Malta PM could be next to fall in Panama scandal

A Maltese minister, or the whole government, could be next to fall in the Panama Papers scandal amid street protests due in Valletta on Sunday (10 April).

Opposition leader Simon Busuttil i has urged people to bring Panama hats at 4.30PM to the Auberge de Castille, the prime minister’s residence.

His appeal comes after Australian and New Zealand media, on Sunday, published revelations that the Maltese energy minister, Konrad Mizzi, and the PM’s chief of staff, Keith Schembri, had tried to set up accounts in banks in Panama and in Dubai.

They tried to do it via separate New Zealand-based trusts and Panamanian firms that had been created for them by Nexia BT, a Malta-based agent of Mossack Fonseca, the law firm at the heart of the Panama Papers scandal.

The Australian and New Zealand reports were based on leaked documents obtained by German daily Sueddeutsche Zeitung and shared with the International Consortium of Investigative Journalists (ICIJ) in Washington.

Daphne Caruana Galizia, a Maltese blogger and journalist, had already published news of the two trusts in February.

Her scoop prompted an earlier anti-corruption protest in March. But she told EUobserver on Wednesday that the new protest is likely to be much bigger.

She said Mizzi and Schembri had defended themselves by saying that even though they had offshore firms they had no offshore bank accounts.

“But if they tried to set up accounts, it means they expected to put money into them,” she said.

The banks which they approached refused them. But Galizia said this made things look worse. “It shows that two jurisdictions which are hardly noted for tough laws [against money laundering] considered them to be too high-risk,” she said.

She also said that events in Iceland have created a more volatile atmosphere.

Iceland’s PM Sigmundur David Gunnlaugsson on Tuesday stepped down from his post pending clarification of his own Panamanian deals. He did it following mass protests in Reykjavik, which is, like Malta, a small island with a large financial sector.

“People here have been glued to the TV and to social media reports [on the Panama Papers affair] … the events in Iceland have galvanised public feeling,” Caruana Galizia said.

Azerbaijan speculation

She said the chronology of the events has also fuelled public speculation on kick-backs from Azerbaijan, a notoriously corrupt dictatorship.

Mizzi and Schembri initiated the process to set up the New Zealand tusts in December 2014. They went the same month to Baku, together with Maltese prime minister Joseph Muscat i and his PR chief, Kurt Farrugia, to sign a deal on fuel supplies.

But they broke with protocol by declining to take any civil servants or diplomats to attend the negotiations.

Opposition leader Bussutil on Tuesday said the fact that Muscat has refused to hold Mizzi and Schembri accountable also makes him look bad.

“He has made Malta the shame of the EU. The obvious thing to do is to sack Mizzi and Schembri but he keeps defending them. This could imply that he is also involved,” he said.

“The anger the people were feeling against Mizzi and Schembri has now turned against Muscat,” he added.

Cracks appear

Cracks have also emerged in Muscat’s own party.

Edward Scicluna i, the finance minister, said in parliament on Tuesday that the revelations could harm the reputation of Malta’s financial services industry.

“We must consider the political consequences of what is being reported … the prime minister must take the necessary and hard decisions in the country’s interest,” he said.

Four other cabinet members said on Monday that Mizzi should at the least resign his ministerial post.

Muscat said that he would not sack Mizzi unless an auditor finds that he actually deposited money in secret accounts.

Mizzi said the ICIJ revelation on the Panamanian and Dubai bank account refusals “confirms my version of events from the very beginning; that is that there are no funds and bank accounts held by these structures [his offshore trust and firm].”

He said he set up the structures because his wife is Chinese and because he has a house in London. He said his current job “does not mean that I will be here [in Malta] forever.”

Schembri, a former businessman, said he created the structures because he has holdings in foreign firms and real estate that are currently beng managed by “professional executives.”

He said his “financial advisors” told him to do it as “a contingency” in case his “local bankers” decided on “changing their business model or transferring their trusts business to third parties.”

Auditors

Mizzi and Schembri also said they would instruct independent auditors to look at the offshore structures to clear their names.

Schembri added that he planned to sue Bussutil for libel.

Schembri and Muscat have refused to answer questions on why they did not take civil servants to Baku.

“I wouldn’t know why no civil servants went but meetings were held with the president [of Azerbaijan], we signed a memorandum of understanding with Azerbaijan. Basically, that’s it,” Schembri said on Monday.