The National Bank Scandal – A skeleton in the cupboard for Bank of Valletta

Excerpts taken from Malta Today (http://www.maltatoday.com.mt/) - National Bank of Malta Saga

 

The National Bank of Malta – shareholders fight for justice 32 years on

On this day thirty years ago, a group of board directors charged with the management of the National Bank of Malta (NBM), a privately-owned commercial bank, were facing a calamity hurling directly from the Prime Minister’s office.
That December month in 1973 would prove to be yet another death knell to many private investors on the island whose business interests were about to be poached and seized by Dominic Mintoff, firebrand Labour party leader and then Prime Minister of Malta.
Like the BICAL crisis one year earlier the NBM shareholders faced yet more political intrigue and wanton destruction of private initiative from Dom Mintoff’s nationalisation plan.

The "Mintoff" socialist policies hit yet another Bank

In circumstances not unlike the rundown to the BICAL closure, the NBM had encountered an unexpected run on their cash deposits, with liquidity resources dwindling precariously after three days of the run. Mintoff’s solution was a simple one: "give me the bank".

But what had sparked yet again, another run on a private, commercial bank, just twelve months following the BICAL crisis? What form of panic had seized depositors to remove their savings from the NBM, the strongest financial institution on the island? Who had spread the rumors that the NBM, one of the prime lenders to the property development and tourism sector, was really performing badly?. In similar, yet altogether mysterious circumstances as was the case with the BICAL crisis, it seemed that Maltese private banks were facing a threat from above, and Mintoff was to be seen at the heart of both banking crisis.’

The Financial state of the National Bank of Malta in 1972 - A prime lender to the property development and tourism sector.

The National Bank of Malta, which incorporated the Sciclunas Bank, was part of a general conglomerate along with the Tagliaferro Bank. The Tagliaferro bank had become a member of the group in 1969. 

By 1972 the total asset worth of the NBM group was Lm45.5 million, of which Lm38 million represented the asset wealth of the National Bank of Malta and the Sciclunas Bank.

Between 1968 and 1972, the NBM had encountered several vicissitudes, not least due to the international economic slowdown with the seventies’ oil crisis. Since 1968 however, pre-tax profits for the NBM had shown general signs of successful progress, increasing from Lm465,662 in 1968 to Lm722,686 in 1972.

A general feature of the NBM was its lending potential, being the main creditor of the property development and tourism sector. The bank itself had been asked by the Nationalist government before 1971 to be more ‘lenient’ in its lending policy with these operators. Between 1968 and 1970, to make more funds available for advances to clients, the NBM’s deposits with the Central Bank were reduced from Lm13.5 million to Lm630,000. Advances increased slowly between 1970 and 1972 from Lm26.9 million to Lm28.5 million, which according to NBM chairman Louis Vella, speaking at the 1972 AGM, was because it was more "prudent to adopt a policy of restraint on lending." The group was embarking on developing a finance company.
Since 1968, the NBM had also registered a 47 per cent increase in client deposits, climbing from Lm15 million to Lm23 million in 1972.
By the end of 1972, the NBM held over Lm39 million in client deposits and Lm3 million in deposits from other banks. Around Lm13 million was in the form of liquid and quasi-liquid assets, representing 34.7 per cent of the bank’s deposits. According to the 1970 Banking Act, it was mandatory for a bank to be in a position to offer banking facilities in excess of 25 per cent of its paid-up share capital and published reserves. This meant that the NBM commanded a substantial liquidity position, greater than the Central Bank’s requested liquidity ratio.

Run on the National Bank of Malta
On Thursday 6 December, 1973, certain NBM branches reported heavy withdrawals amounting to hundreds of thousands of liri. The management of the NBM – General Manager Henry Micallef and assistant manager Antoine Tagliaferro – were called in for a meeting with Central Bank assistant governor Lino Spiteri (Minister of Finance 1996-1997) to assess the situation. Micallef said the bank had enough liquidity to meet a heavy demand.
The next day, as the withdrawals continued, the NBM directors – Chairman Louis Vella, board secretary Dr Robert Staines, Micallef and Antoine Tagliaferro – were called in for a meeting with Prime Minister Dom Mintoff.
On Monday 10 December, Lm900,000 was withdrawn. A board meeting of the NBM was called, and it was assured that the Bank still had 30 per cent liquid assets out of its total deposits. The minimum required by law was 25 per cent.
At 3.00pm that day, Louis Vella, Micallef, Antoine Tagliaferro, Major Austin Cassar Torreggiani and Baron Patrick Scicluna were called in to a meeting with Dom Mintoff, who was flanked by Finance Minister Guze Abela, Central Bank governor RJA Earland, Lino Spiteri and Attorney General Edgar Mizzi.
Dom Mintoff had laid down his cards – he wanted the bank by 5.30pm. He demanded that the shares be transferred to government, threatening he would close the bank and declare a ‘Bank Holiday.’ Mintoff claimed the solution to stop the run on the bank would be to have the government take the bank in its hands to restore depositors’ confidence.
But Mintoff also refused to let the NBM have another lease of life – borrowing bridging finance from other banks such as the Midland Bank, the NatWest, or Barclay’s Bank. What is evidently clear is that the Central Bank did not offer any finance to allay fears of bankruptcy: According to the Curmi and Scicluna Stockbrokers report, the NBM applied for help from the Central Bank to meet the cash needed through a temporary advance facility, offering the Bank’s property and part of its loan portfolio (with the best Maltese companies) as collateral.
But why didn’t The Central Bank grant the necessary cash needed to meet the liquidity demanded, to enable the survival of the NBM through the run? After all, the bank had already gone through minor runs beforehand, even during the BICAL crisis.
‘Naturally without compensation’.
According to court testimonies in the NBM proceedings that commenced years after the takeover, when Major Austin Cassar Torreggiani, one of the NBM directors, asked for the price at which the shares were to be transferred to government, Mintoff replied "naturally without compensation," ordering Dr Edgar Mizzi to draft an Instrument for the transfer of shares which read as follows:

"We the undersigned, hereby authorise the Board of Directors of the National Bank of Malta Ltd to transfer to the Government of Malta all the assets of the Bank in consideration of the assumption by the Government of Malta of all the Bank's liabilities and undertake to do all that may be necessary in order that such transfer be effected."

Mintoff said that if the directors refused the ‘offer,’ he would remove the limited liability of the banks’ shareholders, extending it beyond the bank’s share capital to their personal assets, and that he would withdraw the four million pounds in Government funds which were deposited at the bank.
According to Court evidence given by Dr Philip Attard Montalto, Dom Mintoff said all Malta would know the bank had gone bankrupt when he would take the vans of the Government companies to Strade Reale (Today Republic Street) to sound the alarms, and that he would go on television to say “Jien se ndabbar rasi; tieghi se nehodhom” (I’m getting out of here; I’m taking my cash).
According to Dr Philip Attard Montalto’s evidence in Court, when the directors returned later that day to meet Attorney General Edgar Mizzi, telling him of their intention to ask for bridging finance from Barclay’s bank, Mizzi refused saying that Louis Galea, the director of Barclay’s Bank Malta, which would be later nationalised to become Mid-Med Bank, had “already swallowed the pill” (“Dak diga’ bellghaha l-pillola”).

Mintoff’s threats prompted a telephone campaign to all the NBM shareholders to collect their signatures for the share transfers, fearing the government would take their personal belongings from their homes. Court marshals started knocking at the doors of the shareholders, right up to the early hours of the morning.
Since all sources of support from the government had been blocked, the directors had to either face bankruptcy or get the shares transferred to the government. They feared that if they decided to initiate liquidation proceedings, hundreds of thousands of depositors’ funds would remain frozen for a long period of time, as well ending the employment of the 300 bank workers.

“Jiena nitnejjek mill-Kostituzzjoni" (I couldn't give a damn of the constitution) - Dom Mintoff 1973

The uncouth politician proclaimed by his party as the saviour of Malta and who hopes to be remembered as such was screaming. Dom Mintoff the man who ruined the lives and future of countless Maltese said: "I know this is against the Constitution, I don’t give a damn about the Constitution, not I wrote it, I don’t give a damn about the judges and anybody." (Naf li din hija kontra l-Kostituzzjoni, jiena nitnejjek mill-Kostituzzjoni, mhux jien ghamiltha, nitnejjek mill-Imhallfin u minn kullhadd.")
Socialist Prime Minister Dom Mintoff had clear plans for Maltese banking in 1973 – outright nationalisation would be carried out at all costs, and the costs would be shouldered by the affluent shareholders in the private Maltese banking sector. After the BICAL bank it was the turn of the National Bank.
Il-Perit’s (Dom Mintoff known as the 'Architect' by his profession) style of Nasserian omnipotence, to elevate the role of the state by taking over private initiative, was one played out with open threats and uncontrolled coercion. His 'yes sir men' from those in the Central Bank to those in the Ministry of Finance ensured that Mintoff’s diabolical dreams would come true. And yet, the Nationalist government who promised justice for all, has nothing to settle scores with the countless shareholders of the National Bank. Conveniently forgetting them as was the case with the Bical Bank saga. 
A trait that has dominated today's government’s lethargy and indifference to people’s suffering.
Yet this time, the National Bank could not in any way be accused of ‘fraudulent’ banking activities.
In Court evidence given by Dr Philip Attard Montalto, Mintoff’s ruthless measures designed to gain control of the National Bank of Malta (NBM) are revealed in full. Mintoff wanted the NBM shareholders to transfer their shares without compensation to the government.

