21 September 2003
REVEALED: KMB's naïve and ruthless treatment of Pace's business
The MaltaToday team continue to report in this exclusive reportage
on the BICAL bank scandal
In a show of unashamed negligence and naïveté, Karmenu
Mifsud Bonnici - reborn 'socialist saviour' and shadow to erstwhile
premier Dom Mintoff - turned to breaking up all the wealth of
the BICAL associated companies.
Cecil Pace was not just one of Malta's foremost mega-businessmen
back in the sixties, but also a forward-looking entrepreneur,
at the forefront of property and hotel development, plastic materials,
car importation, and general shipping and boating.
Such was the legacy of the Malta Industrial Development Co Ltd,
the parent company that grouped Jablo Plastics; Marsa Industries;
VIP Ltd; John Bezzina & Sons; Carways: Harris Hughes &
Johns Ltd; and Skylim. On 25 November, 1972, upon the closure
of the BICAL bank on order of the Mintoff government, MIDC was
seized by controller Karmenu Mifsud Bonnici as Mintoff let loose
his guillotine strategy to nationalise private banking.
Jablo Plastics, later renamed Marsa Plastics, had an overdraft
with BICAL of Lm22,127 on 25 November, 1972, carrying an interest
of 8 percent per annum and covered with a general hypothecate
and approved by the Central Bank as is the norm.
As controller, Mifsud Bonnici's duties were to sell enough assets
to pay off the company's overdrafts to then release the company
which would then continue its operations.
But Karmenu Mifsud Bonnici was in a different frame of mind.
"Instead of this happening," Cecil Pace told MaltaToday,
"the controller kept the company running to eventually make
a complete mess of the assets to the detriment of creditors, depositors
and shareholders of the same company and BICAL."
At the time of seizure, Jablo Plastics comprised a large footprint
for its factory, well-equipped with machinery, ample stocks of
raw materials and finished products, with a business edge on local
and foreign markets. It was evident that the sum of assets far
exceeded the relatively small overdraft. The controller could
have easily paid the overdraft immediately to then release the
Around five years later, Mifsud Bonnici authorised a loan of Lm12,000
to the manager of Jablo (now Marsa Plastics) from other associated
BICAL companies, to make up for a inexplicably missing Lm11,345
in cash. In 1984, another sum of money went missing, this time
it was Lm10,000, and so warranting another BICAL loan.
Both KMB and later controller Emanuel Bonello would acquiesce
to repeated requests made by managers of the jablo company to
loan monies from BICAL and associated companies - in 1978, Lm12,000;
1979 - Lm5,169; 1980 - Lm4,000; 1982 - Lm27,000; 1983 - Lm3000;
1984 - Lm10,000; 1985 - Lm13,000; a total of Lm74,169.
Cecil Pace has no ifs and buts about the
background to the loans: "No controller had the right to
approve such loans according to their duty's obligations, because
their sole role was to pay off creditors and liabilities and not
to amass debts. Ironically the two stolen amounts were equivalent
to the overdraft balance with BICAL, proving that there had been
money to pay off the bank."
Nothing, however, would equal the actions of KMBs replacement
Emanuel Bonnello as controller. When he sold off Jablo in 1991,
both controllers had by then increased credit liabilities from
BICAL from Lm22,127 in 1972 to Lm281,985 in 1991, and loans advanced
from associated companies to the tune of Lm76,597.
According to the 1972 accounts, Jablo Plastics had Lm24,954 in
cash at hand and in bank. Yet this cash also disappeared.
Additionally, in 1990 the company had a total asset value of Lm595,086
- Lm195,274 in machinery; stocks valued at Lm134,334; trade debtors
owing the firm Lm114,542; and Lm50,936 cash in hand and at bank,
as well as Lm100,000 in company goodwill. Emanuel Bonello decided
to sell the company for the ridiculous amount of Lm140,000.
VIP Ltd - The Comino Hotel
The Pace family had invested Lm400,000 in the Comino Hotel on
the island of Comino, which carried an emphytheusis for 150 years
at Lm12,000 a year. When the company was seized, the hotel was
valued at over Lm1.5 million.
In order to dispose of the annual rent of Lm12,000, Karmenu Mifsud
Bonnici decided, in an unprecedented action of bizarre logic,
to return the Comino Hotel to its landlord - John Gaul the British
millionaire who owned Comino - for free. Removing the hotel without
any form of recompense, Mifsud Bonnici lost an investment of hundreds
of thousands of liri and the rest of the hotel's potential.
It was ironic that it was in fact Karmenu Mifsud Bonnici, then
lawyer to a French man named Valliere, who encouraged the Pace
family to buy the hotel from John Gaul's former wife, who had
then partnered up with Valliere.
"This was another case of the controller removing all the
BICAL group's wealth without any attempt being made to safeguard
the interests of the shareholders and creditors as he was obliged
to do in his role. At no stage were we ever consulted about this
transaction," Cecil Pace told MaltaToday.
John Gaul no novice to making profits, disposed of the hotel some
weeks later for the price of Lm2 million and Lm50,000 rent a year.
As the controllers dissipated the Pace empire, young aspiring
businessmen moved in for a killing. Pace's Marsa Industries included
two big storehouses which contained joinery machinery. It also
incorporated yachts used for harbour and round-Malta cruises.
Despite being worth five times the amount, the storehouses were
sold for just Lm7,500.
The yachts Comino, Verdala and Maria
Louisa - valued in excess of Lm90,000 - were sold for a
measly Lm7,400. The motor yachts Roberta, Michael,
Celia and Sayonara Hago were sold as a
going concern in 1976 to John Sullivan's Sunsea Cruises Ltd for
the fine sum Lm39,500, despite having a value of over Lm100,000.
When Sullivan paid the initial deposit of Lm20,000 for the boats,
Karmenu Mifsud Bonnici never bothered to collect the remaining
Lm19,500. Only in 1987, was Sunsea Cruises ordered by the Commercial
Court to repay the outstanding amount plus interest, and to this
day no controller has ever told the Pace family whether the money
was actually paid or not.
Likewise, the ship St Rule was sold for a ridiculous
Lm4,800 in 1973, whilst the Maltese Trader was sold
for just Lm14,500.
This was yet another angle to the ludicrous attitude taken by
the controllers who led everyone to believe they were dealing
with bankrupt companies.