SPECIAL REPORT Money trail from Daphne murder probe stretches to China
By Stephen Grey, Engen Tham, Jacob Borg and Christoph Giesen
VALLETTA/SHANGHAI, March 29 (Reuters) - A widening investigation into allegations of high-level corruption on the island of Malta, first levelled by murdered journalist Daphne Caruana Galizia, stretches to China and a $400 million investment into Europe by a Chinese state power company, Reuters has found.
Caruana Galizia was murdered in October 2017 as she investigated a web of companies that she believed were funneling bribes to Maltese politicians.
Now, Reuters and a consortium of journalists have traced two firms involved in that web to relatives of a senior Chinese executive for Accenture, the global consultancy firm. The executive, 43-year-old Chen Cheng from Shanghai, negotiated investments on behalf of China's state-owned Shanghai Electric Power in Malta and in another small European state, Montenegro, over the past decade, according to Maltese officials and official records.
The revelation of a Chinese connection potentially adds a new international dimension to a scandal that has rocked Malta's government and last year led to the resignation of the prime minister. It also could figure in a series of Maltese official investigations into the events leading up to Caruana Galizia's death.
Backed by Malta's government, the investments by Shanghai Electric Power were portrayed by Maltese and Chinese political leaders as one component of China's multi-trillion dollar Belt and Road initiative to pour money into economic infrastructure in central Asia and Europe.
In 2016, a year before she was murdered in a car bombing, Caruana Galizia identified Chen's key role in the transactions on her blog.
A total of six people in Malta have been charged with Caruana Galizia's killing and await trial. There is no suggestion that Accenture, Chen or any Chinese company or individual is linked with that crime.
Caruana Galizia reported that Chen created a company in the British Virgin Islands in 2014, for an unknown purpose. In the same year, Chen played a central role in negotiations and due diligence for Shanghai Electric Power to invest 380 million euros ($400 million) in buying a share of Malta's state power company, Enemalta. Caruana Galizia did not specify any wrongdoing by Chen. Chen and Accenture did not respond to Caruana Galizia's report at the time.
Now, reporters at Reuters, the Times of Malta, the Organized Crime and Corruption Reporting Project and the Süddeutsche Zeitung, have discovered that Chen's family set up two further companies in Hong Kong, both with business links to Malta.
Contacted for this article, Chen and Shanghai Electric Power didn't comment. Accenture said in a statement it is taking the matter very seriously and "carefully reviewing these allegations as they relate to one of our people. We adhere to the highest ethical standards in every market in which we operate and have zero tolerance for any deviation from those standards." Enemalta declined to answer questions about Chen.
The office of the spokesperson of China's foreign ministry said, "China's exchanges and cooperation with other countries are all open and transparent."
The first of the companies set up by the Chen family, known as Macbridge, planned to pay up to $2 million to Panama firms controlled by two Maltese politicians, Reuters has previously reported. The second, called Dow's Media Company, received one million euros ($1.2 million) from a business owned by one of Malta's richest men, Yorgen Fenech, according to financial records seen by Reuters. Fenech is in jail, awaiting trial on a charge of masterminding Caruana Galizia's murder. He has pleaded not guilty.
According to international legal requests seen by Reuters, Maltese law enforcement officials suspect that Macbridge and Dow's Media were part of an elaborate scheme, involving some participants in the China-Malta deals, to make payments to politicians in Malta and siphon off profits for themselves. Reuters was unable to independently determine whether or not that suspicion is correct. Chen has not responded to Reuters' questions on the matter.
Fenech's lawyers declined to comment about any links between their client and Chen.
Caruana Galizia first picked up on the money trail that would eventually lead to China in 2016 when, according to her family and records of her work seen by Reuters, she started to investigate two mystery businesses that she suspected were being used to pay bribes to politicians.
The journalist had few details of the two companies beyond their names, 17 Black Ltd and Macbridge Ltd, and a tip-off from an official source that they were part of a scheme to pay "kickbacks" – undeclared profits from government schemes - to some senior politicians. Caruana Galizia texted her son Matthew in April 2016 that she'd heard the two companies were "crucial to unravelling the web."
