Businessman cleared of fraud and tax evasion 19 years on

A businessman was yesterday cleared of fraud and tax evasion in 19-year case which highlighted the differences between Maltese and German law.

Joseph Farrugia had been accused in 2000 of falsifying invoices issued to Ceiling Systems Limited from Fujitsu General (Euro) Gmbh in Germany and Brooker Air Sales of England in order to evade tax. He was also accused of knowingly undervaluing goods in his customs declaration and defrauding the government of VAT. He faced a long list of fraud counts against VAT and fiscal authorities

Magistrate Monica Vella observed that between February and August 2008, Farrugia had imported eight consignments of air-conditioning units. Maltese authorities had become suspicious when they noted a low declared value on one of the consignments and had contacted the German authorities. Farrugia had declared a total of Lm60,908, while invoices from Germany showed Lm143,273 as the value.

Police had searched a showroom and other properties connected to the accused in 2003, failing to find any documents pertaining to the year 2000.

Farrugia had told the police that he might have been defrauded by one of his employees and the police investigated his accounting system, finding that the value inputted into the system was correct and matched that sent by German customs.

On VAT he had claimed to have used the values mentioned in the original invoices and not those declared to the customs department. This was also found to be true.

The court noted that no searches had been carried out on the residences of the accused’s employees despite one of them having been embroiled in litigation with him and later briefly working with a competitor.

Representatives from a German customs investigation unit had presented documents and explained that from their evaluation, it appeared that the Maltese customs department had been presented with false declarations of value. But a court-appointed translator later pointed out that the documents presented were not attested to under oath, explaining that in his experience the German jurisdiction did not administer oaths to witnesses as happens in Malta.

The court, presided by Magistrate Monica Vella, said that after going through all the documents, it was of the opinion that there had been tampering of the invoices to declare a lower value to the customs department, but that this was not enough to find the accused guilty. For that to happen, the prosecution would have to prove the link between the invoices and the accused beyond reasonable doubt.

This was not the case, however, because the original invoices issued by Fujitsu had never been exhibited and the prosecution had not requested the appointment of a court expert to examine the company’s computers. The German witnesses’ evidence was also inadmissible as they had not testified under oath or made a solemn declaration as required by Maltese law.

The man’s statement to the police, aside from containing his denial of the allegations, had been released without a lawyer being present, noted the court.

Magistrate Vella pointed out that the charges against the accused were no longer crimes because Malta was a member of the EU customs union. Applying the law most favourable to the accused, as is required, the court said that without a crime, there could be no punishment.

Therefore, despite a number of invoices having been tampered with, the court said it could not find the accused guilty and acquitted him.

Lawyer Kathleen Grima was defence counsel.