A pensioner who lost €150,000 to Ryan Schembri when he fled Malta in 2014 has told the court he was assured the former More Supermarkets boss had ‘a lot of power’ since his cousin Keith worked in Castile.
Ryan’s cousin, Keith, is the former chief of staff in the Prime Minister’s Office.
Thomas Gravina, an investor in Schembri’s supermarkets, testified on Tuesday that he handed over some €150,000 to Schembri in cash.
Then the businessman “ran away, money and all”.
“It drove me crazy,” Gravina told the court.
Gravina was originally introduced to Schembri by a friend, Joe Difesa, who told her that Schembri was a meat trader.
“Since his cousin was Keith Schembri who worked in Castile, he said Schembri had a lot of power and could get cruise ship contracts,” the witness explained.
Gravina was testifying in criminal proceedings against Ryan Schembri, who is charged with money laundering, embezzlement, fraud, fraudulent gain, offering financial investment services without a license and knowingly using false documents.
The court heard on Tuesday how accounts audited between 2001 and 2011 showed Schembri’s company growing in terms of sales and profits.
But in 2013, the commercial strategy had failed and the funds of its “cash cow” in Libya completely dried up, testified a former banker.
“No red flags between 2001 and 2011”
During this ten-year period, there were no “red flags” regarding Cassar and Schembri Limited, the company owned and operated by Schembri and its partner Etienne Cassar, Dennis Francalanza said during the appearance of witnesses. .
The former banker explained that when the opportunity arose for Schembri to expand its business by establishing the supermarket chain, he was asked to step in as a financial consultant.
Francalanza joined a pre-opening team working on the project and liaising with banks to secure facilities for the new venture.
In June 2012, he was asked to draw up a business plan, supplemented by a feasibility study, to be presented to two local banks, Banif and APS.
Audited accounts for the year ending December 2011 showed that Schembri’s business recorded growth in sales as well as profits, Francalanza confirmed.
Based on these accounts, he prepared a business plan to justify the request for bank facilities which were then granted in the form of a general bank facility and a large overdraft in favor of More Supermarkets Ħamrun.
Located in a new shopping complex, in a residential area with a good catchment area, with parking lots and competitive prices, the “very, very large supermarket” had good prospects.
Outlets in Ħamrun, Mosta, Paceville, Fgura, Żebbuġ
Soon four more outlets followed in Mosta, Paceville, Fgura and Żebbuġ, each with its own company, memo, different items and shareholders as well as separate bank accounts, the witness explained.
Funds were funneled from Cassar and Schembri to More supermarkets, although in 2014 the idea of a bond issue was also mooted.
Schembri’s attorney asked where the alleged fraud and money laundering was. Until 2014, the business was “a big success” and everything was done right, he said.
“Was Ryan doing something behind someone’s back,” asked defense attorney Roberto Montalto.
“Not that I know of,” Francalanza replied, adding that the first time he heard about the businessman’s troubles was through the newspapers.
“I will not go until the end of the year”
“So what changed in 2014?” persisted Montalto.
After the first quarter, management realized that the forecast and strategy weren’t right, gross profit was “tremendously low” and pricing was “ridiculous”, the witness said.
The situation had first seemed to worsen in June 2013 and Francalanza himself believed at the time that “they would not go until the end of the year”.
In fact, he felt that at that time Schembri was trying to generate more sales to save the supermarket chain by moving sales to Libya to increase turnover.
“The other shareholders didn’t like this idea, but I did.”
At the end of 2013, the situation “was not good at all”, with high rents on the Paceville store and a monthly bill of €10,000 in parking fees borne by the Ħamrun supermarket alone.
When political turmoil erupted in Libya, the flow of funds from this direction which yielded “good gross profits”, totally dried up, leaving Schembri’s business without its “cash cow”.
“Person of great integrity and a great businessman”
The company’s success until 2012 was also confirmed by Patrick Camilleri, a professional who audited Schembri’s business accounts until 2013 and who described Schembri as “a person of great integrity and a great man of business”.
It wasn’t until 2013 that Camilleri pointed out to shareholders “some issues he didn’t like.”
At that time, Schembri entered into a share transfer agreement, a copy of which was not provided to the auditor.
Suddenly More Supermarkets’ balance sheet turned from positive to negative and “the rug was pulled out from under the company’s feet”.
€2.9 million cash shortfall
Loans due to the company have not been repaid.
The company was supposed to receive some €3.9 million from its subsidiaries, but it never did, and there was also a cash shortfall of €2.9 million.
Falling on these figures during the audit of the company’s accounts, Camilleri had sent questions by mail to Schembri and Cassar, but he never got an answer.
A copy of that letter was presented in court on Tuesday.
Faced with this situation, the auditor had no choice but to resign.
“So this stock transfer was the ‘finish line’, and new owner Darren Casha provided new people to manage the accounts for the business. Was he the one who stripped More of everything he had,” the defense asked.
“Correct,” replied Camilleri.
A former banker invests €150,000
Another witness was Ian Azzopardi, a pensioner and former banker who had invested some €150,000 after checking Schembri’s company records against the Malta Financial Services Authority database.
“I was impressed. What company in Malta would register such a profit? It looked solid,” Azzopardi said.
But a few months later, Schembri “disappeared” and Azzopardi had no idea how he was going to get his money back.
He filed a criminal complaint and also sought a civil remedy when Ryan’s business partner disputed signatures on bills of exchange in Azzopardi’s possession.
He had won that case after Judge Lawrence Mintoff ruled that those signatures were genuine.
However, he had paid dearly for his investment in Schembri’s business.
At the time, he was working for a local bank and was fired on the grounds that he had done business with one of the bank’s customers.
Finally, he sued the bank before the Labor Court and won his case for wrongful dismissal.
“Not very talkative”
Another investor, also retired, Gravina called Schembri “not very talkative”.
He told the court he would simply write a post-dated check when Gravina handed over the money, telling him to come back a month later for the interest payment.
“I only saw him for three months. In the fourth month, he runs away.
After Tuesday’s lengthy session, the defense made another bail offer, producing Schembri’s father and partner as third-party guarantors.
“Ryan Schembri does not fall under the definition of ‘fugitive at large’,” argued Montalto, insisting the defendant did not deserve to be treated differently from others who had also left Malta and been brought back.
Given that the main concern of the Attorney General was now the risk of absconding, Montalto stressed that neither the defendant nor his family had any intention of leaving Malta and were willing to commit to any legal conditions.
The court, presided over by magistrate Donatella Frendo Dimech, ordered the prosecution to check the criminal records of Schembri’s parents and partner so that the bail issue could be considered at the next session.
The case continues.
Superintendent James Grech prosecuted, assisted by AG attorney Francesco Refalo. Attorney Roberto Montalto was the defense attorney.
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