The tip-off followed the discovery by Maltese officials of an email written in December 2015 by accountants for two senior figures – Konrad Mizzi, then energy minister, and Keith Schembri, chief of staff and close friend of the prime minister at the time, Joseph Muscat. That email named 17 Black and Macbridge as "target clients" that would pay an estimated $2 million into then-secret Panama companies owned by Schembri and Mizzi.
When news of the email was published in local and international media in April 2018, six months after Caruana Galizia's murder, Schembri confirmed publicly having unrealised "draft business plans" with Macbridge and 17 Black but denied any wrongdoing. Last December, he told a public inquiry into the journalist's death that Macbridge had been included in the December 2015 e-mail "by mistake."
Earlier this month, Schembri was charged with money laundering, forgery and corruption in an unrelated matter. He denies the charges and is in jail awaiting preliminary court hearings. He didn't comment for this article.
Mizzi said he had no knowledge of Macbridge or 17 Black, nor any knowledge of the email. Mizzi has not been charged in any criminal case. He reiterated in a statement to Reuters that he rejects any suggestion he had business plans with Macbridge or a personal interest in any public project. Mizzi said he knew Chen as a consultant assisting Shanghai Electric Power, "and my interactions with him were in that official context."
When Caruana Galizia was killed, she was still following the 17 Black-Macbridge tip, which she believed held the key to understanding why Mizzi and Schembri set up their Panama firms.
"Working out the truth of those two companies was really at the centre of her work. She was determined to get to the bottom of that mystery," recalled Matthew Caruana Galizia, her son, who was first on the scene of the car bomb.
A year after the assassination, Reuters and the Times of Malta traced 17 Black Ltd to a bank in Dubai and identified its owner as Fenech, the Malta tycoon.
A year later, in Nov. 2019, Fenech was arrested at sea as he attempted to leave Malta in his luxury yacht. He was charged a few days later with masterminding the journalist’s assassination, an accusation he denies.
The mystery of Macbridge remained.
TRAIL FROM A BUSINESS CARD
When police searched Fenech's flat, they found a business card for the Accenture consultant Chen.
As detectives questioned Fenech, the accused tycoon added another piece to the puzzle. According to records of the interview, reviewed by Reuters, Fenech told police he had information about Macbridge, which he said stood for "Malta China Bridge." He gave no further details. It isn't clear if he was asked about Chen or the business card.
After learning of Fenech's disclosure, Reuters searched records in China and found a company called Macbridge International Development Company Ltd, which was registered in Hong Kong on Sept. 30, 2014.
Hong Kong's company register doesn't disclose who owns Macbridge. The sole director was named as a 65-year-old Chinese citizen, a woman called Tang Zhaomin.. Further records found in the Panama Papers, the trove of 11.5 million documents about offshore companies obtained by the Süddeutsche Zeitung, confirmed that Tang, via a company in the Indian Ocean island of Seychelles, was also the ultimate owner of Macbridge.
But who was Tang? The Panama Papers contained only a grainy photocopy of her passport; there was no address or telephone number.
Her name was a rare one, however, and other company databases led reporters to the Chinese city of Shanghai. There, a review of social media showed Tang was a keen amateur photographer, a former manager in a car plant and former manager with Yum China, which operates the Kentucky Fried Chicken (KFC) brand in China. In recent years, she had registered small investments in several local companies.
By tracing her posts on the social media platform Weibo, reporters made a discovery. Tang identified herself as the mother-in-law of the Accenture consultant Chen, referring to herself as "Granny" to Chen's children. A family member later confirmed the Tang-Chen relationship to Reuters.
Tang could not be reached for comment. Questions delivered to a major outdoor advertising company where she is currently listed in corporate records as a manager and shareholder were not answered.
A subsequent trip by a Reuters reporter to the city of Nanjing, 180 miles from Shanghai, proved more useful. The purpose was to visit a catering company that public corporate records showed Tang co-owns. That company's headquarters turned out to be a KFC franchise, located in a shopping complex and serving American fast food with a Chinese twist: fried chicken meals for around 40 yuan ($6) and gelatinous durian fruit balls.
