As the year comes to a close, Fenech chose the Christmas festivities to finally push through his new amendments to the gaming law. His annus horribilis started with the gaming ‘revolution’ he started, incurring the wrath of traders. And then came the Arsenal freebie: and things went downhill from there. By MATTHEW VELLA
Tonio Fenech’s mishaps throughout the year dented the credibility of Lawrence Gonzi’s forgotten promise of “a new way of doing politics”. The finance minister managed, in one fell swoop, to cement the perception that the political class and mega business interests were in collusion. Fenech emerged tainted: his whey-faced, goofy ‘nice guy’ smile was transmogrified into a baddie’s jib.
But the ramifications are greater for Fenech and his leader. 2009 was Fenech’s first full year as the finance minister, having previously been Gonzi’s parliamentary secretary. And it was clear, to many observers in the industry, that he was about to change matters inside the gaming industry.
The online gaming revolution had been devised by Mario Galea, the man who under John Dalli would became chief executive of the Lotteries and Gaming Authority. There were high expectations to formalise another sector, the gaming machine business, an area in which millions were generated from unregulated and unlicensed machines. The government was determined to bring them in line by forcing this difficult group of traders to invest in modern machines that could be hooked up to the LGA’s central system, which could trace gaming revenues and keep an eye on problem gaming.
But while the LGA was well on its way to complete this process by the beginning of 2009, Galea – speaking months after having called it a day at the LGA – claimed that as soon as Fenech was appointed finance minister in March 2008, “everything changed”. While the LGA wanted to issue licences for the gaming operators, in June 2008 its roll-out plan was suspended. “The ministry wanted to review things. The roll-out plan, which I had promised to the operators, had to be delayed… during the summer of 2008, things changed… I felt I was alone in pursuing this plan to go ahead with the licences. The ministry kept asking for time. By the end of October I decided to call it a day,” Galea had said.
Something had changed in the government’s attitude. Previously, it had allowed some 80 gambling halls to set up shop without even bothering to issue the licences for their operation. The Malta Environment and Planning Authority was turning to the LGA to advise on whether it should issue change-of-use permits for establishments to be turned into gambling halls. The LGA presented no objection: until the conditions for the licences were enacted by legal notice, it could not stop operators from applying for MEPA permits.
But then came the June clampdown, the massive police raid that closed down all the gambling halls. After being promised a licence, the gaming hall operators were now being told they will have to wait, until Fenech passes a new law with more onerous conditions on gaming licences. The gaming traders were furious.
Game over But this is when things went haywire for Fenech. A trip aboard George Fenech’s private jet in March, to watch Arsenal play in Spain with tickets provided by Joe Gasan, along with the two businessmen, would prove to be his undoing.
George Fenech had big interests in the gaming business: he owned the Oracle and Portomaso casino, and was eyeing the Dragonara concession. Gasan had converging interests with Fenech, not least the possibility of turning around the fortunes of the desolate Jerma Palace Hotel in Marsaskala, which was already up for sale by the Montebello brothers Peter and Jeffrey.
Everything came to a head during the heated parliamentary group meeting in October which outed Fenech for having accepted the freebie trip. It was during that meeting that MPs protested against going for a vote on the new gaming laws, without yet knowing what the new licensing conditions for gambling halls would be. And gaming operators were speaking to the backbenchers: they were telling them that it is the casinos that will profit from their demise. And that is why Tonio Fenech’s ill-fated trip aboard George Fenech’s private jet has left him open to accusations that will forever taint his political record, despite his confessional stance on gambling – the industry that government rakes in millions from, but which the finance minister describes as “intrinsically wrong”.
Fenech protested his innocence, claiming he had sought the Prime Minister’s permission. Gonzi had to defend his minister, protecting him from accusations of conflict of interest. But in accepting the freebie, Fenech had breached the Code of Ethics for Ministers on at least three counts. The same code also specifies that when travelling, ministers should inform the Prime Minister in writing beforehand, and submit a report of their trip upon their return.
But the timing of his ‘one-off’ acceptance was however bound to raise eyebrows. Tonio Fenech had accompanied George Fenech just a month after he presented a yearly report to Cabinet, proposing a series of changes to the Lotteries and Gaming Act. “The reality is that these regulations have long been coming and Cabinet had rejected them a number of times… We are not comfortable to see Malta being turned into Las Vegas,” Fenech claimed.
