Agreement between Vitals and Partners Healthcare.
Ashok Rattehalli: also a US-based medical professional, Dr Rattehalli’s LinkedIn profile described his role with Vitals as the person who, in September 2014, “identified this opportunity in Malta” and “brought in investors and operators”. Dr Rattehalli is also linked to Ohum Healthcare Solutions, the technology service providers for VGH.
Shaukat Ali Abdul Ghafoor (Chaudhry): previously based in Libya where he deveoped his commercial and political connections with Malta – he has since acquired Maltese citizenship and is registered in Tigné, Sliema. Malta Today revealed he had tried to broker the sale of St James Hospital to two American-Pakistani entrepreneurs.
Documents that emerged from court action shed light on how people who never appear on public records could own and control companies such as VGH
Asad Ali Shaukat: a relative of Ghafoor, holding a Maltese ID and residing in Swieqi. A major shareholder in Corporate International Consultancy Ltd (C5114), one of John Dalli’s corporate services companies, between 2009 and 2011.
Mohammed Shoaib Walajahi: the CEO and founder of Dubai-based Pivot Management Consultancy, a boutique advisory firm specialising in PPPs.
Were some investors’ interests hidden?
Documents that emerged from recent court action by Rattehalli (see question on Vitals-Steward deal) shed light on how people who never appear on public records could own and control companies suchas VGH.
Rattehalli, one of the investors, was granted hidden backdated options over the shares in VGH by Bluestone Malta. He was given the right (that would kick in soon after the bid was awarded) to acquire five per cent of VGH for the starting value of the shares (known as nominal value) which is €60. The agreement among the investors granted Bluestone Malta – the company that controls VGH – the right to buy Rattehalli’s five per cent shares back, but this time for the “market price”.
Since VGH knew it would ‘win’ the bid, which guaranteed multi-million euro cash flows paid by taxpayers for up to 99 years, as well as transfer of the hospitals and their assets, the investor’s five per cent of such venture would clearly be worth much more than €60. Rattehalli’s submissions in court intimately link the pre-concession MoU arrangements between the investors and the option agreement indicating that the arrangements described were replaced with options in VGH.
Rattehalli was also promised a seat on the Medical Board as well as in the Operating Management Team. He did not get what he was promised which is why he is resorting to the courts in Malta to stop the sale to Steward Health Care.
Who else stands to gain from the Vitals deal?
Suppliers of course.
For example, VGH appointed a company called Technoline to procure all of its medical supplies a few months after the company was bought by one of its managers, Ivan Vassallo. This meant that the supply chain to VGH hospitals was controlled by one company – an extremely lucrative deal.
Interestingly, the other director of Technoline – Yaser Ali Bader, also Pakistani – is registered at the same Tigné flat address as Shaukat Ali Abdul Ghafoor (Chaudhry). In an interview with Vassallo “who made a killing off VGH,” Lovin Malta questioned how he had acquired the funds to buy Technoline.
Why did Vitals sell out after only two years?
Further investigation of Rattehalli’s documents by The Shift News led to a trail in the British Virgin Islands and the discovery of a court document there showing VGH’s owner (on paper) was in serious financial trouble.
On August 31, 2017, a finance company asked a BVI court to declare Asia Harimau Investments Ltd insolvent (bankrupt).
It is a key company that sits at the top of the complex web set up to hide the investors and beneficiaries behind VGH in Malta. It is owned by Pawley, and according to court documents borrowed money it could not pay back.
Discussions on the sale of Vitals to Steward started a month after legal action against Pawley’s company was taken in the BVI. The men behind the shady deal seem to have decided it was time to cash out. Still, their links to the supply networks to the hospitals may mean they will still continue to cash in on the project for years to come.
So was Vitals a sound choice to begin with?
Obviously not. The initial agreements submitted by Rattehalli in court clearly showed the investors did not have deep pockets. They did not even have enough capital to cover the pre-commencement costs for the project ($500,000, the bulk of which were “consultancy” costs).
