Keith Schembri charged with corruption, fraud, money laundering

Keith Schembri, the once powerful chief of staff to prime minister Joseph Muscat, pleaded not guilty to charges of corruption and giving false testimony.

Schembri was denied bail and taken to the Corradino Correctional Facility. He was also accused of forgery.

On Saturday, Schembri was charged together with his elderly father Alfio Schembri, a director of several of the Kasco companies, and business partner Malcolm Scerri and financial controller Robert Zammit.

Also charged with separate money laundering charges were former Nexia BT partners Brian Tonna, Karl Cini, Manuel Castagna and their financial controller Katrin Bondin Carter, as well as Zenith Finance’s owners Matthew Pace, a former PA board member, and Lorraine Falzon. Zenith was formerly MFSP Financial.

Also accused was former Allied Group managing director Vincent Buhagiar. Not included in the charges was former Allied Group managing director Adrian Hillman, who is expected to be brought to Malta from the UK to face similar charges.

The charges stem from allegations made by the former PN leader Simon Busuttil, based on information in the hands of the late journalist Daphne Caruana Galizia, that Schembri transferred €650,000 through various offshore companies and then paid out in the form of financial instruments.

Among the beneficiaries, it was alleged, was Hillman himself, as one of the Allied directors when Schembri’s Kasco group won a tender for the construction of Allied’s €30 million printing press in Mrieħel.

A total of 20 companies connected to the Kasco, Nexia and Zenith principals, were also included in the charges.

All 11 accused pleaded not guilty, but only Buhagiar was granted bail at the end of a marathon sitting.

At all stages of the proceedings, the prosecution, led by Superintendent Frank Anthony Tabone, Inspectors Joseph Scerri and Anne Marie Xuereb, and lawyer Elaine Mercieca Rizzo from the AG, opposed the granting of bail. “The accused are professionally qualified individuals who are accused of facilitating serious crimes. Secondly, they have assets abroad and could abscond. The investigations are still ongoing, even with regards to third parties,” Mercieca Rizzo told the court, adding that their release could lead to tampering with evidence.

The defence counsels were vociferous in their opposition to the prosecution’s request. Stephen Tonna Lowell, for Brian Tonna, insisted that the gravity of the crime alone was not grounds to deny bail. “The fear of absconding is based on incorrect facts in this case. Two companies mentioned do not exist anymore. The accused live and own property in Malta; their families are in Malta. They had been on police bail since last year… There is no risk of them absconding... Their respect for the police bail conditions shows that they will be respecting the court’s conditions. These fears are simply phantasmal.”

Other defence counsels included Michael Sciriha, Franco Debono, and Gianella de Marco.

But Magistrate Charmaine Galea, after an interminable round of protestations, decided she would not grant bail.

Karl Cini, one of the Nexia partners, could be seen crying in the dock.

‘The justice of Keith Schembri’

Defence lawyer Edward Gatt was equally as vociferous in demanding that his client Keith Schembri is given bail. He also told the court that in another magisterial inquiry concerning the alleged kickbacks from Tonna to Schembri on the sale of Maltese citizenship to wealthy foreigners, no prima facie evidence against Schembri had emerged.

Gatt argued that the court had the comfort from the police saying they had not feared the men absconding while on police bail. “These people have everything in Malta. Their families, assets, their life. What is society going to gain by keeping these people under arrest? Here you have a case where the evidence is all documentary and preserved. If they are given bail today or next week, or next month, what is the benefit? The denial of bail must be based on reality not the hypothetical.”

Gatt made himself heard loud and clear in the court. “This looks like the ‘justice of Keith Schembri’… smoke and mirrors. Now that he has been charged, let justice take its course. The same police who decided to give these men police bail are now objecting to their release from arrest.”

Prosecuting lawyer Mercieca Rizzo reiterated that the prosecution’s fears were linked to the fact that the investigations are still underway. “This is not the ‘justice of Keith Schembri’. It is the same justice for all.”

With bail denied for Schembri and his associates, the same fate awaited Matthew Pace and Lorraine Falzon, who were assisted by lawyers Mark Vassallo and Edward Gatt, Ishmael Psaila and Shaun Zammit. They too pleaded not guilty.

Gatt argued that Enemalta scandal accused Tancred Tabone and others “never spent 15 minutes in prison”. Still, the court decided that nobody would get bail.

On the other hand, the ageing Vincent Buhagiar was granted bail, with a €20,000 deposit and €40,000 personal guarantee. He will have to observe a curfew.

Buhagiar was charged with money laundering, conspiracy to commit a crime, making false declarations to Malta Enterprise, Bank of Valletta and customs, fraud and corruption.

The charges concern an alleged €1.7 million cash aid from Malta Enterprise to the Allied Group, on which a specific amount of money or rebates could have been fraudulently obtained.

The arraignments come following the conclusion of a magisterial inquiry into allegations that Schembri paid Hillman some €650,000 in bribes between 2011 and 2015. The payments are thought to have been routed through offshore companies and accounts, to Hillman’s BVI registered company, Lester Holdings. Schembri’s Kasco Group had previously won a competitive tender to supply Allied Group’s Progress Press with its new multi-million-euro printing press in 2010.

It was Schembri himself who broke the news of his impending arraignment in a lengthy Facebook post on Thursday. He said the magisterial inquiry recommended that criminal action be taken against the directors of Allied Newspapers and himself, as the inquiring Magistrate had ruled that the news outlet defrauded Malta Enterprise.

Reactions

Opposition leader Bernard Grech reacted to yesterday’s happenings by dubbing it the start of the road to justice on a case revealed by Daphne Caruana Galizia. “Today is another episode that confirms how a criminal gang captured the Labour government and then captured the institutions so that none of them will face justice. Today is another episode that confirms the country’s need to turn a new page and close once and for all this black chapter in its history. This is another step to start clearing this country’s reputation.”