Mintoff’s communist streak takes over

According to National Bank shareholder Dr Philip Attard Montalto's evidence in court, he challenged Mintoff during a meeting held at the Office of the Prime Minister at the height of the run on the NBM, on Monday 10 December 1973, to nationalise the bank by compensating the shareholders. Mintoff told him: "What do you think I am? I’m no fool, this does not suit me."
Mintoff’s arrangement was fraught with threats. He did this by menacing shareholders that he would remove their limited liability, holding them personally responsible for any loss in the NBM accounts. The personal assets of shareholders would be taken to make for the losses of the bank – although the claims of bankruptcy are seriously put in doubt by reports and accounting records on the bank.
Mintoff was crystal clear in his actions. The evidence in Court given by Dr Attard Montalto on October 17, 1980 reveals what was said by Mintoff that day:
(Mintoff) – "Tell all the shareholders that who doesn’t sign will be held personally responsible. Tonight I will go to Parliament the minute I leave here and I will pass either one law or the other." (Ghidu lix-shareholders kollha li min ma jiffirmax ser ikun responsabbli personalment. Il-lejla jiena kif nohrog minn hawn sejjer il-Parlament u nghaddi jew ligi jew ohra.)
"I’ll either pass a law to appoint a Council of Administration to take care of the banking group’s assets and liabilities, or else I will pass a law to remove the limited liability of all the shareholders." (… jew nghaddi ligi biex inqabbad Council of Administration biex jiehu hsieb l-assets and liabilities tal-banking group, inkella nghaddi ligi biex inehhi l-limited liability tax-shareholders kollha.)
Attard Montalto then said that Mintoff suddenly flared up said: "I know this is against the Constitution, I don’t give a damn about the Constitution, not I wrote it, I don’t give a damn about the judges and anybody." (Naf li din hija kontra l-Kostituzzjoni, jiena nitnejjek mill-Kostituzzjoni, mhux jien ghamiltha, nitnejjek mill-Imhallfin u minn kullhadd.")
He turned to his right hand man the late Dr Edgar Mizzi and said: "Edgar, is this true?’ Dr Mizzi said: ‘Yes it’s true. We have two laws ready, either one or the other.’ At that moment they had left us with no doubt what Government’s intentions were."
Early warning – RJA Earland sounds the alarm
Mintoff’s blueprint for nationalisation was gaining ground. Following the BICAL crisis in 1972, by mid-1973 he was already eyeing the National Bank of Malta (NBM). And Central Bank governor RJA Earland was privy to his plans. He would be the person to send early warnings to vice-chairman Frank Cassar Torreggiani that Mintoff was after the NBM.
The election of Labour in the seventies meets a lull in economic activity, but one which leaves the banking sector, as epitomised by the NBM, in yet prosperous and stable conditions. Between 1968 and 1972, the NBM had encountered several vicissitudes, not least due to the international economic slowdown with the seventies’ oil crisis. Since 1968 however, pre-tax profits for the NBM had shown general signs of successful progress, increasing from Lm465,662 in 1968 to Lm722,686 in 1972.
By the summer of 1973, Mintoff had set his eyes on the NBM. And the warning had come from an unlikely source – the Governor of the Central Bank, RJA Earland.
RJA Earland and NBM vice-chairman Colonel Frank Cassar Torreggiani were golfing partners on the course at the Marsa sports grounds. Only six months before the fatal run on the NBM, in which Lm2.5 million were withdrawn by clients following rumours of bankruptcy, RJA Earland informed Cassar Torreggiani of Mintoff’s plans.
Peter Cassar Torreggiani, son of Frank, says Earland had warned his father of an eventual take over well before the run on the bank:
"My father and RJA Earland used to be good friends. A month before he died, which was prior to the run on the bank, my father had told me that Earland had gave him stark warning. He had told my father that Mintoff wanted the bank. His advice to my father was that he ‘should have his house in order’ by the time of the takeover, meaning that the board of directors had better make sure it would be a smooth takeover."

Earland’s warning had to be taken seriously. Mintoff had already heeded to the eventual nationalisation of the banking sector in the summer in certain speeches. Finance Minister Guze Abela had also hinted that the bank should be taken in the hands of the employees to modernise it and that the Nationalists had been wrong in their industrial policy not to have nationalised private banks.
Additionally, in 1973 Mintoff had paid off the Malta Drydocks’ Lm3 million loan with the NBM. According to Peter Cassar Torreggiani, there were those who thought that putting pressure on the dockyard to recover the Lm3 million debt had been a wrong move at a time when Mintoff was feuding with the British forces over renting the army bases in Malta.
"My father died a week before the takeover of the bank," Peter Cassar Torreggiani says, "after having returned from a game of golf. His death inspired popular rumours that he died following the takeover of the bank, but he died before the actual run. My father was under great strain. The day he died he had told his daughters not to let him go to the board meeting of the NBM."
Mintoff threatens: I will remove your limited liability
The mysterious run on the NBM started on Thursday 6 December, 1973 and proceeded straight through Monday 10 December. That Monday, at 3.00 pm, as heavy withdrawals continued, Chairman Louis Vella, Major Austin Cassar Torreggiani and Baron Patrick Scicluna, met Prime Minister Dom Mintoff, Finance Minister Guze Abela, RJA Earland, and Attorney General Edgar Mizzi, Central Bank deputy governor Lino Spiteri The latter has always presented the case that he had nothing whatsoever to do with Mintoff’s nationalistion mania.
Dom Mintoff spelt out the situation: he wanted the bank by 5.30pm and demanded that the shares be transferred over to the government in order to stop the bank run and restore depositors’ confidence.
Through the ensuing days, efforts by the NBM directors to obtain bridging finance to meet the heavy demand proved futile. Mintoff refused to let the NBM borrow money from other banks such as the Midland Bank, the NatWest, or Barclays Bank. Neither the Central Bank, which should have done its utmost to ensure the safety of the banking sector, did not offer any finance to allay fears of bankruptcy. Mintoff refused the NBM’s offer to front its property and part of its loan portfolio as collateral.
Mintoff ordered Edgar Mizzi to draft an instrument for the transfer of the NBM shares to the government. The shareholders would get no compensation for their shares. The phoenix that would be given life out of the ashes of the NBM would spell disaster for the shareholders who had most of their life savings in the NBM.
Mintoff’s threats were clear: if shareholders would not transfer their share over immediately, he would remove their limited liability. Shareholders would be held personally liable beyond the bank’s capital base. Their personal assets would be seized. And this was a determining factor in shareholders signing off their shares without compensation.
Former NBM shareholder Adrian Busietta wrote in The Times of 22 January 1995 that the choices were clear:
"Either give Mintoff the shares for free (as he wanted) within two hours and lose everything we owned in the bank amounting jointly to about Lm 6 million in 1973; he would remove limited liability… and Mintoff would still acquire all the share of our banking group for free. And by legally or illegally removing limited liability he could then take their other personal possessions, to cover so-called deficits on the account."
Mintoff’s threats prompted a telephone campaign to all the NBM shareholders to collect their signatures for the share transfers, fearing that the government would take their personal belongings from their homes. Court marshals started knocking at the doors of the shareholders, right up to the early hours of the morning.
Since all sources of support from the government had been blocked, the directors had to either face bankruptcy or get the shares transferred to the government. They feared that if they decided to initiate liquidation proceedings, hundreds of thousands of depositors’ money would remain frozen for a long period of time, as well ending the employment of the 300 bank workers.

