Justice Francesco Depasquale’s in his controversial judgment against Steward Healthcare International (SHCI) claimed that the American healthcare giant had failed to deliver for three hospitals during the contractual period of around five years but evidence shows that the judge reached completely wrong conclusions and ignored glaring evidence which demonstrated proof of delivery and an investment exceeding €60,000,000.
Justice Francesco Depasquale’s ruling – made in February 2023 and now subject to a challenge at the European Court of Justice – has been widely condemned in court filings as “more a work of fiction than a sound and proper ruling” as it made references to toilet renovations but a forensic analysis shows that the judge didn’t take into consideration evidence which showed the fulfillment of terms and delivery but the judge made highly politicized and controversial remarks in the damning judgment.
According to new European court filings, the development and construction of Barts Medical School merit specific attention as the development around this project alone shows how the judge victimized the healthcare giant.
At the European Court of Justice, Steward has slammed the judge for making accusations of fraud and impropriety against the healthcare giants’ running of three hospitals: Karin Grech, St Luke’s, and Gozo General starting in 2018 when Steward took over these hospitals from Vitals Global Healthcare in 2018. In a 100-page appeal, Steward has accused 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”.
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The deal was originally made in 2015 when the Malta government granted a contract for the running of three hospitals to Vitals Global Healthcare (VGH) which sold the deal to American giant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 favor 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.
Upon Steward taking over the Concession at the Government of Malta’s behest, the completion of the construction of Barts – which had stalled under the Vital Global Healthcare (VGH) administration – was clearly and specifically indicated to Steward as a priority by Joseph Muscat, the former Prime Minister on behalf of the Government of Malta.
Steward at the time intervened, according to evidence, to heal a worsening relationship with Queen Mary University of London (QMUL), which was threatening to leave Malta and Gozo as its students had no facilities to continue their clinical studies.
There were initial high-level meetings between Steward and QMUL leadership in London and Malta, with a view to re-engaging and realigning objectives, and monthly steering group meetings involving all stakeholders (Steward, QMUL, Government) were resumed. According to evidence, the Anatomy Centre was immediately built to allow for continued medical student education, since failure to do so would have resulted in the need to transfer students back to London. This meant an accelerated 5-month design, construction, and refurbishment to ensure the success of the QMUL program, leading to the completion of this part of the project in October 2018 a mere eight months after the Steward takeover.
Steward subsequently designed and built the Medical School in 17 months (April 2018 to October 2019) although the Malta Government and QMUL requirements involved an increased size of the facility from approximately 4,000 square meters to 8800 square meters, with the challenges that these changes involved, especially considering the requirement to build an innovative hybrid construction for a high-tech building. Steward delivered this in the shortest possible time and spent thirty-five million Euros (€35,000,000), according to court papers.
In the appealed judgment, the Court implied that Steward acquired the Vitals shares with the ulterior aim of profiting from the Government of Malta by obtaining financing from Bank of Valletta plc with the peace of mind that the Government would guarantee such financing but the judge failed to take into account and mention that such financing, which was only provided in September 2019 together with Steward equity, was destined to the construction and finalization of Barts Medical School.
According to court papers, Justice Francesco Depasquale made the “ulterior motives” allegation a matter of truth based on assumptions in the judgment when the claimant didn’t allege in its claim that Steward acquired the Vitals shares with these “ulterior motives”. The court filing says that the Court’s reasoning also shows considerable ignorance of how an international group of companies with over 40,000 employees all over the world, which runs over forty hospitals, and whose turnover is in excess of USD $7 billion runs a business.
Certainly not by planning to default a €30 million loan upon the cancellation of a concession to receive cash via a Government guarantee, according to the court papers. The appeal explains that Steward entered into Malta deal with the aim to expand in, amongst others, the European Union, which made the timing favourable for both Malta Government and Steward and also this was an initial opportunity from where Steward could expand its footprint into other European countries running Public Private Partnership (PPP) processes.
Despite the fact that the Government did not fulfil its promises, Steward continued to perform its duties as Concessionaire namely, 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, according to papers.
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Before the First Court judge, Steward lawyers exhibited James Grima’s affidavit together with a photo report attached to it that testified to capital projects carried out by Steward but the judge ignored this evidence and the Court implied that Steward did not do anything except renovate a toilet.
The court filing says the unfairness of this assessment can be seen from the evidence given to the court which shows, among others, upgrades that took place at the Gozo General Hospital, including a new Dental Clinic and Stroke Unit, a new Orthopaedic Unit, a new Orthotics and Prosthetics Unit at Karin Grech Hospital, complemented by new collaborations and joint ventures with world experts in the field of prosthetics, a new fleet of ambulances as well as new helicopter services for patients, an Anatomy Centre in Gozo together with the Barts College for Medicine and Dentistry Building – a project that had stalled under the Vitals administration but was swiftly completed soon after Steward entered into the Concession. This is among several other renovation projects all carried out while Steward was also providing and developing high-quality healthcare services from the hospitals it operated, court papers say.
Steward has told the European court that it faced enormous problems after entering into the Concession but “despite these challenges, they continued to provide excellent health services, while making capital investments that exceeded sixty million Euro”.
It says that 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, says the court filing.
Steward has told the European court that in the five years that Steward has been involved in the Concession, it never received any notice from the Government alleging any default in relation to the management of the hospitals. On the contrary, the Government’s public statements, including those of Minister Fearne, defending the choice of Steward as Concessionaire and the budgets allocated for the management of the hospitals by Steward are well known.
It rejects the false allegations made by the court and says that it built a new Orthotics and Prosthetics Unit at the Karin Grech Hospital, complemented by collaboration with world experts in the field of prosthetics, a new fleet of ambulances, new services of a helicopter for patients, an Anatomy Centre in Gozo together with the Barts College for Medicine and Dentistry Building – a project which had stalled under Vitals and was speedily completed as soon as Steward joined the Concession, among several other upgrade projects plus the continuous delivery and improvement of health services throughout.
The appeal shows shock that the judge failed to see an investment of €60,000,000 and talked about an “upgrade of the toilets”. “Moreover, both the Plaintiff as well as the Court seem to forget that the Concession did not only consist of obligations of construction, development, and upgrades but also a reorganization of the operations and the provision of health services from the Hospital Sites,” it says.
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The court has been told that Steward ran its operations with efficiency including during the difficult periods of the spread of Covid where Steward utilised its international contacts to obtain ventilators in a short period of time in the Gozo Hospital and prepared a ward with twenty-five beds equipped with a ventilator while the Government was still scrambling to find a supply of ventilators. However, the Court seems to have been so invested in analysing the “ceramic of the toilets” that it even overlooked this fact explained in James Grima’s report, says Steward’s response submitted in the court.
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”.
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 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 government – 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.
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 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 the government’s lack of oversight and failure to fulfill its obligations on several counts and the court failed to take into account the fact that the Malta government – 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.
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When Steward took over the hospitals, only then did it become aware of the real extent of the problems underlying the Concession as Steward found a system in complete disarray.
Steward’s 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.”