A ‘TRANSPARENT’ PROCESS
Schembri is the founder of IZI Group, an umbrella organisation for diverse interests in the gambling sector. He is the managing director of Dragonara Gaming, the company that runs the Dragonara casino in St Julian’s.
Last year, his group took over the running of the national lottery, following the award of a 10-year tender.
The group also includes IZI Bet, an online gambling company with physical branches dotted around the island.
Schembri said via his lawyer that the way the Dragonara lease was acquired was entirely transparent, having gone through all the established procedures leading to it being the subject of a unanimous resolution by parliament in 2019.
On the lease payment terms, Schembri said the €500,000 annual payments will increase to €1.5 million.
“May we point out that this is the highest – both in absolute terms and in terms of rate per square metre – paid for any property along the ‘golden mile’. The said lease also entails other onerous conditions and investment obligations.”
Schembri argued that the difference between the previous €1.2 million annual rent and the current rent is “logical” and driven solely by economic considerations reflecting the changes in circumstances.
“When Dragonara Gaming Limited leased the premises in 2010, there was only one other casino in the area, whereas by the time the new lease was being negotiated, a third casino concession for the area had already been granted to the Eden Leisure Group (Eden).
“This third concession was granted for the lowest concession fee to government ever recorded for a casino concession. Dragonara Gaming Limited also instituted legal proceedings in 2016 against Dr Muscat’s government challenging the award of this third concession, as it deemed this to have been awarded on subjective criteria, unfairly and without justification.”
Schembri said that Dragonara Casino, as a result of what was deemed to be a “vitiated tender award process”, suffered significant financial loss.
“Consequently, all this, including the resulting reduction in market share, was obviously taken into account when negotiating and establishing the value of the new lease for the premises,” Schembri said.
One minister, who declined to be named, said the details of the deal came as an “absolute surprise” and were only made known to him after the parliamentary vote was taken.
Another minister, who is no longer in government, however, insisted that cabinet was presented with legal advice about the deal.
Cardona had justified the lack of a tender by arguing that the deal did not involve any public procurement.
Contacted for comment, Muscat said the deal was discussed at cabinet level.
“When the Dragonara operators came to government with a plan for a multimillion project requiring an extension to their lease to justify the investment, this was presented to cabinet and discussions ensued. As you know, the content of discussions in cabinet is privileged.”
Muscat said that in due course, Cardona’s ministry sought legal advice on the best way forward.
The ex-prime minister said he was informed that written advice from the attorney general stated there was no obligation for a parliamentary motion, as the original agreement signed in 2010 following a public call provided for an “extension mechanism” for the lease.
Muscat said Casma Limited, the government entity that administers the lease, could have technically extended it itself.
“Nevertheless, it was decided to go to parliament for the sake of transparency. Parliament approved unanimously in plenary.”
Muscat said that while cabinet’s formal approval on the content of a motion before parliament is not a requirement, it is the practice which “was most often used” by the government he led.
Many MPs from both sides of the house were caught unaware about the contents of the motion.
Muscat said the motion was on the parliamentary agenda, but the fact that the methodology habitually adopted was not followed was only raised later.
“As prime minister, I was not responsible for this scheduling and clearly was not ‘aware’ of it”.
Muscat said that irrespective of the procedure adopted, the final result was that the country’s highest institution was given the biggest say possible to scrutinise, approve or disapprove the motion.
“Parliament approved unanimously. Cabinet held yet another discussion afterwards and all formalities were adhered to.”