Silvio Schembri refuses to explain €17 million discrepancy on MBR office lease

Economy Minister Silvio Schembri has refused to explain the €17 million discrepancy between what he said was the cost of the taxpayer-funded lease of Malta Business Registry (MBR) office space in Zejtun and what a National Audit Office (NAO) study concluded in a report that described the costs as “prohibitive”.

A few weeks ago, Schembri told Parliament that the lease is costing €454,335 a year, to be increased by 3% annually for a 15-year period. According to The Shift’s calculations, this should mean a total payment of €8.4 million over the lease duration, with the annual and final payment reaching €686,715 in 2033.

Schembri has refused to publish the contract, requested by PN MP Joe Ellis, citing “commercial sensitivity”.

However, the information Schembri provided Parliament differs significantly from the results of an NAO audit. The NAO, having carried out a study of the lease contract, concluded that taxpayers will be paying a total of €26 million by the end of 2033, when the lease ends and the building is returned to its owners, Alex Marceica Bathroom Centre Ltd of Zejtun.

In all, this lease contract will cost taxpayers a total of €31 million over 15 years, including the more than €5 million the government spent on finishing the interiors of the office space to ‘state-of-the-art’ standards.

Asked by The Shift to explain the multi-million euro discrepancy between the information he gave to Parliament and the actual sum taxpayers will be paying for this lease, Schembri failed to reply.

In another damning report of the government’s abuse of public funds, the NAO said that while the MBR, under the guidance of Minister Schembri, had issued an expression of interest to lease out the Zejtun building, instead of a proper tender, it had serious reservations on the value for money of this deal.

“Payment of €26 million in rent for premises, which at the end of the lease term will still be property of the lessor, raises questions from the value for money perspective,” the NAO said.

The NAO also highlighted the €5 million forked our by taxpayers to turn the shell building, occupying a former bathroom showroom, into luxury office space, including €1 million spent on the installation of heating, ventilation and air conditioning systems.

Disgraced former MFSA boss distances himself from deal

Meanwhile, in another development, the disgraced former CEO of the MFSA, Joseph Cuschieri, distanced himself from the MBR office lease deal, insisting that he had nothing to do with the contract.

In a letter to The Shift, Cuschieri said that “the decision to carve out the MBR from the MFSA and create a new separate entity was taken before I joined the MFSA in April 2018”.

“I as CEO at the time and the MFSA had nothing to do with the process to choose new premises for the MBR”.

Cuschieri, one of the inner-circle of disgraced former Prime Minister Joseph Muscat, was forced to resign in 2020 following scandalous revelations of an intimate friendship with Yorgen Fenech – accused of being the alleged mastermind in the assassination of journalist Daphne Caruana Galizia. Together with his general counsel at the MFSA, Edwina Licari, he had travelled to Las Vegas on a trip fully paid by Fenech. 

While Licari was immediately removed from the board of governors of the anti-money laundering body – the FIAU – she still retained her €100,000 indefinite-contract job at the MFSA.

The ‘golden’ business centre in Zejtun

The business centre in Zejtun, formerly an outlet of Alex Mercieca Bathroom Centre Ltd, was taken over by the MBR in 2018. The shell-form building was transformed into office space at taxpayers’ expense. Concurrently, under Minister Schembri, the number of employees at the government agency almost doubled in 12 months from 47 to 93, and reached 130 by last year.

The MBR’s lease does not include the entire building, but only some floors of the development. The exact number of floors or square metres leased is unknown and Minister Schembri failed to supply the information when asked for it in a parliamentary question. Schembri said only that “the information is still being compiled”.

Registered in December 2013, Alex Mercieca Bathroom Centre Ltd is owned by Alex Merceica and his daughter Priscilla Mercieca Gauci, who holds the majority shareholding.

Mercieca is involved in various other businesses, with a shareholding in A&R Mercieca Ltd, registered in 1987; Alpris Ltd registered in 1995, and he also holds half of the shares of Villa Fermaux Ltd, formed in 1998 together with Baldacchino Woodworks Ltd.

Through this deal, the Merciecas will take back possession of the building by 2033, along with €31 million in payments and improvements.

Lease costs do not make sense

Various property negotiations and developers consulted by The Shift said that €2 million a year in costs for office space in Zejtun “is way beyond current market prices”.

“Even the price of almost half a million a year, mentioned originally by the Minister in Parliament is already on the high side when considering the number of properties available, and in much more central areas, for the use of office space,” a senior commercial letting expert told The Shift.

“To me there is something very sinister in this lease contract. It might be worth if someone investigates further, as €31 million over 15 years for such a building are not peanuts. They could have bought the whole block and another one with all that money,” the expert said.

Is Schembri misleading parliament again?

Just a few days ago The Shift revealed how Minister Schembri misled parliament through another parliamentary question in which he was asked to provide a list of all direct orders dished out by the Malta Gaming Authority during the past years.

The Shift revealed that Schembri left out several direct orders in his list, including those given to Labour pollster Vince Marmara, government PR consultant Saviour Balzan through his Malta Today newspaper business, and to Veronique Dalli – the sister of Energy Minister Miriam Dalli.

Following an ‘investigation’, Speaker Anglu Farrugia concluded that although some information was missing from  the list presented to Parliament, the minister did not err “intentionally” in misleading parliament.