VALLETTA—American healthcare giant Steward Healthcare International (SHCI) has slammed Justice Francesco Depasquale’s controversial judgment as “more a work of fiction than a sound and proper ruling” in a blistering court filing, rejecting the biased court ruling on each and every point including wild allegations of criminal conduct and fraud.
In an appeal filed at the European Court of Justice, Steward has slammed the judge and his ruling for making accusations of fraud and impropriety against the healthcare giants’ running of three hospitals: Karin Grech, St Luke’s and Gozo General starting from 2018 when Steward took over these hospitals from Vitals Global Healthcare in 2018.
In a 100-page appeal, Steward has accused the judge Justice Francesco Depasquale of bias, sensationalism and arriving at the “wrong conclusions” after making “wild assumptions” while making findings of fraud and possibly criminal conduct – and being based on “factually and legally mistaken grounds”.
In a scathing comment, Steward has described the court ruling as “simply hilarious (if it was not made by a court of an EU member state)” as the judgment has made the government members including former health minister Konrad Mizzi look like “amateurs, virgins or, at worst, cretins, as well as devoid of any responsibility as if they were not of age”.
Steward appeal has listed12 grievances and appealed the judgment after Mr. Justice Francesco Depasquale revoked the deal between Steward Healthcare and the Government of Malta.
The deal was originally made in 2015 when the Malta government granted a contract for the running of three hospitals to Vitals Global Healthcare (VGH) which sold the deal to American giant Steward in 2018. In the same year, Adrian Delia, then nationalist leader of the opposition, filed the case against Prime Minister Joseph Muscat and Vitals Global Healthcare, alleging that both Vitals Global Healthcare and Steward Healthcare had not fulfilled their contractual obligations. This was seen as a political ploy against the Labour govt for media publicity and point scoring as the issue got traction with the local nationalist media which is seen as anti-foreign, anti-foreign investment and nurtures hatred for the outsider immigrants.
On 24th February 2023, Mr. Justice Francesco Depasquale at the First Hall, Civil Court, ruled in favour of plaintiff Doctor Adrian Delia’s petition and accepted his assumptions and accusations while annulling the contract for the development, maintenance, management and operation of three of the public hospitals in Malta: St. Luke’s, Karen Grech and the Gozo General Hospital. Steward Malta has said that Mr. Justice Francesco Depasquale has given to Dr Adrian Delia what he had not even asked for and that “such conclusions are so baseless that they skirt defamation, present the judgment as more a work of fiction than a sound and proper ruling which respects the substantive and procedural rights of the parties” and made “defamatory statements about the Appellants and their representatives and accused them of criminal conduct whilst, ironically, depicting the Government of Malta, an EU Member State, not only as innocent but as a weak, if not even an “ignorant” party, that ended up being deceived or coerced by Steward to accept certain terms or conditions against the interests of the Maltese citizen”.
Steward tells the European Court that “this is decidedly not the case, and it was, on the contrary, the Government of Malta that with various promises and assurances, convinced Steward to take over and save a broken Concession which was vital to the country, and which was then on the verge of completely collapsing, causing a great scandal for the Government”.
Steward has highlighted that the court applied wrong principle when annulling the concession and “the court was wrong and incorrectly applied the dispositions of Chapter 573 when it found that Adrian Delia had locus standi to request the recission of the contract based on alleged breach” and the termination amounts to a breach of the Constitutional and Conventional rights, the rights protected under the Charter of Fundamental Rights of the European Union, and of the basic founding principles of European Union Law, including respect of fundamental rights and the principle of proportionality.
Steward’s legal response to the court judgment takes exception to the unverified and false allegations and assumption made by Mr. Justice Francesco Depasquale and says the allegations of alleged fraud and malicious conduct made in the judgment are “wrong in fact and in law because there is no evidence in the records of the case that could conceivably justify the statement that the Appellants or their directors/representatives acted criminally, when taking over the Concession or at any moment after this. This shortcoming is grave when one considers the basic principle, expressly set out in the Civil Code, that bad faith must be proven and not presumed. On the contrary, it was the Appellants who were deceived by the Government of Malta and induced to enter into the Concession. Moreover, the First Court recognised in various parts of its judgment alleged collusion that involved members of the Government and/or the public authorities concerned, particularly in connection with the granting of the Concession to Vitals. This excludes the concept of vitiation of contract based on fraud, which can never be present if (allegedly) the two contracting parties were acting in collusion between them”.