 

A shareholder with nothing to say? – Nationalist MP Alexander Cachia Zammit

In his winding up of the parliamentary session that was to kill the National Bank (NBM), Opposition Leader Gorg Borg Olivier informed MPs that the Opposition had heard a different story about the whole sequence of events that had led to the demise of the National Bank.
Borg Olivier never expounded in Parliament on what he had been told by shareholders, directors and possibly even relatives of MPs. There had been little opposition throughout the session. Some would say it was because he had been given ten minutes in which to study the National and Tagliaferro Banks Bill beforehand. In other ways, the PN seemed to have had offered little resistance on the day the Bill was passed.
But it was strange that a Nationalist MP, former Health Minister, Alexander Cachia Zammit, who was also a National Bank of Malta shareholder, failed to stir up any concern for the fate of the shareholders in the parliamentary sessions which were to see the National and Tagliaferro Banks law passed by both sides of the House. * Was this a conspiracy, some people would say?
During the parliamentary session Cachia Zammit asked Mintoff whether he was only expecting the shares of the estate of Count Alfred Sant Fournier and Marquis John Scicluna to be transferred to the State in order to notch up the required two-thirds of shareholders, needed to ensure the complete transfer of the bank. Over 1,000 shares were at stake in the Second Hall of the Civil Court case involving the Sant Fournier and Scicluna estates.
Cachia Zammit also asked Mintoff about the signature the government was expecting from the National Bank shareholders, in order "to avoid any misunderstanding." Mintoff started explaining what the new law he intended passing through Parliament that evening would mean. Only minutes later news arrived that the Second Hall of the Civil Court had accepted the share transfer, and Mintoff announced the news amid applause from his MPs.
Mintoff explained to Cachia Zammit that the reason the signatures were needed was to ensure Government could proceed to build a new bank out of the National Bank of Malta, and this warranted the signatures of the National Bank’s shareholders.
But Cachia Zammit made no attempt to challenge Mintoff’s plans to take over the bank. He said he wanted to seek clarifications about the shareholders that had not signed off their shares yet and whether there was need to deal with those shareholders.
Maybe Cachia Zammit was expecting the court marshals to arrive for his signature. It was evident from Mintoff’s speech in Parliament that the marshals had targeted the big shareholders first. Cachia Zammit, with a minimal two shares according to a 2002 list of National Bank shareholders, may not even have been approached. And he wanted to know what would happen to those shareholders who had not signed their shares yet.

Mintoff: "Now they are telling me we have these shares…So this hurdle appears to be no longer."
Cachia Zammit: "Now I am clear on this position because this was a very delicate matter, and the fact…"
Mintoff: "We had a misunderstanding."
Cachia Zammit: "… that the Prime Minister said that the Second Hall had now approved the share transfer…"
Mintoff: "The ones from the Second Hall were a small part, just some 900 out of 6,000."
Cachia Zammit: "It was enough to reach the two-thirds."
Mintoff: "There are even more now. They are saying there’s more."
Cachia Zammit: "This is where I want to be clear. That means that for those who have not signed or who have not been approached to sign, there is no scope for them."
Mintoff: "No, no, because the two-thirds…"
Cachia Zammit: "Who hasn’t signed hasn’t done anything wrong…No. That’s it. I wanted to be clear."

On Thursday, 13 December 2004, following a one-day closure, the National Bank of Malta and its subsidiary, Tagliaferro Bank, were re-opened under the administration of the Council of Administration, providing limited banking services to industry and hotels.
The three-man council was made up of Maurice Abela, the Secretary of the Ministry of Commonwealth and Foreign Affairs, along with Dennis Degiorgio – a branch manager from Barclays Bank International – and Antoine Tagliaferro, one of the general managers of the National Bank of Malta. Lino Spiteri, then working with the Central Bank, was appointed as Controller.
The new guidelines at the National Bank restricted banking services: depositors could only withdraw up to a maximum of Lm50 a week. Permitted transactions were limited for the purpose of payment of wages, raw materials, exports and imports and other expenses.
That day it was also reported that Steve Mogford, senior managing director of Barclays Bank International (Conspiracy?), flew to Malta for talks with Dom Mintoff and senior Central Bank officials on proposals to form a new company in association with Barclays Malta, to take over the National Bank of Malta. There had been inklings that Barclays Bank, which had made an offer to National Bank director Adrian Busietta for bridging finance throughout the run, had succumbed to Mintoff’s plan to take over. Attorney General Edgar Mizzi’s comments to Adrian Busietta that Barclays Malta director Louis Galea ‘had swallowed the pill’ was a sign that there would be no help coming from Barclays Bank International.

Despite all, nothing would come of the joint takeover by Barclays Bank and the government. Writing in the Financial Times of Friday, December 14, 1973, Michael Blanden said that Barclays Bank had said in London that it had received no proposals from the Maltese government to participate in the operation to ‘rescue’ the National Bank. According to the report, Barclays Bank Malta was also encountering a run on its liquidity. Louis Galea quashed the suggestion, and denied the bank was leaving the island.

On Monday, December 17, 1973, Nationalist MP GM Camilleri tabled a parliamentary question to Dom Mintoff asking him if he would be considering setting up a Commission of Inquiry in connection with the National Bank, the Scicluna’s Bank and Tagliaferro Bank. Camilleri had based his question on statements made by Mintoff concerning an assurance he had from the Central Bank that the National Bank of Malta had been in a sound financial position and that there had been unfounded rumours.

Camilleri suggested the Commission be presided by a former member of the judiciary, assisted by a banker and an accountant, to establish who had started the unjustified rumours which caused the run; to ask if there had been any real danger of the National Bank going bankrupt, and to investigate the way in which some of the shareholders had renounced their shareholdings. Camilleri also demanded that Mintoff presents the balance sheet of the National Bank before moving the resolution for the appropriation of Lm1.8 million to be contributed by Government to acquire 60 per cent of the shares of the new company that was to replace the National Bank. Mintoff however answered that an inquiry would only be held on grounds of mismanagement. A month later, on 31 January, 1974, he ruled out holding an inquiry citing that it would be superfluous to find out who had started the run.

BOV – a bank with a skeleton in the closet

On 24 March, 1974, the Bank of Valletta opened for business, a bank that had been created by Mintoff on the forced appropriation of the assets, properties and money from the National Bank of Malta shareholders.
There had been no form of consideration for the shareholders and directors – none of them would be re-employed. Everything had been lost. "Our job and our bread and butter was of no importance to the new authorities of the bank," Adrian Busietta would later write in his 1994 affidavit, "who were all political appointees, as were those of the council of administration, such as Maurice Abela and Dennis de Giorgio." To set up the Bank of Valletta, the government issued a stand-by of just Lm3.3 million against more than Lm37.8 million that the National Bank of Malta shareholders had left behind as basic assets. Was this the bank that was in danger of bankruptcy? Was this the bank that had warranted seizure by the government for the people? And why was the Lm3.3 million which the government fronted for the start of the Bank of Valletta, not given to the National Bank of Malta directors during the run, to ensure there would be enough cash to meet the run on the bank?

In its new accounts the government made "provision" for "bad debts" of almost Lm6 million. It would later emerge that the provision was based on a Property Index compiled by the council of administration. The Index decreed that real estate prices had dropped and deduced that loans forwarded by the National Bank to property developers would never be recouped because of the tumble in real estate value. The index was a smokescreen to cover the fact that the National Bank of Malta had never been in financial trouble at all.

The Bank of Valletta was profitable from the first year, a confirmation that the shares the National Bank shareholders were forced to give up had not been devoid of value. The final transfer of hundreds of outstanding shares was later effected by the council of administration itself, in accordance with ex-officio powers given by the unconstitutionality of the National Bank and Tagliaferro Bank Act.

Adrian Busietta would write in his affidavit how life savings of shareholders were blown away through Mintoff’s own hurricane of state capitalism: "Dr Attard Montalto and I used to administer B Tagliafferro and Sons, with 2,328 ordinary shares of Lm100 each in the National Bank of Malta, apart from being curators of 191 ordinary shares from the Count Sant Fournier estate…the two of us held 25,000 ordinary shares in Tagliaferro Bank…in this way, Dr Attard Montalto and I held approximately 30 per cent of the National Bank of Malta between us …

"We had every good reason to want to resist Mintoff and his takeover, to save all those assets that were legitimate and the fruit of an unrelenting endeavour to make these banks the best in Malta. As is the Bank of Valletta today. But the unjust methods of duress and abuse of power used by Mintoff were too strong for us to stand up to such confusion without hurting many people. So, once it was clear that he wanted to take over the bank, we decided we had better pass it on to him as he wanted it, in one piece, so others would not suffer."

 

Hunting down the shareholders - Mintoff begins collecting signatures

As the National Bank of Malta crisis verged closer to the day in which Parliament would enact a law authorising the transfer of the bank to the government, the NBM directors sought help from other quarters.
Their pleas for bridging finance from other banks had met a massive hurdle in the form of Prime Minister Dom Mintoff, who was adamant that the shareholders transfer all shares to the government. The offers of help from Barclays Bank Malta, which had already received blessing from abroad, were no use either: Dr Egdar Mizzi, Attorney General, had told the NBM directors that the Barclays Bank managers in Malta had already "swallowed the pill." There was no way out of the quandary Mintoff had placed the NBM in.

However, the NBM would have to reckon with a graver picture of the situation: they found themselves without allies in this battle for justice. On Tuesday, 11 December 2003, directors Philip Attard Montalto and Adrian Busietta, went to seek advice from Dr Mario Felice, the shadow minister of finance. It was shock for the two directors to realise that Felice was suggesting them to "lay down arms" and let Mintoff take the bank for, "as we understood him, to mean ‘whatever Mintoff wanted, Mintoff took!’," Adrian Busietta cites in his court affidavit. "Dr Felice reminded us that Mr Mintoff had television under his control – apart from being the minister responsible for the Police and the Armed Forces. How could we resist him?"
And indeed, the Nationalist Party would offer little or no resistance when the next day Mintoff presented the National and Tagliaferro Banks (temporary provision) Act for its final reading in Parliament. Felice would congratulate both shareholders and the government for the decision taken to ‘safeguard’ the bank.

