Fraudulent: court orders Steward to return hospitals to the people in scathing judgement

The largest ever deal a Maltese government has ever stuck with the private sector that saw a concession for three public hospitals being given to Vitals Global Healthcare has been rescinded by the courts after finding it had been fraudulent throughout – from before its very conception to when the public concession was handed over to Steward Health Care.

The case to have the contracts and all ancillary documents rescinded – including Steward’s €100 million escape clause – had been opened in 2018 by then-opposition leader Adrian Delia in his personal capacity as an MP against then-prime minister Joseph Muscat.

Mr Justice Francesco Depasquale methodically shot down the government’s defence point by point and ruled that Vitals should have been disqualified from the concession from the very outset.

The court ruled the process had been vitiated by fraud throughout the entire process: before the contract was signed, over the course of the contract and after the concession was sold to Steward.

The fraud, according to the ruling handed down this afternoon, “persisted not only prior but also throughout the concession”.

The fact that all the promised projects were never completed and that some had never even been started, the court ruled in rejecting all of the defendant’s pleas, was “all part of the fraudulent plot”.

All three related agreements, as well as their amendments, have been ordered to be rescinded and annulled and the hospitals returned to the government.

In a terse statement following the ruling, the government said it is analysing the sentence and said it will protect the national interest, health care workers and patients.

Vitals ‘should have been disqualified’, Steward ‘reprehensible’

Well before the government made its intention to privatise the hospitals known, Vitals’ shareholders of Vitals had already concluded a memorandum of understanding with the government, the court confirmed.

Vitals had also kept that memoramindum of understanding, which it had signed with former economy minister Chris Cardona, hidden, which according to the court, ” was evidence of its fraudulent intent”.

About Steward, which purchased the hospitals concession from Vitals, the court said it “had no doubt that it was well aware of Vitals’ shortcomings “.

This, the court said, was also evident from the fact that former Vitals CEO Armin Ernst is now an official at Steward.

The court noted how well before its intention to privatise the hospitals was made public, Vitals’ shareholders had already signed a memorandum of understanding with then-economy minister Chris Cardona.

After the government was informed of a number of investors interested in developing Gozo hospital, the government bound itself not to deal with anyone while that agreement was in effect. At that stage, there had still not been a public announcement.

Fraud, blackmail and unjustified enrichment

The court questioned how Vitals could have prepared its detailed bid in a matter of a mere two weeks and said it was in no doubt that Vitals had obliged the government to give it the information required for the bid in advance.

“They abused their position. Their investors were aware of the political situation at the time and used fraudulent tactics to get the concession,” the court observed.

It noted how the bid’s evaluation committee carried out no due diligence whatsoever on the bidders but instead relied on mere letters of comfort.

Turning to Steward’s €100 million escape clause and a provision for the government to assume it debts should its concession be cancelled, which it had signed with former minister Konrad Mizzi, the court found those conditions “were also part of Steward’s fraud to make unjustified enrichment to the detriment of the Maltese government and people.”

The court questioned whether those in authority at the time had accepted such conditions “out of ingenuity or pressure”.

“No person who has the good of the country at heart would ever enter into such a deal if not taken in by fraud. Steward’s stance was reprehensible.”

Mr Justice Depasquale said Steward’s manoeuvres were intended for “solely blackmail and unjustified enrichment”.

Court perplexed by lack of evidence

The court said it was perplexed by the defendants’ lack of evidence which it said “most likely reflects the poverty of the project”.

Mr Justice Depasquale noted the milestones that were never met, which included construction at Gozo General Hospital, where no new work has been completed to date, and the provision of 80 rehabilitation beds at St Luke’s Hospital, which had been completely shelved as no evidence had been brought forward to show the project had ever even been on the cards.

The court said it expected the defendants to have produced witnesses to prove their obligations had been met but all Steward provided was a one-page affidavit and 76 pages of photos, including images of its new helicopter.

The court ruled there was no doubt that if one of the concession’s agreements was breached, then there was a breach of the whole concession, the milestones of which were “deliberately hidden” when the contracts were was presented in parliament.

The judge clearly ruled that none of the milestones were met by Vitals or Steward and that they were made “laughable and virtually ineffective”.

Such shortfalls, the court said, should have been flagged by the government, including then-minister Konrad Mizzi.

Slamming the government, the court noted how when it had become obvious that Vitals was not meeting its obligations, the government “incredibly” went on to rework the deal with Vitals being given another four and a half years – and they still failed to produce any results.

Former minister Konrad Mizzi, who had spearheaded the deal although was not yet health minister, had given Vitals up to 2022 to meet its 2018 obligations. Mizzi’s actions, the court rules “made no logical sense”.

Mizzi has still not explained his actions since he had resigned from the government in the meantime and chose to no longer testify in the case.