Former Vitals Global Healthcare director Ram Tumuluri wants whistleblower protection in the US to reveal alleged coercion, threats and corrupt practices by Joseph Muscat’s government in the hospitals deal.
In a 500-page filing in the US, Tumuluri alleges he was the victim of a plot by Muscat’s government to boot him out of Malta in favour of a pre-ordained deal with American operators Steward Health Care.
“You know what happened with Daphne and you don’t want to end up in that position. You want us to be a friend, not a foe,” Tumuluri alleges Schembri had told him in a December 2017 meeting.
When contacted, Schembri said Tumuluri's claims are completely false and baseless.
Journalist Daphne Caruana Galizia was assassinated in an October 2017 car bombing.
Tumuluri's claims of coercion are also referenced in an extensive report by the Auditor General published on Monday, although the ex-VGH director did not go into detail about the alleged threats when speaking to the National Audit Office.
Tumuluri's whistleblower bid
The share sale from Vitals to Steward was completed in February 2018. However, Tumuluri claims he only agreed to it due to the “unlawful coercion” and “extortionate acts” by Steward and Muscat’s government.
Tumuluri now wants to turn whistleblower in a filing under the US Foreign Corrupt Practices Act (FCPA) to the Securities and Exchange Commission (SEC).
The Act is regarded as a powerful and effective transnational anti-corruption law, targeting bribery of foreign government officials by US companies or individuals.
Tumuluri said via his lawyer that he could not discuss the issues raised in his SEC whistleblower complaint because he could not comment on “any ongoing investigations.”
Tumuluri's FCPA filings were obtained by OCCRP and shared with Times of Malta and The Shift News.
In the filings, Tumuluri pins much of Vital's failures to deliver on its promise to revamp three public hospitals on the company's then-CEO, Armin Ernst.
Ram Tumuluri.A civil court in February terminated the government’s contracts with Steward on grounds of fraud. Steward is appealing the decision. Ernst became president of Steward Health Care months after his contract as CEO of Vitals was ended.
Steward dismissed Tumuluri's whistleblower filing and claims as "malicious, self-serving, and entirely without merit.
"This so-called filing is self-evidently a stunt, either for publicity or monetary gain, it is not real or legally cognisable, and is in and of itself a farce," a Steward spokesperson said.
Steward-government 'conspiracy'
Tumuluri accuses Ernst of conspiring with Steward and government officials behind his back to take over the running of the St Luke’s, Karin Grech and Gozo hospitals.
He claims that in early 2017, Ernst began to push him to form a partnership with Steward.
Because Vitals was looking for strategic partners, Tumuluri says he agreed to meet Steward’s boss Ralph de la Torre in Boston, Massachusetts, around February 2017.
He claims that during the meeting, de la Torre boasted that he could “issue brown bags” to government officials in Malta if necessary, to close deals.
Tumuluri says he did not respond to this comment, but nonetheless agreed to further discussions with de la Torre on a potential equity investment by Steward into Vitals.
Steward, Muscat, Schembri and ex-health minister Konrad Mizzi all strongly denied any suggestions of wrongdoing when contacted by Times of Malta.
Tumuluri says Vitals gave "trade secrets" to Steward that were meant to be protected by a non-disclosure agreement. Tumuluri says he instructed Ernst to terminate talks with Steward in July 2017, after equity investment talks hit a brick wall.
He claims Ernst continued to hold “unauthorised talks” with Steward behind his back.
According to the filings, de la Torre offered Tumuluri €2 million to walk away from Vitals, saying he would otherwise go over his head and negotiate directly with the Maltese government to take over the state hospitals.
Tumuluri says that while the government publicly supported Vitals, unbeknownst to him, officials were actually “colluding” with Steward to harm his interests in the company.
Enter Keith Schembri
Tumuluri says he was “summoned” to Schembri’s office in September 2017. During the meeting, Tumuluri says Muscat’s chief of staff made several “unlawful” demands.
These included terminating the contracts of Vitals' chief legal officer and its public relations officer and appointing a chief financial officer of Schembri’s choosing.