The two directors proceeded to consult with Busietta’s personal legal counsel, Prof Felice Cremona: "When we told him that we were considering not signing the free transfer of shares, he told us – reacting like one who was worried and perturbed – ‘Give it to him, give it to him. This man is a madman and if he wants it, because he likes it, what can you do to stop him?’ This is daylight robbery… Give it to him, indeed, so that no one will blame you. This is robbery of the highest order that will have to go down one day in the dark history of Malta. How sorry I am that towards the end of my life I had to see so many ugly things take place!"
On that Tuesday however, the most massive withdrawals had already occurred, following Mintoff’s speech on television on the proposed hand-over of business, with Lm1.3 million being withdrawn in a day, more than what had been withdrawn over the past week (Lm1.2 million).

Early on Wednesday morning, police and armed soldiers came to the doors of the directors, who were forced out of bed and handed a letter, signed by Notary Joseph Abela, Minister of Finance, in which they were told that the bank licence had been suspended. They said the suspension was irreversible and they wanted them to sign the free transfer with urgency because the shares were of no value. 

At the house of the custodian of the keys of Tagliaferro Bank, Guido Sant Fournier, policemen and soldiers arrived at 3 am in the morning to tell him that if he failed to hand over the keys to them, they would arrest him.

Mintoff wanted two-thirds of the shares transferred over to the government by that evening. In the morning he again sent for the board of the directors. Another display of shouting and banging on his desk followed, warning that if by 6pm that same day the free transfer of shares are not signed, he would legislate – and that meant either appointing the Council of Administration to manage the bank, or to remove the limited liability of the NBM shareholders.

"The objective of this bill, Mr Speaker…"
"Mr Speaker, the objective of this bill is to, whilst we await the hand-over of business by two-thirds of the shareholders, to create a Council of Administration, which will be authorised by the Minister to take certain activities in hand, if possible by tomorrow morning," Mintoff said, as he started the debate on the second reading of Act XLV of 1973 – the National and Tagliaferro Banks (temporary provision) Act, in Parliament on Wednesday, 12 December 2003.
The evening parliamentary session had urgent business to conduct, and Mintoff was impatient to get the House to vote on the Act that would seal the hand-over of business from the NBM to the government.
"The current position is that we need 6,534 shareowners to authorise this transfer. Up until now there are more than 5,900. There are two applications in the Second Hall of the Civil Court concerning 1,109 shares and I hope that before we pass this law we will already have the result of this recourses," Mintoff said, referring to the shares belonging to the late Count Alfred Antonio Sant Fournier, which were administered by NBM directors Adrian Busietta and Philip Attard Montalto. They were the co-curators for the 191 ordinary voting shares registered in the name of the Count and his four children: Marie, wife of Attard Montalto, and Eileen, wife of Busietta, and their brothers Alfred and Anthony Sant Fournier.
The other shares belonged to late Marquis John Scicluna, 918 in total, and these were administered by his son Baron Patrick Scicluna and Alfred Delia. Mintoff was getting impatient – he wanted to notch up the two-thirds of shares (9,800 in total) as soon as possible: "The number that is needed is 6,534," Mintoff said in Parliament amid interruptions in the House, "Isn’t that why? They are looking for those who have a lot, not those who have just one otherwise they’ll take long… fancy looking for all of them! They are looking for the big ones to say: ‘We have so much.’ Now there are two applications in Court for 1,109. And we think the decree will not take long."

Attard Montalto and Busietta found themselves in a difficult and embarrassing position as they faced the threats of the removal of their limited liability whilst resisting Mintoff’s irrational requests: "We were going to cause trouble to the other shareholders and directors, our friends, who had already signed – doubtless under constant threat, fear and tension," Busietta wrote in a Court affidavit some thirty years later. "Since as Mr Mintoff did not have the majority of the shares he was going to do his worst to everyone. On the other hand, we as curators were responsible for the shares of Count Sant Fournier. Mr Delia and Baron Scicluna were in the same situation. We were in a really difficult situation."

Attard Montalto and Busietta had been summoned, along with Scicluna and Delia, before the Second Hall of the Civil Court on the afternoon of Wednesday, 12 December, hours before Mintoff would repair to Parliament and commence procedures to transfer the NBM to government. The testamentary administrators of these shares could not legally surrender the shares of Scicluna and Sant Fournier, which is why they had to appear in Court.
"We appeared before an almost empty courtroom," Busietta writes in his affidavit. "I do not know whether the application was filed by the Attorney General Dr Edgar Mizzi or by Dr Robert Staines on the Prime Minister’s instigation. The application requested the court to decide whether the shares of Marquis Scicluna and Count Sant Fournier could be transferred for free in accordance with Government’s requirement.

"Dr Mizzi was going in and out of the Hall and informed the judge that the Prime Minister wanted a decision quickly so that this affair could be closed. The position of that side was that it was better that the shares administered by us be ceded to the government for free, for otherwise the consequences to those shares would be bad. Besides, went the argument, those shares carried no value today, once the bank’s licence expired. I remember Judge Xuereb’s words to Dr Mizzi very clearly - Edgar, I cannot visualise ‘zero value’ in a share because if it has no value, why is he selling it? In that case he keeps it. Everything has some value, even if only for the design on the share certificate’."

Although the judge told Mizzi he refused to be hurried and pushed "here and there on such a delicate matter," it seemed apparent that Attorney General was exerting more pressure on the situation. As witness, Dr Mizzi assured the judge that at that stage the shares had no value because the licence was suspended and because the government would be taking over the bank. Above all, it would be in the interest of those shareholders who themselves had deposits with the bank, that the government should save it.
Present in the courtroom was also Louis E. Galea, director of Barclays Bank Malta, who although a rival had earlier on offered bridging finance to the NBM. Now, following Mintoff’s statement in Parliament that Barclays would be a partner in a new banking venture which would rise out of the ashes of NBM, it seemed that in Edgar Mizzi’s words, he had truly "swallowed the pill."

"The courtroom scene, in the smallness of that chamber, was truly a drama that I would never forget," Busietta recalled. "The appearance there of Mr Galea for the third time in three days shocked me. First he phoned me on Monday morning to offer me ‘help and solidarity.’ Then in the afternoon at Castille, Mr Mintoff referred to him as the ‘No 1 of Barclays’ and that Galea was shoulder to shoulder with him to form a joint venture or a company between Government and Barclays and together take over our bank. The third time, now, I had to see him giving what was described to the Court as independent advice or technical advice, namely – that our shares had no value! I do not know if he appeared as an expert appointed by the court or as a witness for the ‘prosecution’."
Both Galea and Mizzi said that since the government had taken over the licence, the shares on that particular day had no value. Busietta contested their claims in Court, saying that it was the Court’s responsibility to see whether the removal of the licence was legal and that no circumstance such as this could remove the intrinsic value of the shares, consisting in the true proportional share of the net assets of the company up to the moment of the ‘takeover,’ having also to take into account the cash deposits of millions of liri, cash in the vaults, the value of the 25 branch offices and other assets of the bank.

“Your shares are worth nothing”

"A case of either us or Mr Mintoff"
In the single day following the announcement on television by then premier Dom Mintoff that the government would be taking over the National Bank of Malta, army soldiers and policemen were being sent round to shareholders’ houses to collect signatures for the share transfers. Soldiers arrived as early as 2am and 3am to collect the signatures from the shareholders. The shareholders were scared: they had been warned by the National Bank directors that Mintoff intended to remove their limited liability and that he would make them personally liable for any deficit the bank would have incurred in the run.

On the morning of Wednesday, December 12, 1973, Adrian Busietta and Philip Attard Montalto had already signed off the shares they held in the National Bank through B. Tagliaferro & Sons. Busietta and Attard Montalto had signed off 2,328 ordinary shares to Mintoff, worth at the time approximately Lm575,000 (in 1973 money): 

"We did so under great pressure and fear following threats to us and our families," Busietta wrote in his November 11, 1995 affidavit.

By that evening, Mintoff had already announced that the government had obtained over 5,900 shares and that it needed 6,534 shares in order to have the two-thirds necessary to complete the takeover. In Parliament, it seemed that Mintoff’s tenacity to obtain the signatures of the shareholders was not arousing the Nationalists a little bit – everything seemed to have been flowing as usual.
Earlier that afternoon however, Busietta and Attard Montalto had been summoned to Court, along with Baron Patrick Scicluna and Alfred Delia. Mintoff urgently needed a large number of shares to complete the two-thirds of shares he needed. These included the 1,109 shares pertaining to the late Count Alfred Antonio Sant Fournier and the Marquis John Scicluna.

The former were administered by directors Adrian Busietta and Philip Attard Montalto. They were the co-curators for the 191 ordinary voting shares registered in the name of the Count and his four children: Marie, wife of Attard Montalto, and Eileen, wife of Busietta, and their brothers Alfred and Anthony Sant Fournier.

