BICAL • November 16 2003

Excelsior - Dr Tonio Farrugia’s report still sparks controversy

MaltaToday is publishing a reply sent to this newspaper by Dr Tonio Farrugia and a reaction by Dr Malcolm Pace, Cecil Pace’s son and lawyer

Tonio Farrugia reacts to MaltaToday’s report on the Excelsior Hotel saga

Dr Tonio Farrugia has reacted to the article in the MaltaToday of the 9 November 2003 ‘The Excelsior saga continued – Cecil Pace shown no mercy.’ Farrugia said:
1. I am not in a position to reveal the exact instructions given to me by the then Finance Minister when he commissioned from me the confidential Informal Report in question in 1988. I can only do so with the latter’s consent. However I can state that such Report was intended ‘for his eyes only’ and that it became public without my knowledge or approval.
2. You do not mention that I had contacted and interviewed Mr Cecil Pace’s lawyers and these had submitted to me all the documentation deemed pertinent by them to the instructions I had. Therefore the phrase ‘Farrugia made no contact with Cecil Pace’ is manifestly misleading since his version had been taken in consideration as well and not as implied.
3. The phrase ‘and instead chooses to have a sojourn in Rome for his exchange with Martone’ is a blatant untruth and malicious in my regard since it never happened!
4. The phrase ‘The outcome is a clear case of biased information’ is manifestly defamatory in my regard since my conclusions were based only on the legal norms applicable to the matter and on no other considerations.
5. Nowhere in your Article is stated that even the preceding Controller of the Bical (Dr. Karmenu Mifsud Bonnici) had concurred in writing with the legitimacy of Martone’s claim on such shares.
6. My conclusions in such Report tally with those which were eventually reached by Legal Expert Dr. Tony Mallia in the formal Court proceedings that followed and, as you admit in your Article, the Appeals Court decided in favour of Tony Mallia’s original opinion.

MaltaToday spoke to Cecil Pace’s son and lawyer Malcolm, who contradicted Farrugia on several points.
In 1988, Nationalist Finance Minister George Bonello Dupuis appointed lawyer Tonio Farrugia to commence an informal ‘fact-finding mission’ into the claims of Italian Michele Martone and Cecil Pace to the Malta & Europe Hotels (M&E) shares, of which property included the Excelsior Hotel in Floriana. Both Martone, a lawyer of several M&E creditors dating from the sixties, and Cecil Pace, owner of MIDC, a holding company of the M&E, claim former shareholders Antonio and Nada Ghidoli, had sold the M&E shares to them.
Dr Pace questions why an informal report designed to be a ‘fact-finding mission’ turned into the gospel truth which saw controller Emanuel Bonello registering the Excelsior shares in Michele Martone’s name in 1989.
Dr Pace questions why this legal opinion turned out to be a legally-binding report which led to the shares being registered in Martone’s name.