Tumuluri claims that Schembri warned him that if he did not agree to these demands, the government would remove him from the country and replace him with someone who would comply.
He says Vitals was seeking financing from Deutsche Bank during this same time period, but those attempts were frustrated by the government’s lack of cooperation in providing documents needed by the bank.
Tumuluri alleges that ex-minister Konrad Mizzi told him that at least one other minister had vocalised a desire not to support Vitals’ efforts to obtain financing because he had “alternative plans”.
Health Minister Chris Fearne is mentioned as one of the "relevant individuals" in the filings.
The filings claim that Fearne had been in discussions with Ernst regarding plans to take over the concession since approximately September 2017. Fearne denied this when contacted.
Fearne has told the National Audit Office that a September 2017 meeting in New York was the point of first contact between the government and Steward about the potential takeover. Fearne told the NAO that the New York meeting was between Muscat, Schembri and Ernst.
Tumuluri says in one of his first meetings with Fearne after he was appointed health minister, Fearne demanded that the VGH director show loyalty to him rather than Schembri and Mizzi.
'Acting on Muscat's instructions'
In another claimed meeting with Schembri towards the end of 2017, Tumuluri says the OPM chief of staff demanded that he transfer his shares in Vitals to an “undisclosed third party”.
Tumuluri claims that when he refused to do so, Schembri threatened to cause him “both professional and personal harm,” according to the US whistleblower filings.
During one of these meetings, Schembri is alleged to have told Tumuluri that the government had already made a deal with this “undisclosed third party” to take over the running of the three hospitals.
A December 2017 e-mail in which Steward president Armin Ernst highlights the 'pressing timeline' for the Vitals takeover.
The US filings further claim that Schembri said he was acting on Muscat’s instructions to remove Tumuluri from the hospitals' concession and transfer it to a third party.
These alleged meetings took place at the Office of the Prime Minister, according to Tumuluri.
Agree or face arrest
Tumuluri says Schembri finally revealed to him that the mystery third-party buyer was Steward on December 2, 2017.
At that point, Ernst was brought into the room and introduced as a representative of Steward, Tumuluri says.
Tumuluri claims Schembri asked him to ensure that the deal with Steward was finalised within two weeks.
During another meeting with Schembri, this time in mid-December, Tumuluri says he argued that Vitals was not in default of its obligations under the concession agreement, and was therefore due a €100 million termination penalty if the government unilaterally terminated the agreement with Vitals.
Schembri allegedly replied that “he is the law in Malta” and no agreement would protect Tumuluri’s interests.
Tumuluri details a catalogue of other threats allegedly levelled against him by Schembri, including the threat of “fabricating” false criminal charges against him and arresting him if he turned up at Vitals’ annual Christmas party.
Tumuluri says that it is for this reason alone that he agreed to sign the deal in February 2018, transferring his shares in Vitals to Steward.
The filings say that the constant threats led him to fear that harm would come to him and his family.
'Evident conspiracy'
In a sworn statement included in the filings, Tumuluri alleges it was “evident” that discussions between Steward and the government had been in play behind his back, and both parties “conspired” to commit fraud by forcing him to transfer the concession for a token €1.
Times of Malta has previously reported how Tumuluri received payments from a Swiss company called Accutor AG.
Companies linked to Accutor AG, which were in receipt of large amounts of money from Steward, paid Muscat at least €60,000 as part of a consultancy deal that is being investigated as part of a probe into potential corruption in the hospitals deal.
Another key Vitals player, Shaukat Ali, was also put on Accutor’s payroll together with his son Asad.
Tumuluri claims in his whistleblower filings that the Alis acted as “de facto government agents” during Steward’s takeover of the hospitals concession.
The ex-VGH director says that Shaukat Ali also amplified warnings that his life could be in danger if he failed to agree to the transfer.
Contacted by Times of Malta, Shaukat Ali said the allegations of wrongdoing against him and his son are "entirely false and vehemently denied".
"We are liaising with our lawyers both in Malta and abroad who are monitoring the situation, including the publication of defamatory material. Should the need arise, we will not hesitate to take legal action," he said.