The other shares belonging to the late Marquis John Scicluna, 918 in total, were administered by his son Baron Patrick Scicluna and Alfred Delia. Mintoff was getting impatient – he wanted to notch up the two-thirds of shares (9,800 in total) as soon as possible: "The number that is needed is 6,534… they are looking for those who have a lot, not those who have just one otherwise they’ll take long… fancy looking for all of them! They are looking for the big ones to say: ‘We have so much.’ Now there are two applications in Court for 1,109. And we think the decree will not take long."

In Court, Busietta refrained from giving evidence so as not to commit himself on these shares. Those who gave evidence for the Sant Fournier shares, curators and administrators, insisted that if there was any case of "zero value" this could only be temporary, in the circumstances of the case: "It was enough to recall what we had been thinking, namely what could be awaiting us when we went out of the courthouse, when we returned home….after all those insults in public, that we the shareholders had now ‘had our fill’… and that Mr Mintoff was not going to be responsible for whatever the people might do if we continued to cause them ‘greater losses’," Busietta writes in his affidavit. "This was a case of either us or the state of Mr Mintoff."

In the courtroom: "We appeared before an almost empty courtroom," Busietta writes in his affidavit. "The application requested the court to decide on whether the shares of Marquis Scicluna and Count Sant Fournier could be transferred for free in accordance with Government’s requirement."

Attorney General Edgar Mizzi was going in and out of the Second Hall of the Civil Court, and informed the judge that the Prime Minister wanted a decision quickly so that this affair could be closed. "I remember very clearly Judge Xuereb’s words to Dr Mizzi - Edgar, I cannot visualise ‘zero value’ in a share because if it has no value, why is he selling it? In that case he keeps it. 

"Everything has some value, even if only for the design on the share certificate’."

Although the judge told Mizzi he refused to be hurried and pushed "here and there on such a delicate matter," it seemed apparent that Attorney General was placing more pressure on the situation. As witness, Mizzi assured the judge that at that stage the shares had no value because the licence was suspended and because the government would be taking over the bank. Above all, it would be in the interest of those shareholders who themselves had deposits with the bank and that the government should save the bank.
Present in the courtroom was also Louis E. Galea, director of Barclays Bank Malta who, although a rival, had earlier on offered bridging finance to the National Bank. Now, according to Mintoff’s statement in Parliament, Barclays would be a partner in a new banking venture which would rise out of the ashes of the National Bank, looking more clearly that, as in Edgar Mizzi’s words, Galea had truly "swallowed the pill."

Both Galea and Mizzi said that since the government had taken over the licence, the shares on that particular day had no value. Busietta contested their claims in Court, saying the Court had to see whether the removal of the licence was legal and that no circumstance such as this could remove the intrinsic value of the shares, consisting in the true proportional share of the net assets of the company up to the moment of the ‘takeover’, having also to take into account the cash deposits of millions of liri, cash in the vaults, the value of the 25 branch offices and other assets of the bank.

Dr Staines, secretary to the bank’s board, also seemed to favour the theory of temporary ‘nil’ value: "That day we did not have the professional help of our usual lawyer as co-curators….because the sitting was organised so hurriedly that his presence to defend our case was precluded, neither did we have time to produce expert witnesses such as qualified accountants who could really value the shares.
"At one point, the judge, who was visibly embarrassed by the messages that began to arrive from Castille, said that he had reached a ‘complete stop,’ or words to that effect, and that he could not see how he could accept the application for the free transfer of shares."

Two hours had passed since the start of the sitting. It was 6.00 pm, and Mintoff was already in Parliament awaiting the Court decision as he delivered his speech on the bill he intended to pass for the hand-over of business from the National Bank to the government.

Edgar Mizzi came back to Court and argued that since Count Sant Fournier and Marquis Scicluna had some deposits in the bank, if their shares were ceded to the government as Mintoff wished, these would eventually be ‘collectible’ after the bank reopened for banking business. If not, even these deposits would be in danger. Throughout the process of the Court case, the judge had to take telephone calls from his private chambers. About 20 minutes later, he returned to the courtroom to inform those present that Mizzi was on his way again from the Prime Minister’s office to give evidence on why the shares had no value.

Busietta contradicted Mizzi in Court, telling him each share was worth at least Lm250. Mizzi replied that if the shares were not surrendered the government would just keep the bank closed. Busietta told Mizzi that the government had prevented the National Bank directors from selling their shares to third parties, and that the government was monopolising the market.
Judge Xuereb turned to Busietta to ask him whether he wanted to give any evidence. Edgar Mizzi had left the courtroom again: "Your Honour," Busietta said, "if I give evidence, you would tear up that decree." According to Busietta, Xuereb sighed and said, "I understand."
After signing the decree authorising the transfer gratis of the shares of Count Sant Fournier and Marquis Scicluna, the Judge told the shareholders present how much he regretted the way things had developed during the sitting and not having retired from office before the case came before him. But although Attard Montalto, Busietta and Baron Scicluna signed away the shares, Alfred Delia, co-curator of the Scicluna shares, did not follow suit. This did not perturb Government, which still considered the share transfer as valid.

"They have just told me we have the shares"
In Parliament that day, Mintoff was explaining in rush fashion the intricacies of erecting a Council of Administration to take over the activities of the National Bank of Malta. It was late in the evening, and Mintoff had already informed both sides that the marshals were on the lookout for shareholders, tracking them down. In Parliament that evening there had been little opposition from the Nationalists:
Mintoff: "…this is the position. We are going to do this tomorrow. And I wish that as soon as we pass this law, I‘ll be certain, and as soon as I’ll have the signatures, I’ll try to go on television even for five minutes to say what will happen tomorrow. And that is why I am hurrying up myself, because if we want to save this situation let’s not dilly-dally for long or else what we are trying to do will amount to nothing."
Alexander Cachia Zammit (PN): "Mr Speaker, I wish to ask a question to the Prime Minister. Maybe there is a certain misunderstanding and I wish the Prime Minister to clarify this because we would like to help. Regarding the signature of the shareholders the government is expecting: is the government expecting the ones from the Second Hall only?"
Dom Mintoff: "No. Allow me."
ACZ: "Excuse me. The second question…."
Mintoff: "If the Second Hall shares come we’ll have extra already."
ACZ: "Now, I shall ask another question. The signature that the government is expecting: what is this signature it is expecting?"
Mintoff: "Look, let’s understand each other a little bit. Let’s do this."
ACZ: "This to be clear that there is no misunderstanding."
Mintoff: "Yes. What is the normal process contemplated by the Banking law? Let’s see this because if we don’t we cannot understand."
ACZ: "To avoid any misunderstanding."
Mintoff: "Good… If we had proceeded normally, there would be a Controller and as the position is we would have arrived at liquidation… In these circumstances, the shareholders would have lost theirs, surely. You know what ‘liquidation’ means. First it’s the shareholders’ blame, you take everything they have, then you start paying the depositors. Now…"
ACZ: "If there is bankruptcy eh."
Mintoff: "But that’s what liquidation means, bankruptcy. Of course! What do you want to do? If you open there’s been no bankruptcy. Allow me mate. The law contemplates that you either open, or else bankruptcy. There’s no other road. We are finding another… that is why we are doing another law. Isn’t that so? So what does this mean? It means those who have the shares bye-bye… and who has shares and deposits these are saying: ‘If I lost the shares I’ll do whatever I can to save my deposits.’ Let it be understood, there’s no altruism here, or some form of craziness from their part…Those who have shares are courteously saying: ‘Listen, since my position has finished, I have no reason to do harm to someone else.’ There is the moral side as well. However, apart from that, there is the other side that who has the shares and has deposits and wants to save as much as they can from their deposits, these will not opt for liquidation of the bank. As much as possible, definitely not pound for pound, which they said yesterday. That is why I told you not to rush with the pound for pound compensation."
At that moment, a messenger arrived by the Prime Minister’s side to inform him of the outcome of the application in front of the Second Hall of the Civil Court:
"They are telling me that the result of the Second Hall is alright," Mintoff said to applauding from the House. Mintoff had done it. In one day, he had managed to collect the two-thirds of shareholders signatures which he needed to take over the bank.
Now all he needed to do was pass the law that would crystallise his nationalisation drive.

Killing off the National Bank of Malta…mission accomplished in 24 hours

Nationalist passiveness 
On Wednesday, 12 December 1973, the shareholders of the National Bank of Malta, the island’s premier financial institution and merchant bank, would gasp their final breath as Mintoff concluded his takeover mission of the National Bank of Malta.
It seemed that even The Times of Malta was aware of the conundrum the shareholders found themselves in. The day following the creation of the Council of Administration, the body which took over the running of the National Bank of Malta, the newspaper even reported that the bank could have been in a healthy state, after all - quoting sources which claimed "the National Bank group would have shown a bigger pre-tax profit than the previous financial year" as 1973 drew to a close, and that "before the suspension of all banking operations, the group had some Lm2 million available in cash."
But the few lines at the foot of the report on the creation of the Council would have done little to provide respite for the shareholders who had been trounced by Mintoff’s wrath.