The visit revealed a new connection with Chen, the Accenture executive, and with Malta. A staff member at another nearby KFC, run by the same catering company that Tang co-owns, said she had no knowledge of Tang Zhaomin but she did know another co-owner, a woman called Wang Rui. Wang is the boss of the catering company, the staffer said, but rarely visits the KFC outlets.
Wang Rui, records showed, is the director of a Hong Kong firm called Dow's Media Company that was set up in 2014 within a fortnight of Macbridge. According to bank records, seen by Reuters, Yorgen Fenech's 17 Black paid one million euros to Dow's Media in 2016.
With a number supplied by KFC staff, Wang Rui was contacted by phone. She told Reuters she is a cousin of Tang Zhaomin and Tang is Chen's mother-in-law. She said she set up Dow's Media at Chen's request and for his purposes, and knew nothing about the million euros or the firm's activities.
"He asked me to set up the company and I thought there wasn't any problem in doing so," Wang said of Chen. "He told me that it would do media-type work." She added that Chen at the time had told her he could not set the company up himself because of his connection to a state-owned enterprise. Wang didn't name that company or otherwise elaborate.
Maltese investigators are also on the trail of Dow's Media and Macbridge. In international legal requests, reviewed by Reuters, they have sought information about the firms' business activities, their money flows and their ultimate owners. In one such request, via Interpol in 2018, Malta's police asked China about Dow's Media and the one million euros the firm received from Fenech's 17 Black in 2016. The sum may have involved "illicit funds" linked to "possible corruption and money laundering," Malta's police said. There was no record of a reply from China, a Maltese official said. The office of the spokesperson of China's foreign ministry said it was unaware of the matter.
Malta made other legal requests for information to the United Arab Emirates related to the potential payments by Macbridge to the Maltese politicians Schembri and Mizzi. These requests also cite possible corruption and money laundering. The UAE told Malta that it found no trace of Macbridge.
In June 2020, Reuters and the Times of Malta revealed that Fenech's 17 Black took a secret $5 million profit from a Montenegro wind farm project involving Shanghai Electric and Malta's state power firm Enemalta. Chen had promoted the project in a presentation to Enemalta's board, according to an internal audit by Enemalta.
In 2016, 17 Black received its $5 million profit from the wind farm. Two weeks before that payday, in May of that year, Fenech's firm made the first of three payments to Dow's Media, according to bank records seen by Reuters and the Interpol request to China by Maltese investigators. The payments, totalling one million euros, were completed two months later.
The disclosure of Chen's private businesses may pose a problem for him at Accenture, where he has been employed as a managing director of its energy business, the firm's ethics handbook suggests. Accenture does not outright prohibit its employees from having private business interests, but it warns against possible conflicts of interest, including the use of Accenture information or its position "for personal gain (or that of family members or close friends)."
Asked about Chen's links to Macbridge and Dow's Media and his relationship via these firms with Maltese business and political figures, Accenture said it is carefully reviewing the allegations. Shanghai Electric Power didn't respond to questions about Chen's role. A spokesman for Enemalta said that following its internal audit of the wind farm deal "the report was passed on to the Police to assist in any investigations. Any further comments at this stage would be imprudent."
In Malta, the uncovering of the China connection could play into a series of official corruption investigations. There is a public inquiry into the events leading up to Caruana Galizia's death, a judicial investigation into 17 Black, a judicial inquiry into the Montenegro wind farm deal, and an ongoing investigation by Malta Police's financial crimes unit into 17 Black, Macbridge and wider corruption claims.
In Montenegro, the exposure by Reuters last year of 17 Black's role in financing the wind farm deal has prompted a judicial inquiry. The same report also led to the expulsion of Konrad Mizzi, the former energy minister, from Malta's Labour Party. Joseph Muscat, the former Maltese prime minister, has said he had no knowledge of any business dealings by Mizzi and Schembri.
(Stephen Grey reported for Reuters from Valletta and London; Jacob Borg reported from Valletta for the Times of Malta; Engen Tham reported for Reuters in Shanghai and Nanjing; Christoph Giesen reported from Beijing and Shanghai for the Süddeutsche Zeitung. Additional reporting and research by staff from the Organized Crime and Corruption Reporting Project. Additional reporting for Reuters by Clare Baldwin in Hong Kong and the Shanghai newsroom; edited by Janet McBride)
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