His ‘fatal flight’ to Spain took place two months before the expiry of the 10-year lease of the Dragonara Casino in St Julian’s – until last June, managed by French-owned group Accor. George Fenech’s Tumas Group is now set for an aggressive takeover of the casino industry, if and when it secures the Dragonara to become the owner of 90% of the island’s casino business. At present, the €20 million-a-year industry is divided between three players. Tumas Group’s casino company, Tomino, is already in a dominant position with 49% of the business in hand, namely through the Oracle and Portomaso casinos. The Dragonara accounts for 40.7% of market share, while the Venice municipality’s Casinò di Venezia, in Vittoriosa, takes just 10.4% of the market. In 2006, Tomino bolstered its dominance of the market with the Portomaso casino – Tomino was granted a special concession through a two-for-one ‘split’ licence that covers both the Portomaso and Oracle casinos. The split-licence was first mooted in a letter of intent signed by John Dalli as finance minister back in 2004. The licence was formally issued in 2006, with Lawrence Gonzi as finance minister. An additional change in policy allowed all casinos to increase their ratio of 10 gaming machines for each gaming table to 15, which allowed Tomino to spread out its gaming assets across both casinos.
No wonder then that George Fenech was already perceived to have been favoured by decisions taken by the Lotteries and Gaming authority.
The Jerma sale that never was And then came Montebello-gate, or Jerma-gate, or Fenech’s big house renovation fracas: the minister was having works done at his Balzan residence. For some reason, the man who was conducting the works was none other than Peter Montebello, one of the directors of JPM Brothers, whose construction projects included Mistra Village, the Addolarata Towers and the Galaxy Hotel in Sliema. What was such a mega-developer doing inside the minister’s house, carrying out a house renovation?
It turned out he was sub-contracting the work to a small turnkey firm, Rainbow Projects, for works that were allegedly “a favour” to Tonio Fenech, for his intervention in the sale of their hotel, the Jerma. Fenech has denied the allegation, made by Charles Magro, the director of Rainbow.
And to whom did JPM Brothers wanted to sell the hotel? To none other than George Fenech and Joe Gasan, who had presented the Prime Minister with their plans, together with their architectural consultant Ray Demicoli, to transform the Jerma Palace Hotel into a potential ‘Portomaso of the south’, at the beginning of the summer.
Hoping for an urgent sale of the property they had purchased a year before, JPM Brothers were hoping they could settle some outstanding loans with banks and creditors. According to Charles Magro, the director of Rainbow Projects, it was this sale that Montebello was waiting to happen, to actually pay for the works that Rainbow were carrying out inside Fenech’s home.
But soon after, Gonzi backtracked on the Jerma proposal, realising the political and ethical implications of his involvement – as the minister responsible for MEPA – in the application process. After all, the MEPA chairman had stated that hotels should not be converted into luxury apartments. Gonzi’s ‘support’ for such a project would have opened him up to endless accusations.
The failure of the sale led to problems inside Casa Fenech: Rainbow demanded payment from Montebello, who was not forthcoming. Tonio Fenech decided to take matters in hand and pay Rainbow directly. But disagreement ensued between Fenech and Rainbow’s director on the costs the minister was being charged. After refusing to push his prices downward, Magro blew the whistle.
Fenech denied playing the role of broker for the sale of the Jerma, but once again he had tainted his reputation. Gonzi’s response was total silence: on the day of the Budget, the Labour opposition bench taunted the minister with copies of the MaltaToday that had broken the story. Gonzi refused to address questions related to the Fenech saga. He announced a major investment by an aviation company a week later, with Tonio Fenech by his side, and again refused to deal directly with any questions concerning Fenech’s alleged brokers’ role.
Gonzi’s silence was made against the backdrop of a veritable increase in the perception of corruption in Malta, confirmed by Transparency International (Malta was dropped three places in the corruption perceptions index); and also by the Eurobarometer, where corruption was confirmed as the modus operandi of Maltese everyday life. Whether corruption exists or not, the perception is clearly cemented inside people’s minds: Fenech’s antics and Gonzi’s refusal to deal with the matter at hand, definitely contributed to this perception.
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