And it seemed that not even the Nationalist Party could help the National Bank of Malta shareholders. Even the shadow Minister of Finance, Nationalist MP Mario Felice, would stand up in Parliament to offer mere rhetoric and little analysis on the situation which the National Bank of Malta shareholders faced.
And Felice knew well the background to the National Bank saga: the day before the parliamentary session that would appoint the Council of Administration, on Tuesday 11 December 1973, bank directors Adrian Busietta and Philip Attard Montalto went to seek advice from him.

It was a shock for the two directors to realise that Felice was suggesting to them to "lay down arms" and let Mintoff take the bank for, "as we understood him, to mean ‘whatever Mintoff wanted, Mintoff took!’," Adrian Busietta cites in his court affidavit. "Dr Felice reminded us that Mr Mintoff had television under his control – apart from being the minister responsible for the Police and the Armed Forces. How could we resist him?"

Indeed, there would be little, or no resistance from the Nationalist Opposition during the debate that saw the National and Tagliaferro Banks Act being rushed through Parliament.

On the evening of Wednesday, 12 December 1973, Felice congratulated the sense of sacrifice and great loyalty of the shareholders that had given up their shares: "… Many of them have no money other than these shares, and this is their livelihood… these people did something good that is in direct contrast to the action of those who committed the disgusting and ridiculous action to have brought these shareholders in the situation they find themselves in – in my opinion – and one cannot but publicly congratulate these people who have renounced their life savings.
"Relatives of mine have had to do this. I see this as a serious act, one of courage, as much as the act committed by who brought about this situation was disgusting (Hear, hear)…"
Felice lauded the government’s initiative to have a Council of Administration continue banking operations at the National Bank of Malta (albeit limited), and also that the government had diverted the immediate danger of industrial collapse:
"This means that for the time being, I personally agree with the government…Mr President, under these circumstances, I am not going to see what the government had to do in the interest of its shareholders; neither does it interest me, nor do I want to know…I understand government has not taken any risks, however it has taken a great responsibility which I am sure it will face in the best way possible in these circumstances along with the Central Bank and its advisors…"

Felice also said it would be good for the Prime Minister to appear on television to give the general public a "sign of relief" to show that what had been presented as the collapse of the entire national economy had now been saved by the sacrifice of the shareholders – even after Mintoff’s appearance on television on Monday, 10 December, had resulted in a further precipitating Lm1.3 million in withdrawals, sending total withdrawals up to Lm2.5 million within less than a week. The National Bank of Malta was running precariously close to the liquidity ratio, the mandatory level of liquid cash a bank had to keep by law.

"Government is going to profit greatly from the sacrifice of these shareholders and will now be in a better position to quickly take power in its hands… that is why I feel, Mr President, that from a very dark cloud where one could have foreseen a great disaster, the position we are taking today will enable us to find a solution faster, and not only practical, but also an equal solution for many people.
"Mr President, I feel that whoever was part of these negotiations has reaped a good result. I conclude by congratulating these people who helped those who could have been in an embarrassing situation had this bank found itself sinking. My congratulations go to the shareholders… (Hear, hear)."


Mintoff said the government had taken great risk to ensure the National Bank of Malta stayed on its feet, even after its parastatal companies had threatened to remove its Lm4 million in deposits – Mintoff himself had threatened the National Bank management that he would withdraw monies of the parastatal companies and parade the vans with the money in Republic Street, if they did not acquiesce to his demand to have the bank transferred over to the government.
Mario Felice, the Nationalist MP, said the shareholders had been sensible to transfer their shares over to the government. It seemed that the Opposition was not interested in picking a fight for the sake of the shareholders, even though certain MPs knew then the concerns expressed by the National Bank of Malta shareholders and directors.

Fenech Adami raises his doubts
As the reading of the National and Tagliaferro Banks (Temporary Provision) bill reached committee stage, Eddie Fenech Adami emerged as one of the sole Nationalist MPs to raise doubt about the general reading of the bill that was to create a Council of Administration to take over the National Bank of Malta.
The bill was intended to temporarily entrust the administration of the National Bank of Malta to a Council of Administration, subject to certain restrictions and limitations. but able to exercise all powers and functions formerly in the hands of the directors and shareholders.

The three-man council of administration would begin managing the National Bank the day after, on Thursday, 13 December, 1973, as well its subsidiary Tagliaferro Bank, providing limited banking services to industry and hotels.
The Council was made up of Maurice Abela, the Secretary of the Ministry of Commonwealth and Foreign Affairs, along with Denis Degiorgio – a branch manager from Barclays Bank International – and Antoine Tagliaferro, one of the general managers of the National Bank of Malta. Lino Spiteri, then working with the Central Bank, was appointed as Controller.
Eddie Fenech Adami however raised doubts on clause six of the bill, which read: "The Prime Minister may by order in the Gazette exempt the Council or any member thereof, from complying with any provisions of the law of Malta relating to commercial partnerships with which, in the opinion of the Prime Minister, it would not be possible or appropriate in the circumstances to comply."

Eddie Fenech Adami: "I don’t know, I understand there could have been reason for this exemption. But is there something in particular for laying down this clause, or simply just ‘if anything crops up’?"
Guze Abela (Finance Minister): "No, no, this is just in case something crops up. This is to be covered in everything."
Mintoff: "I can say that this has been drafted by the legal side. It does not say…"
Fenech Adami: "I don’t understand what this can be. For example, you are not going to say that they might not publish the balance sheet. I don’t think so, right?"
Hon. Member: "It could be."
Fenech Adami: "But can he say that, I don’t think he is going to say that?"
Joe Brincat (MLP): "This is a blanket clause."
Fenech Adami: "Everything is ‘blanket’ here."

Despite the doubts raised by Fenech Adami at the final stages of the reading, the National and Tagliaferro Banks (Temporary Provision) bill was passed through all stages, and Mintoff had in fact created a very wide provision that would confer the most arbitrary of powers within the Council of Administration. Clause 6 of the bill rendered the Commercial Partnerships Ordinance ineffective through this blanket provision whereby the limited liability safeguard contemplated by the Ordinance, could be lifted at any time. Mintoff had reserved the right, after threatening the shareholders with the removal of their limited liability, to actually still have the power to make them liable for any financial deficit that may result once the bank was handed over to Government.
Mintoff may have not had the two-thirds of signatures needed for the transfer of assets and liabilities to the government, so he kept in his power the possibility of threatening the shareholders with the removal of their limited liability. His intentions were as clear as crystal.

Commenting at the end of the debate, Mintoff said this had been the first time that Government and Opposition had co-operated in finding a solution "to a grave problem," hoping that the "shattered confidence in the bank" would be regained.
Parliament rose at 10pm that evening. It had been a hectic day for Mintoff. But he had managed to seal the fate of the National Bank of Malta once and for all. The National Bank of Malta, Scicluna’s Bank and the Tagliaferro Bank were no more. Their demise at the hands of the fiery premier had paved the way for a new government venture, one that had been orchestrated beforehand at the hands of the self-style, socialist saviour of Malta.

A former Nationalist member of parliament told MaltaToday Mintoff never held a gun to their heads, describing the shareholders as having been duped by Mintoff’s threats to remove their limited liability.

The evaluation of the National Bank of Malta saga by former MPs and other close members of the PN secretariat has revealed the tension that was apparent within the Opposition’s echelons throughout the National Bank of Malta crisis. Refusing to be named, former politicians and party activists have presented opposing claims on the National Bank saga, as seen through the eyes of those who watched from the Opposition benches.
“The facts of the case were clear. Mintoff never held a gun to anybody’s head and it was unconstitutional from the start for him to threaten the shareholders claiming he could have removed the limited liability of the National Bank,” the former Nationalist MP said.
“So if the directors thought that this threat was real, it was their problem. It was the shareholders who signed at the will of the directors. They were certainly cowards, because in no way could the government take away their limited liability.
“My relatives also owned shares in the National Bank, and they phoned me from abroad to complain of the way the management had dealt with the situation. They never signed over their shares.”

Barclays’ shadow 
New revelations on what happened in the crucial December month that was to see the National Bank of Malta taken over by Mintoff’s government, point towards the friendship between Dom Mintoff and Barclays Bank Malta director Louis Galea. “There was no doubt that Barclays Bank Malta were certainly on good terms with Mintoff. Louis Galea, Barclays’ factotum in Malta, was a good friend of Mintoff’s and would often be seen in Parliament with him,” the former MP said.
The former MP said there could have been much to suggest that that friendship was a factor behind the pressure exerted on the National Bank of Malta shareholders to transfer their shares to the government.
The enigmatic role of Louis Galea in the National Bank of Malta crisis however paints a schizophrenic picture of the events as they unfolded in the December week when the National Bank was hit by a run on its cash reserves.
According to Adrian Busietta, a director of the National Bank of Malta, early in the morning of Monday, 10 December, at 7.45 am, he received a phone call from Louis Galea. Barclays Bank was then the main rival of the National Bank. Louis Galea told Busietta the following words:

“Adrian, do you have some small trouble, because they phoned me up from London with some information.”
Busietta said Galea was offering the board of directors at the National Bank to help the bank: “He said he could also offer standby finance from London because they had authorised him to back us up. I thanked him and said I would pass on his kind offer to the board of directors, but told him that I did not think there was any urgent need at the moment. And so I did – but what happened later led to no possibility of liaison with Barclays. Here I must state that I felt perplexed by this approach from Mr Galea.”
It was in fact later that evening, when a National Bank of Malta delegation visited the office of the Attorney General Edgar Mizzi, that Galea’s role was disclosed, as Busietta’s affidavit read:
“We asked him to arrange a meeting with Louis Galea who that same morning had offered us help. Mizzi told Dr Attard Montalto (an NBM director) – according to the latter: ‘Dak digà belaghha l-pillola!” (he has already swallowed the pill), and that Galea was at that very moment with Mintoff at Castille. Some of us thought that these words meant that Mintoff was also going to take over Barclays Bank.”