"I am not in a position to reveal the exact instructions given to me by the then Finance Minister…"
Farrugia has told MaltaToday he can only reveal the exact instructions given to him by Bonello Dupuis with the latter’s consent. Bonello Dupuis is today the Maltese High Commissioner to the United Kingdom. Although this was intended to be a confidential report, which as Farrugia writes was ‘for his [Bonello Dupuis’] eyes only’ it became public without his knowledge or approval. According to Pace, it was in fact Michele Martone himself who presented the report in the court case he filed against Cecil Pace and the controller, through his nominee Herbert Baldacchino, in 1993. The very report was exhibited by Martone.
"I had contacted and interviewed Mr Cecil Pace’s lawyers…"
According to Pace, on 8 April and 3 May 1988, Farrugia met Martone to hear the Italian’s version of events. Malcolm Pace says Farrugia never sought to call or meet Cecil Pace to hear his version of events: "When Farrugia interviewed Martone," Malcolm Pace said, "Giovanni Bonello, Martone’s lawyer, was present as well. What valid reason did Farrugia have not to meet the other interested party, Cecil Pace, in person as well? This is a question of two measures and two weights.
"A lawyer cannot give a version of events. It has to be the interested party himself to give his own version of events. When Cecil Pace phoned Farrugia to ask to be interviewed as well, Farrugia told him there was no need, because he had had a few words with me," Malcolm Pace said.
According to Malcolm Pace, Cecil Pace’s version was never taken into consideration, and only documents related to Cecil Pace’s claim were analysed by Farrugia.
"…my conclusions were based only on the legal norms applicable to the matter and on no other considerations."
Court expert Tony Mallia, giving his opinion in the court case initiated by Martone against Cecil Pace and the controller, never agreed with the conclusion of Farrugia’s 1988 report, which read that Farrugia was "legally and morally convinced that the claim put forward by Cecil Pace regarding the transfer of shares belonging to Ghidoli was not to be accepted since it was unfounded in fact, and that the undersigned is of the opinion that documents were fabricated to suit the occasion." In his report, Farrugia advised the Attorney General to hold Cecil Pace criminally liable in this connection.
"Tony Mallia did not accept this conclusion," Malcolm Pace told MaltaToday. "Farrugia himself was never shown the contract of the share transfer, which is issued by the company upon a mass transfer of shares, which should have shown that Martone was the owner of the shares. In 1993, when Martone presented his evidence in Court, he displayed a contract which we claim has been irregularly amended to suit Martone’s wishes. What this proves is that Farrugia did not bother to look for sufficient evidence of Martone’s claims, and that Martone himself did not provide Farrugia certain documentation on the share transfer."
Pace told MaltaToday that according to Farrugia’s own report, he also never saw the circular which according to the Articles of Association of a company, has to be sent to all shareholders to inform them of a share transfer from a member to a non-member, which also offers member shareholders to put forward their options for the shares being sold. This circular should have been presented by Martone to show he intended buying a share from a member shareholder of M&E.
In Farrugia’s own words: "I therefore asked Mr Joseph Abela [secretary of M&E] whether in fact such a circular had been sent and whether he has a copy of it. Mr Abela assured me that he had sent such circular himself to the shareholders and that a copy of it is to be found in the documents of such company."
Malcolm Pace claims that Tonio Farrugia rested on the claims made by Martone and Abela without being shown the actual circular which should have confirmed that Martone had bought a share from an M&E shareholder:
"It has to be said that for Martone to be able to buy the 51 percent majority shareholding of M&E from the Ghidolis, he first had to buy a share from a member shareholder, in order to have a ‘foot’ in the company. A circular has to inform shareholders of this transfer, as well as offering them the opportunity to buy the share themselves instead of an outsider. This circular was never presented to Tonio Farrugia, which would have confirmed whether Martone had indeed become a shareholder in M&E. This shows that there was never any effort made to get as much evidence as possible. The circular which confirms Cecil Pace’s own share transfer for two shares in M&E exists in this case.
"Moreover, Cecil Pace’s initial purchase of two shares from a member shareholder, were never registered by controller Emanuel Bonello," Pace argues. Farrugia’s report states that these two shares were never registered, thereby concluding that Cecil Pace could have never been a shareholder in the company, proceeding to decree that Pace had fabricated the share documents.
"Even when a Court judgement ordered Bonello to register this share transfer, Bonello refused, prejudicing Pace’s position since these critical two shares signified that Pace had become a member shareholder in 1972 and therefore eligible to purchase the majority shareholding from Ghidoli. It was only when we secured the Nada delle Piane Ghidoli declaration confirming the share transfer to Pace, that Bonello registered the shares. That is why Cecil Pace is asking for a re-trial.”
"The phrase ‘The outcome is a clear case of biased information’ is manifestly defamatory…"
Pace questions: if Tonio Farrugia wanted to truly search for the crux of the Ghidoli share transfer, why didn’t he go directly to Antonio and Nada delle Piane Ghidoli? “It seems like there was no excuse for him to contact them and get their own version of events and see who had been sold the shares in the first place.”
"…Karmenu Mifsud Bonnici concurred in writing with the legitimacy of Martone’s claim on such shares."
According to Pace, Farrugia’s report explicitly states that KMB had signed a declaration in 1974 on a 1972 share transfer document, which allegedly cites Ghidoli as having transferred his majority shareholding to Martone, with the words "Non ho ogezzione al trasferimento".
Malcolm Pace claims that this does not mean KMB ‘concurred’ with the legitimacy of the transfer:
"KMB had no objection to the Ghidoli share transfer but he himself never registered it. These were later registered by the controller Emanuel Bonello in 1989. KMB never concluded that this share transfer was in fact legally valid, but only that he had no objection to the transfer. KMB himself never saw the circular informing member shareholders of the transfer, since as a lawyer he knew that circular only could evidence the intention to transfer the share, otherwise he would have registered it.
"KMB in fact registered the initial share transfer from a member shareholder to Martone, but then again he never even saw the circular that should have informed member shareholders of that transfer. In fact he should have never registered that initial share transfer without seeing the circular. There was no excuse for not seeing the circular," Malcolm Pace argues.
"My conclusions tally with those reached by Legal Expert Dr Tony Mallia…"
"Tony Mallia never agreed with Farrugia’s conclusion that Cecil Pace should be held criminally liable for fabrication of documents," Malcolm Pace says. "In fact, neither Tony Mallia, nor the First Hall of the Civil Court presided by Mr Justice Noel Arrigo, and the Attorney General, agreed with the claim of fabrication of documents, otherwise these would have taken criminal action against Cecil Pace."
According to Farrugia’s report, Martone told him that Cecil Pace was "never interested in acquiring shares from Ghidoli or his wife." However according to Pace, when Martone commenced legal action against Pace and the controller, he himself produced the contract of sale of shares done out to Cecil Pace from Ghidoli.
"In this case, both Martone and Cecil Pace’s then lawyer Albert Ganado had each written out a copy of the share contract which transferred Ghidoli’s shares to Cecil Pace. If Farrugia accepted Martone’s version that Pace was never interested in buying the shares, how did Martone himself present the contract in Court?
"Martone presented his contract to prove that Pace had defaulted on payments to Ghidoli. His own handwritten copy included an extra sentence, which read that if Pace defaulted on payment, the share transfer would be invalid. But this is not a hire-purchase contract and such a share transfer cannot be rendered null. In fact, it is even more serious that Martone presented a facsimile of the contract with an addenda that was not signed by any of the parties involved, and therefore not corroborated. It was Martone who added this ‘mystery’ addenda, to secure the share transfer once Pace defaulted on payment the minute he was sent to jail."