05 November 2003

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BICAL - An exercise in destruction

In the aftermath of the suspension of the BICAL licence, there follows the ruthless dissipation of the BICAL assets. Central Bank controllers entrusted with selling off enough assets to cancel all debts associated with the BICAL bank and its debtors – the so-called BICAL associated companies, of which the Pace’s were directors and owners – literally proceeded to render the BICAL empire worthless.
Million-lira investments, hotels, businesses, property and so many other thriving business organisations of the BICAL empire literally dissipated for little or no money at all, at the mere whim of the BICAL controllers – Karmenu Mifsud Bonnici and Emanuel Bonello.
Whilst KMB is revealed as having been naïve in his handling of the BICAL assets - removing assets for nothing, selling off at ridiculous prices, not keeping accounts of receipts or never actually collecting payments – Bonello’s tenure is one in which endless amounts of money are withdrawn from the BICAL assets for administrative expenses, and for the exercise of compiling the accounts which KMB never kept.
On the other end of the stage, looking in from the side-curtains, Cecil Pace, 73, released from jail in 1985 after a total of fourteen years in jail and house arrest, fights for the release of BICAL deposited monies to be returned to the depositors who lost their rights when the bank licence was suspended in 1972. So far, 20 per cent of depositors still await the money they had with the bank before that fateful 25 November of the BICAL closure.
First movements
Whilst Pace has yet to wait until 1977 for his sentence, he spends four years under house arrest, and intermittently in jail. Even under house arrest, Pace has been stripped of all his rights over the BICAL bank and its associated companies. He watches first hand as his crown jewels are all dissipated under the negligence and irresponsibility of controller Karmenu Mifsud Bonnici.
In one of the first events in which Pace is to encounter the fate of his companies’ wealth, KMB visits him in jail, where he had been kept briefly before being sent under house arrest.
It is eleven ‘o’ clock in the night and KMB pays a surprise visit to Cecil Pace. He tells Pace that he has found a buyer for his entire fleet. Pace enquires on who is the buyer and what has been the amount negotiated. But KMB refuses to divulge details. He threatens Pace into signing, but Pace is undeterred. He is already in jail and suggests to KMB there is enough place for him. The next day Pace discovers through his lawyer that KMB planned to sell part of his fleet to the fledgling Sea Malta for a couple of tens of thousands. "I refused to sign off my fleet in that manner," Pace said. "When I was under house arrest I made contacts myself to find some buyers for the fleet. The fleet was eventually sold for a better price, but without my consent. Since that refusal I would never sign anything else having to do with my companies’ assets."
But in 1973, Cecil Pace had already started tasting the vindictive style of the controllers who took over his empire: The ship "St Rule" was sold for a ridiculous Lm4,800 in 1973, whilst the "Maltese Trader" was sold for just Lm14,500. The yachts "Comino", "Verdala" and "Maria Louisa" - valued in excess of Lm90,000 - were sold for a measly Lm7,400. The motor yachts "Roberta", "Michael", Celia" and "Sayonara Hago" were sold as a going concern in 1976 to John Sullivan's Sunsea Cruises Ltd for the fine sum Lm39,500, despite having a value of over Lm100,000. When Sullivan paid the initial deposit of Lm20,000 for the boats, Karmenu Mifsud Bonnici never bothered to collect the remaining Lm19,500. Only in 1987, was Sunsea Cruises ordered by the Commercial Court to repay the outstanding amount plus interest, and to this day no controller has ever told the Pace family whether the money was actually paid or not.
This was yet another angle to the ludicrous attitude taken by the controllers who led everyone to believe that they were dealing with bankrupt companies.
No mercy
One of the easiest victims of the controller’s wrath was certainly BICAL Bank’s main headquarters off Zachary Street, which had been bought for free for the princely sum of LM35,000 back in 1962. More than a decade later these premises were given to Mintoff's people’s bank - Bank of Valletta - for nothing.
Another case in point of KMB’s ruthless dissipation of BICAL’s assets was Skylim, a property development company of which MIDC, a BICAL company, had a 50% shareholding. Sklyim owned property in Kappara, Naxxar, Hal-Lija and twelve apartments in a block of 24 in Marina Str, Pieta, which also housed Carways Ltd, the holding company for Cecil Pace's automobile agencies, which included Mazda, Lotus, Honda and BMW amongst others.
The controllers progress reports for 1972 until 1988 confirm that when Skylim was seized in 1972 as part of the BICAL associated company holdings, there had been no overdraft or loan from BICAL or other banks, but a substantial credit in its current account with BICAL.
In 1975 however, Karmenu Mifsud Bonnici, Mintoff-appointed controller and later his chosen replacement for leading the Labour government, literally got rid of Cecil Pace's 50 per cent shareholding in Skylim for the paltry sum of Lm30,000.
The amount barely covered two loans Skylim had with two other BICAL companies (Universal Investment Ltd and Maltese Properties Ltd) and personal loans from Henry and Cecil Pace.
He gave the two other shareholders in the company – Architect Eric Mamo and Grech & Co Ltd (each holding a 25% shareholding) - a Kappara Villa and the Pieta apartments, as well as Lm15,000 in the current account.
As for MIDC’s 4,999 shares, each worth Lm1, Mifsud Bonnici got rid of them for just the nominal sum of Lm2. Cecil Pace was delivered blow after blow of wanton destructive treatment of his assets: "This quality of administration on the part of the controllers was typical of every sale of assets and debt collection," Cecil Pace insists, "The potential of this property was so big, which as Mamo and Grech said in their testimony, that one of the apartments had been sold for Lm32,000 some years ago. We had 12 of those apartments. Instead of acquiring the value of the apartments, the controller collected only part of the loan to Skylim. The controllers never took any interest in the sale of the assets except so as to remove the BICAL group's assets even by transferring property away for nothing or for little at all."
An exercise in disbelief – VIP Ltd
The Pace family had invested Lm400,000 in the Comino Hotel on the island of Comino, which carried an emphytheusis for 150 years at Lm12,000 a year. When the company was seized, the hotel was valued at over Lm1.5 million.
In order to dispose of the annual rent of Lm12,000, Karmenu Mifsud Bonnici decided, in an unprecedented action of bizarre logic, to return the Comino Hotel for free to its landlord John Gaul, the British millionaire who owned Comino. Removing the hotel without any form of recompense, Mifsud Bonnici lost an investment of hundreds of thousands of liri and the rest of the hotel's potential.
It was ironic that it was in fact Karmenu Mifsud Bonnici, then lawyer to a French man named Valliere, who encouraged the Pace family to buy the hotel from John Gaul's former wife, who had then partnered up with Valliere.
This was another case of the controller removing all the BICAL group's wealth without any attempt being made to safeguard the interests of the shareholders and creditors as he was obliged to do in his role. At no stage were the Pace’s ever consulted about this transaction.
John Gaul no novice in making profits, disposed of the hotel some weeks later for the reported price of Lm2 million and Lm50,000 rent a year.

Copyright © Newsworks Ltd. Malta.
Editor: Saviour Balzan
The Malta Financial & Business Times, Newsworks Ltd, Vjal ir-Rihan, San Gwann
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