Conflicting views
According to one of the confidantes of the late Gorg Borg Olivier, leader of the Opposition throughout the National Bank of Malta crisis in December 1973, there were complaints about the lack of support the party had shown towards the shareholders.
“I remember Dr Mario Felice expressing his opinion and considerations in Parliament as shadow Minister of Finance. I remember however that although certain shareholders and directors came over to the party to seek support, the PN never took any concrete steps to help them. I don’t know why.

“Some said Felice had not ‘helped’ the shareholders enough in Parliament that evening, although he did support them in certain ways. I suppose that Felice had other commercial interest at heart throughout his political career and may have not wanted Mintoff to turn on him one day as well. After all, there was the time when Felice had acted as messenger for Mintoff to deliver a letter to the American government for him, on matters relating to the country.”
Another former Nationalist member of parliament said there had been little or no contact between the Nationalist Party and the shareholders, disagreeing with claims that Borg Olivier was not happy with the performance of the Opposition throughout the reading of the National and Tagliaferro Banks (temporary provision) Act – the law which transferred all business of the National Bank of Malta to the government.
“Borg Olivier never understood a thing. If he felt annoyed by what happened in Parliament that evening he could have gone and braved the winds himself. The fact was that Borg Olivier was so lazy he couldn’t even think of getting angry about the situation,” one former MP said.

Mathematics of deceit – draining profitability out of the National Bank

For thirty years since 1973, the shareholders of the National Bank of Malta have had justice denied. A calculated and premeditated attempt to take over one of Malta’s most thriving financial institutions was carried out with impunity by Labour Prime Minister Dom Mintoff, at the expense of the shareholders of the National Bank.
Since 1976, the shareholders who campaigned for what is rightfully theirs, have not yet been compensated for the robbery of the National Bank. What was to become the ‘bank of the people’ – the Bank of Valletta – would from its inception be a bank that had ploughed its initial profits and success out of the National Bank of Malta.
From Republic Street to Victory Square in Xaghra, Gozo, the National Bank had 25 branches including its head office and the Sciclunas Bank branches. When the BOV took over the business of the National Bank, the Sciclunas Bank and the Tagliaferro Bank, the premises and equipment were valued at Lm297,000 – less than Lm12,000 for each branch, a downwards valuation that sought to show the National Bank of Malta was facing bankruptcy.

Denying the strength of the National Bank
In 1972, the assets of the National Bank and the Sciclunas Bank totalled over Lm38 million. Coupled with its 90 per cent shareholding in the Tagliaferro Bank Ltd, the group’s asset base totalled over Lm45 million. Since 1968, the pre-tax profits of the National Bank increased from Lm465,000 to Lm722,000 in 1972. There were never any signs of impending failure before the ominous run of December 1973.

With a share capital of almost Lm3 million in 1972, the success of the National Bank saw more depositors joining as clients – deposits increased from over Lm15 million in 1968 to Lm23 million in 1972 – an increase of 47 percent over four years. How could such a rapid expansion meet instant doom in the space of weeks, as then premier Dom Mintoff had announced to the general public in 1973?
What the financial figures of the National Bank of Malta prove is that the bank’s cash liquidity never dipped to precarious levels, despite not having been aided by the Central Bank – supposedly the lender of last resort – with bridging finance to meet the run on its cash reserves.

The 1970 Banking Act demanded that banks had, at their disposition, in excess of 25 per cent of their paid-up share capital and reserves, as liquid cash, readily available for their depositors.
In 1972 the National Bank of Malta held over Lm42 million in customer deposits, and Lm14.7 million in liquid or quasi-liquid assets – a liquidity ratio of almost 35 per cent, well above the mandatory liquidity ratio. When the run hit the bank, cash started being withdrawn at breakneck speed but no bank, not even the Central Bank, was allowed to lend bridging finance to the National Bank. Mintoff was adamant that the National Bank be transferred to the government, without compensation for the shares.
Evidence that the National Bank was still in a position to meet the liquidity ratio was the fact that during the fatal December week that saw the run on the bank, not enough money was withdrawn to pitch the bank in trouble.
In four days, the run on the bank saw enormous withdrawals totalling at least Lm2.5 million. With a deposit base of over Lm42 million in 1972, the National Bank had to have at least Lm10.5 million in cash at its disposal. The bank had Lm14.7 million.
When the run came through, Lm2.5 million was withdrawn, never enough to put a strain on the liquid position of the National Bank. At the height of the run, the National Bank still had at least Lm2 million in liquid cash to meet client demands.
Maybe it was for that reason that Mintoff threatened to withdraw the millions of Liri that parastatal companies had deposited at the National Bank – one way or another, he would have seen the bank either transferred over to the government, or face a suspension of its licence for not meeting liquidity demands.

When the Council of Administration took the bank over in 1973, the final published accounts for the National Bank showed that total deposits had decreased to Lm36 million. With total cash liquidity at Lm10.3 million, the National Bank was well over the mandatory 25 per cent liquidity ratio – 28.6 per cent of its deposits, were liquid cash.

The bad debts that never were
One of the major features of the National Bank of Malta crisis was the deceitful design by the Council of Administration, to have the provisions for bad and doubtful debts increased exponentially to suggest the bank was never in a position to recoup the credit it had lent to major companies.

It is difficult to understand when in 1972, auditors Turquand Youngs and Co (today Ernst & Young) declared a provision of Lm2.3 million as money which would never be recovered from debt owed to the bank by its debtors. A year later, the new auditors Deloitte and Co completely altered the picture by providing for Lm5.9 million – the provision had increased by three times the amount it was a year before.

Adding insult to injury, the government-appointed administration that took over the National Bank at the apex of its profitability sought to present the bank as having been close to bankruptcy, in a bid to prove the worthlessness of the share capital. The notorious Property Index was the source of the exponential increase in bad debts. The index was a rushed affair drawn up by the Council of Administration, to evaluate the state of the real estate and property market on the Maltese Islands, and the National Bank of Malta was one of the prime lenders to the property market.

The major part of the provision was in fact calculated by applying the index of property price changes between 1969 and 1973, to the values of the properties on which loans had been secured. The final accounts for 1973 released by the Council of Administration showed that the provision for bad and doubtful debts was based on the Valuation of the Property Index.
The objective of the Index was to establish which loans advanced by the National Bank needed to be deemed as irrecoverable, due to the perceived notion that since the property market was facing a slowdown, surely these loans would not be repaid. But the Council’s logic defied rationality because it assumed that the slump in the property market since the election of Labour to government, meant that many of the property-secure loans had lost their value, and were therefore to be declared as bad or doubtful debts.

This was even aggravated by the fact that the authors of the Index stated that the register gave a "rough indication of the direction in which the value of property in the Maltese Islands is moving. It does not present itself as being a precise figure but rather as a guide in the general trend."


The data was collected at random from the files of the Public Registry from the actual sales deeds registered during the years 1969 and 1973. A sample of just 163 items were taken for 1969 and 198 for 1973, the Index quoted.
The information proved scant. These were the official sales prices as quoted on various official contracts. No mention was made of the nature of the property (controlled or decontrolled) or whether the sale or purchase had been made between Maltese citizens or foreign citizens, in the case of the latter suggesting the price of the property would have been expected to be higher than normal.
Other mishaps featured in the desultory Index. Being based on official sales deeds, these were unable to give a precise indication of the actual price of the property, since deeds are always visibly affected by factors such as stamp duty and indirect taxation. Values on contracts do not always give a true indication of actual property value.

Despite being drawn up as a guideline for the Council, the three-man administration of the National Bank used the Index as the main guideline to proportionally reduce property values, creating a shortfall between the loan and its collateral. The shortfall was transmuted into a bad debt.
A major shortcoming of the Index was that no weight in property price fluctuation had been given to hotels and related property, of which the National Bank was substantially a main creditor. Additionally, the National Bank of Malta shareholders were never able to collect the relevant information from the Council of Administration to establish the names of those companies and debtors which had lost credit-worthiness according to the Property Index.