In making allegations of fraud and criminal conduct on the part of Steward and/or its representatives, Steward says, the Court violated the right to a fair hearing of the parties involved not only because it deprived the concerned parties from the opportunity to contest the allegations that were raised in the judgment but also because it led to this conclusion on the basis of a superficial and totally wrong examination of the evidence, which ultimately seriously tarnishes the reputation of an internationally well-established and highly regarding hospital operator.
Steward says the court revealed its bias against the “foreign” party Steward when sarcastically deciding the alleged breach of the Concession contracts and when pinning all judicial costs on the Appellants.
The appeal says that the court was so biased it failed to take into consideration that at the time of the original grant of the Concession, the shareholder in the Vital entities was a company named Bluestone Investments Malta Limited and Steward Health Care, the present shareholder, had nothing to do with that phase of the concession; that Steward was not a bidder nor did it in any way participate in the procedure for the grant of the Concession and/or in any discussions leading to the grant of the Concession; and also that Steward has nothing to do with the alleged breach of the Concession conditions.
It says: “Indeed, Steward entered into the Concession only three years after the award, as a result of a transfer of shares from the Concessionaire companies, which transfer of shares occurred on the 16 February 2018, that is only days before the present proceedings were filed.”
Steward has stressed that it took over from VGH in February 2018 in good faith and on the insistence of Malta government, a Member State of the European Union, following a due process of merit, based on explicit, significant and material assurances from Malta govt – through the Prime Minister, Chief of Staff and the Minister of Health and Tourism – that the Concession would be restructured to make it sustainable and capable of obtaining necessary financing to make it “bankable” for the long-term sustainability of the services offered.
That undertaking from Malta govt to provide a bankable and sustainable concession framework, reveals Steward, has not been honoured to date as the government broke several promises it made and the Malta govt deceived Steward by various means in December 2020 and May/June 2021, agreeing to signing dates of documentation purporting to restructure the Concession and then refusing at the last minute.
The appeal says it was the Government of Malta, not Bluestone, that gave rise to legitimate expectations to Steward that the acquistion of VGH would be immediately followed by restructuring of the concession agreements; it was the government, not Bluestone, who represented to the European Commission that the Concession Agreements would be restructured to make them “bankable” and sustainable; and it was the Government of Malta, not Bluestone, who acknowledged to Steward that the financial model of the Concession needed to be amended to make it viable.
Steward stresses it would not have entered into the agreement with Bluestone to acquire the shares in the concessionaire companies (VGH) had the undertakings of the Government of Malta to restructure the Concession not been made as there was no investment logic for Steward in doing this as this was the Government of Malta which wanted Steward to step into the Concession.
Steward explains that when it took over the three hospitals, the concession was bankrupt due it to its financial model, which rested only on govt to fix it; the Government of Malta benefited directly from Steward becoming the holder of the shares in the concessionaire companies and it benefited further by finding of a solution to a publicly acknowledged failed concession award to VGH; the cure to a 3-year blatantly failed concession supervision; the remedy to the ensuing loss of credibility of GOM due to the points mentioned above, and the stopping of the unsustainable damage to the Health Care sector in Malta.
Steward says the Malta govt induced Steward for benefits through undertakings which were entirely within Malta govt’s power and Steward entered into the agreement with the understanding its rights will be protected by the EU laws.
Steward has told the European Court that the First Court’s Mr Justice Francesco Depasquale’s ruling has made the govt look clean and a victim in the whole saga, while Steward as the “criminal” or “con artist”. It says, however, the truth is the concession unravelled because of govt’s lack of oversight and failure to fulfil its obligations on several counts and the court failed to take into account the fact that Malta govt – through its Prime Minister, Chief of Staff and Health and Tourism Minister at the time – made significant and material representations to Steward (the largest privately held for-profit hospital system in the United States) in order to induce Steward to take over the concessionaire and with it.
When Steward took over the hospitals, only then it became aware of the real extent of the problems underlying the Concession as Steward found a system in complete disarray.
The legal document says: “It is in this context that the Court’s statement about “fraud” on the part of Steward is simply hilarious (if it hadn’t been made by a Court of an EU Member State). The judgment, in a totally unfounded manner, portrays a totally different picture to the one in which Steward was really involved, so much so that it states that the negotiations between the Government and Steward were the result of possibly “ingenuity on the part of the Government of Malta” but “certainly” a consequence of “criminal acts” on the part of Steward. The now known background to the award of the concession and its oversight show little “ingenuity”.”