They raised further money through loans from investors such as Dr Ambrish Gupta who lent $150,000 and likely lent a further $275,000, documents showed. The investors then agreed to work together to raise “roughly around $30m”.
Media reports had long been stating the company was facing financial trouble, claims that were repeatedly denied. Yet subsequent revelations showed the company borrowed heavily from banks such as Agribank plc and attempted to acquire financing from Allianz Global Investors GmBH, a fund management house. After the June election, during which VGH was the focus of negative publicity, VGH also attempted to acquire finance from Deutsche Bank, but this capital failed to materialise, according to Malta Today.
The supply chain to VGH hospitals was controlled by one company – an extremely lucrative deal
The insolvency charges filed in the BVI against Pawley’s company continue to confirm a track record of financial difficulties.
Could action in the BVI have an impact on Malta’s NHS?
Experts have told The Shift News that court action in BVI may trigger nightmare scenarios for Malta’s hospitals if insolvency clauses in agreements are triggered. It could affect the control of the entire structure if, for example, a liquidator is appointed.
Has an investigation been started?
After the Nationalist Party declared that it wanted the National Audit Office to investigate the ‘shady’ deal, Chris Fearne took the initiative and asked the NAO to carry out an investigation, stating that the government had nothing to hide. He said he handed over the full version of the contract to the NAO.
So far, the NAO has not started its investigation as it is still working on other ongoing investigations. Although recognising that the VGH contract is very important, the NAO uses a system whereby investigations are done according to the order they are asked for.
Has the new deal between Vitals and Steward Healthcare been signed?
Tourism Minister Konrad Mizzi, who negotiated the deal with VGH and retained the portfolio of Public Private Partnerships after the general election, said Steward Health Care would be taking over operations last week. But the transfer of the hospital concession cannot proceed because one of the hidden investors – Rattehalli – filed a warrant of prohibitory injunction on December 19 to stop the sale.
The Shift News revealed that a meeting with Rattehalli was held at Castille the following night. Present were the Prime Minister’s chief of staff Keith Schembri and Konrad Mizzi, as well as Tumuluri and Ghafoor (Chaudhry). Then Rattehalli stopped pursuing legal action, until last Monday when he filed a second warrant of prohibitory injunction saying he had been given no substantial guarantee his rights would be safeguarded.
How much will the new concessionaire, Steward, be paid for the duration of the contract?
The government agreed to pay the concessionaire some €180,000 a day for the rest of the 30-year period, accumulating a total of over €2 billion over 30 years, The Sunday Times had revealed in relation to VGH. It is assumed that Steward will operate under the same terms.
Additionally, the government is paying many millions more to fund the construction of the Barts Medical campus, the helicopter service from Gozo, medicinal supplies and operations over and above a set threshold.
How much has VGH profited from selling its concession to Steward?
That is a big question that still needs to be answered.
Mr Fearne said at first that this was a “business to business” contract so it was not in the public interest to know. However, when pressed in Parliament, he has offered to show it to the Opposition once it is finalised. Only then might the public learn how much VGH has made.
Why was the contract kept secret?
Originally the government resisted calls by then Opposition leader Simon Busuttil to be fully transparent about the deal.
After intense pressure and a change in the Health Ministry – Konrad Mizzi having been removed following the Panama Papers – the new minister Chris Fearne published a redacted copy of the deal.
However, many details were cited as “commercially sensitive”, including dates by when VGH was meant to deliver. They were redacted – 60 pages in all.
The Sunday Times of Malta has now revealed nearly all the important hidden text of the deal.
The revelations, including today’s, show the extent to which the government has gone to give Vitals advantageous terms – no wonder it kept them under wraps.
Can the government take back the hospitals?
The government appears to have enough legal grounds to declare the VGH deal null and void and take back the concession. This on the back of clear evidence that Vitals did not fulfil its obligations, including on the failed concession milestones.
However, this is no easy and quick solution as VGH would likely contest the decision and take the government to court. In the way the contract was written there may be enough loopholes to favour VGH in a legal battle.
In reality, the government has no intention of pursuing this course of action, with Mr Fearne promoting Steward as the “real deal”.
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