By 1978, Bank of Valletta’s final accounting report revealed how the remaining part of the original Lm5,972,000 in bad debts which had not yet been recovered were either recovered and collected or reinstated as normal debts over a period of four years.
The drastic reductions proved that the over-inflated provisions for bad debts were collected in due course in a relatively short span of time, proof of the National Bank of Malta’s prudent banking strategy. The dramatic decrease in the provision for bad debts to 72 percent of the original amount of Lm5,972,000, showed that the amount originally provided for did not reflect the reality of the Bank’s financial situation.

Trading freedom for greed – the case for the National Bank of Malta

Former banker Anthony R Curmi FCIB (MaltaToday, 21 March 2004) has written to show the shareholders in the National Bank of Malta solidarity. It is comforting for us I am sure to feel that a third party, not a shareholder, expert as his credentials suggest and from the Malta banking industry of the time, has of his own initiative, come forward to add weight to the arguments made in my last article.
Yet, while the shareholders are comforted by Mr Curmi’s remarks we are bewildered by the silence of so many others that should speak. My last article highlighted the hypocrisy of some in the Nationalist party. Others simply keep quiet knowing much about the injustices being suffered by the National Bank shareholders for the last 30 years and while silence may not be hypocrisy, surely with persons with the responsibility of office we have dereliction of duty. We were brought up to think that office and power bring with it greater responsibilities, and I ask - what’s the nature of office and power with our Nationalist Party politicians when they regularly disregard their duty in this important case? I brought forward the unconstitutionality of act XLV of 1973 that placed the National Bank of Malta in suspended animation. I attacked the government of the time for orchestrating a massive theft and accused the Nationalist Party, then in opposition, for almost being an aiding and abetting accomplice. That 30 years have passed and all the Nationalist party can do is refer to the pending court cases which it very well knows can be protracted ad infinitum almost confirms this.
Rather than the expected avalanche of criticism and irrefutable evidence to show our error, these accusations have been replied to only by the thunderous sound of silence.

Initially I felt proud. Proud of the fact that when taken to task nobody had the nerve, ability or logical ammunition to take us on and to prove to me and the rest of the victimised shareholders the fallacy of our arguments. Yet while I felt initially proud for having silenced the entire Cabinet and Opposition, I realised that rather than silence it was indifference that we the shareholders of National Bank of Malta Ltd are dealing with.

The Nationalist Party is indifferent towards this case because it is not a principled party. The Labour party is indifferent towards this case because it was its principle to expropriate, to seize control of all domestic credit and control the population through their finances, helping ‘friends’ and destroying ‘enemies’ (and there are a few of these cases documented in the litigation pending in Court), and pass discriminating legislation that targeted a small proportion of our Island population even if it meant – and continues to mean – that doing so would violate the rights of the Maltese people as supposedly crystallised by our Constitution.
And I wonder how can this be? How and why do people accept to live in such a morbid state? Who are our leaders and how don’t they speak out to defend our republic when its essence has been challenged? Is it possible that human rights in Malta only mean something if the Labour Party or the Nationalist party think that the issue is politically relevant? Is this the substance of our political parties’ belief in democracy?
Bear in mind that the National Bank of Malta financed up to 50 percent of the economy at the time. Anyone knowing the recent history of the National Bank would tell you about the constant pressure by the Nationalist Party leaders on the Bank to extend credit under favourable terms to Maltese entrepreneurs so that Malta could stand a fighting chance at survival in the 1960s as a new independent state.

They would also tell you about the constant assurances that the Central Bank would assist in cases of lack of liquidity arising from extending credit to grow Malta. And then, only a few years later that very olive branch was so cruelly used to make sure that all the support the National Bank gave to Malta would be used against it in a vicious effort to turn Malta into a socialist state, without the rule of law or democracy at the basis of our nationhood, where friends of the Government continued to get credit and the enemies of the people had their credit called in overnight and ruined.

Bear in mind also that the National Bank was not some foreign-owned bank which, as Mintoff used to like to rabble-rouse the people who could not know better, had taken advantage of the colonial control of the economy. The National Bank grew from Maltese enterprise under the colonial era to father many facets of the republic that we enjoy today.
Bear in mind also, that it has been ignored simply because its solution has not been encouraged by an electoral compromise and since both sides of the political fence have agreed to remaining indifferent. Its solution carries no weight in the political arena. All governments have profited from this theft and if the news is correct the Nationalist party is preparing for a final dip to take out the last remaining profit the Government can gain from this tragedy.

And wouldn’t you think that the Nationalist Party would first sort out the issues, pay back the shareholders their value plus interest to date and then take the final profit? Of course not! We are in Malta here and we speak justice but don’t do it. Already several times, capital in Bank of Valletta was sold by the government at a profit and we have also heard of how the Bank of Valletta, after having for many years made reserves for the calculated amount of compensation payable to the National Bank shareholders for the assets received for free in 1973, then decided to reverse the reserve and distribute it as profit to its shareholders – the Government at the time being the main shareholder! And guess which party was in Government – you guessed it, the Nationalist Party.
So the little bit of sense that justice must eventually be done and paid for from the Bank of Valletta funds (as Bank of Valletta was the recipient for free of what we estimate to be between five to six million Maltese Liri of assets completely disregarding goodwill) was again wiped away so that Government could take the cash. We take peoples’ property for nothing and then happily receive millions in dividends and sell the property for millions again, year after year, and year after year, until the stunning difference between the zero paid for it and the millions received becomes quite unimaginable…conscience numbing.

And our Minister of Finance will yet again, maybe this year, proudly state to the Nation that he has made money from the sale of the remaining shares… in Bank of Valletta.
As pointed out by Anthony R Curmi FCIB (former banker Barclays Bank 1973) the Deloitte report commissioned by the government-appointed Council of Administration did conclude that the equity balance of the National Bank of Malta Ltd stood at Lm250,000 at the end of their exercise. As rightly pointed out by him this figure was reached after the provision for Bad and Doubtful debts was increased by close to 450 percent on the assumption that certain loans as given out would never be repaid. Most of the loans were obviously repayable and were in fact repaid and there is much to be said about the administration of the debts in the following years, but that is another story of ‘justice’ and friends and enemies of socialist Malta for another time.
Persons who were supported by the National Bank and whose debts were later written off at the expense of the shareholders and who were then and are now booming entrepreneurs will have a chance to give their evidence to show how farcical the calculation of asset value of the National Bank was at the time.

So now what? The National Bank of Malta Ltd was nationalised without compensation in 1973, the politicians that orchestrated its takeover remain silent, the Bank of Valletta makes Lm20,000,000 a year in profits and life in Malta must go on.
Yet “what we do in life lives on in eternity.” Our country is today in a serious financial mess. Our bid to compete in Europe is a dream that we must struggle to make a reality if we are to progress. Yet where are our leaders? And where is their leadership? Where is their idealism and integrity? These are not ‘switch-on’ ‘switch-off’ virtues, for virtues are constant. If they will ignore an expropriatory takeover that had 50 percent of the economy under its belt how will they treat other smaller issues which will hit our island as our economy grows bigger and negative values, theft, fraud and greed start to dominate more and more.

How do our leaders show us the people the difference between selfish interest and objective decisions so that we can move forward towards sustainable growth for the common good? If our Nationalist Party believes in values what about these values when the decision making process is not under the direct influence of a vote grabbing exercise that challenges its objectivity? How do our leaders give us hope if all they can do is remain silent and where are all the others who believe in truth and justice if and when put to the test will say nothing? Is this what we want our citizens to be – short-sighted, self interested, of no virtue, conspiring, dishonest, inconsistent…that is what comes out of the National Bank story and the fact that no one in leadership does or says anything means that they condone.

Malta needs her very best to survive in the changing paradigm of the European Union. The time has come for our leaders to lead. The time has come for our country to act yet by ignoring these issues we are fostering an economy that is based on totalitarian inefficiencies that will make Malta poor. The emptiness in our pockets will be matched only by the emptiness in our values and then we will turn around and blame each other when the fault will be that we all remained silent when we had a duty to act in the name of truth and justice, for injustice tolerated provides a greater example than empty speeches to the masses.
What is the next thief who wants to steal our property going to argue: the Government does it why not me! Do it in a way that looks technically legal, and deny, deny, deny and don’t forget to share it with some others so that you buy their support come what may, and make it difficult for a solution to be found according to law…Even if I am sued I can keep all the profits of my theft for at least 30 years! I can sell the assets I stole to someone in good faith and I can enjoy all the sale proceeds. And then maybe, one day, when I am no longer around, a humble judge may decide against me, but by then the value of what I stole will be so small compared to all the profits I made that it would be worth it!


That is what the successive Governments have been teaching our people for the last 30 years by refusing to deal with the National Bank of Malta situation.

By ignoring this case, Malta is trading the value of freedom to all for greed. We have many clear examples that making this choice is hampering our economic growth and future sustainability. If we do not get our values right we will have many more.

From 2001 the Government of Malta has made it public that it intends selling off it's large shareholding held in the Bank of Valletta. But no bank will buy, not before the skeleton in the cupboard is brought out and laid to rest.

1973 - 2006 Justice delayed is justice denied ...........