Steward has accused the Malta government of fraud, bad faith and deception. It says: “”If there is anyone in this matter who has been defrauded, it is none other than Steward at the hands of the Government of Malta. The Government of Malta failed to respect its promises. Not only did the Deputy Prime Minister and Minister of Health declare in Parliament in May 2022 that ‘no negotiations would take place’ but to add insult to injury, as soon as the appealed judgment was delivered, he publicly stated that the Government of Malta’s strategy to “’esist’ Steward’s requests for renegotiation of the Concession had borne fruit since the Government of Malta could now use the judgment in its favour against Steward! This goes completely against the same Minister Fearne’s statements at the time of the transfer of shares, stating that Steward was the ‘real deal’ or ordering to all parties involved that closing was in essence ‘Guys – we absolutely need to close this week. I am being told that MAM are once more being pushed to go to industrial action. That will damage all of us.’”
Steward says that meetings between its representatives and the Malta officials including PM Robert Adela also sometimes involved high representatives of the US Embassy in Malta. “In fact, since Steward took over the Concession at the request of the Government of Malta, several senior executives and directors of Steward met regularly with US Ambassadors and the Chargé d’Affaire to keep them abreast of the progress of the negotiations and the challenges Steward was facing.”
Steward says that facts show that how mistaken the First Court was when it “assumed” any sort of wrongdoing on the part of Steward, when it was none other than the Government of Malta which was “in the driving seat” and can therefore never be portrayed as a victim of any misrepresentations or wrongful acts allegedly carried out by Steward.
Steward’s appeal says: “it should be reiterated that Steward was under the impression that it was discussing and negotiating with high-ranking officials of a sovereign State within the European Union. In such a context, it certainly did not expect and never dreamt that it could not trust what was being promised by the highest representatives of the Maltese State. If there is any “victim” in this saga it is certainly not the Government of Malta, but Steward or the Appellants. In this context, the comments that Steward carried out any “fraudulent” or “wrongful acts”, or that it “conned” the Government of Malta, are totally inconceivable and out of place and defamatory. So is the allegation that the Appellants obtained any “unjustified enrichment” to the prejudice of the State of Malta.
“On the contrary, it was Steward whose legitimate expectations were breached – legitimate expectations which were created by the Government of Malta. This resulted in serious prejudice and financial loss to Steward which was perpetrated through breach of the Government’s commitments, stated not only at the moment of taking over the concession, but also repeatedly over the course of the following years.
“It should also be stated that all this was confirmed by Steward and its representatives to the Office of the Auditor General in the context of investigations which were meant to lead to the third part of the NAO report regarding the Concession, which part was meant to specifically cover the transfer of the Concession to Steward, including negotiations to Government leading to such Concession. This investigation was carried out early in 2022 but, strangely, despite Steward being informed that the report would be published some time around September 2022, the report has, to date, not been published. With the benefit of hindsight, Steward has its own suspicions as to why this is the case.”
Steward says it was let down by the Malta govt throughout but Steward continued to perform its duties, providing the best possible medical services from the hospitals that are under its management, thus protecting and improving the health sector, in the public interest of the citizens of Malta and Gozo.
It says: “Steward managed this operation with efficiency including in the challenging times of the Covid pandemic during which Steward used its international contacts to obtain ventilators in the Gozo Hospital in a rapid manner, even before the Government managed to acquire ventilators for MDH. While the Government was still struggling with obtaining equipment, leaving Steward in the lurch, Steward managed to prepare a ward at GGH with twenty-five beds equipped with ventilators obtained through Steward’s international network of health product suppliers. It is a pity that the Court was so preoccupied with the “ceramics of the toilets” that it seems to have missed this fact explained in James Grima’s report.”
Steward’s appeal maintains that any finding of “fraud” or “malicious acts” in their regard – in any case devoid of any proof, hearing or otherwise – is wrong in fact and at law and once again demonstrates the clear bias of the First Court in Steward’s regard, with the purpose of first “saving” and then justifying the Plaintiff’s claim.
Steward appeal says the Malta court in its most superficial analysis regarding the alleged “fraud”, the court completely ignores the involvement of Bank of Valletta in the contracts which the Court considered so problematic. “The fact that the Bank of Valletta was also a signatory to the contracts goes to show that there were other interests involved, beyond those of the Government and of Steward as Concessionaire, but in its judgment, the Court completely fails to take this into account, and as a result, its analysis remains superficial and incomplete.”