Arrests, interrogations, and documents seized in Schembri-Hillman money laundering investigation

Updated to include statement by Progress Press

The police are making considerable progress in their investigations into graft and money laundering between former OPM chief of staff Keith Schembri and the former Managing Director of Allied Newspapers Adrian Hillman edging closer to arraigning the two, and possibly others, after a magisterial inquiry was finalised last week.

The Shift is informed that while Magistrate Josette Demicoli has tied the transfer of hundreds of thousands of euro in ‘kickbacks’ to various projects conducted by Allied Newspapers, publishers of The Times of Malta, a number of individuals have already been interrogated at length.

These include Alfio Schembri, Keith Schembri’s father and co-director at Kasco Group, Malcolm Scerri of Kasco Engineering, Adrian Hillman’s wife Velislava Hillman, and Vince Buhagiar who was Allied Newspapers’ Managing Director before Hillman.

The investigation included a visit to The Times of Malta’s headquarters in Mriehel to gather evidence.

Kickbacks and the Panama Papers

Last week, The Shift revealed that the magisterial inquiry into kickbacks between Hillman and Schembri was presented to the Attorney General following evidence presented by former Opposition Leader Simon Busuttil. Criminal charges are expected.

The police were handed evidence of possible graft in 2016, by the FIAU. When the file reached police headquarters, the police commissioner at the time, Michael Cassar, resigned and the file was shelved. Schembri was the Head of Joseph Muscat’s private secretariat at the time.

The first revelations that Hillman was on the take from the new Progress Press investment in printing equipment from Kasco were made by slain journalist Daphne Caruana Galizia following the Panama Papers leaks.

Hundreds of thousands were given to Hillman by Schembri between 2010 and 2016 through different bank accounts, according to the FIAU report.

The majority of the alleged kickbacks go back to 2010 and 2011 when Allied Group spent millions to buy a former supermarket building in Mriehel and started transforming it into its headquarters including a ‘state of the art’ printing press.

At the time, the newsprint industry was already in decline globally. Yet Hillman, with the approval of the board of directors, proceeded with an investment of some €30 million.

As part of this project, Kasco Group, owned by Keith Schembri, was chosen to install a ‘unique’ state of the art printing facility, which could only take paper imported by Schembri. All maintenance was also left up to Schembri’s engineering arm through various long term contracts.

According to the evidence presented to the magistrate, Hillman started receiving tens of thousands from Schembri in 2010 for ‘unknown services’ through companies and bank accounts owned by Schembri in different countries, including Switzerland, Cyprus, Gibraltar and others.

Also in 2010, Hillman, using the services of Nexia BT – the same firm used by Schembri – set up a shell company in the British Virgin Islands called Lester Holdings Group Ltd. He then connected it to various bank accounts in questionable Maltese banks – Pilatus Bank and Sparkasse Bank – as well as an investment account at MFSP Financial Services (now Zenith), owned by Matthew Pace, a close collaborator of Schembri.

Bank documents show that the bulk of payments to Hillman were made in 2010 and 2011, on the completion of the Progress Press complex.

Payments from Schembri to Hillman for ‘editorial services’ continued until the end of 2015, mainly in tranches of €5,000 every few weeks. A total of €125,000 were passed through this method, the FIAU reported.

Apart from a total of some €650,000 in alleged kickbacks over a period of five years, Hillman also deposited some €224,000 in cash in his personal account at HSBC.

The Hillmans and their lifestyle

According to FIAU intelligence, the only income which Hillman received in his Lester Holdings accounts were from Schembri or related companies. He transferred these funds to MFSP, investing them in bonds 24 hours after receipt.

In one case, these funds were used to pay for his wife, Velislava Hillman’s, admission fees at a renowned educational institution. The payment was made to the Green and Piegel Trust.

The FIAU noted that it could not explain how the Hillman couple’s lifestyle could be sustained by only €15,190 in cash withdrawals from their personal accounts over five years.

According to the FIAU, on a €100,000 income from Allied Group, Hillman had considerable expenses including three children attending private schools, some €200,000 paid in home mortgages over five years and travel expenses on holidays in excess of €40,000.

“The lack of cash withdrawals may indicate that Mr Hillman possibly had access to funds which were not being introduced into the banking system”, the FIAU had told the police in its report.

Hillman resigned his posts at Allied Group in 2016, soon after the publication of Caruana Galizia’s reports about him. He was put on leave but retained on the company’s payroll, given full pay until he resigned months later after a deal was reached.

An internal investigation by Allied Newspapers was never published and its conclusions remain unknown.

Meanwhile, Progress Press has been closed, despite the millions in investment, and its employees fired. Allied Group had to sell its iconic Valletta building to pay millions in accumulated debts. The Mriehel facility is currently up for rent.

Statement by Progress Press

Progress Press has sent the following statement as a right of reply:

“Progress Press Co. Limited refers to the article titled ‘Arrests, interrogations, and documents seized in Schembri-Hillman money laundering investigation’ carried in The Shift in which it was alleged that ‘Progress Press has been closed, despite the millions in investment, and its employees fired’.

While Progress Press has in fact sub-contracted the printing of its newspapers to a third party printer for sound commercial reasons, the company confirms that it is still operating a printing press in line with current market demands, and there exist no plans whatsoever to close it down.

The decision to move the entire Allied Group, including Progress Press, to Mriehel was driven by the need for the Group to transfer its operations to a more appropriate premises outside of Valletta. The Group confirms that it is still operating from its premises in Mriehel and that it does not have any plans to move elsewhere. In line with the commercial potential of the Mriehel investment, Progress Press is currently offering its excess space for letting.

In terms of the ongoing Schembri-Hillman investigations, Progress Press will continue to co-operate fully with such investigations as it did during the Magisterial Inquiry conducted by Magistrate Josette Demicoli.”