Funny thing, this whole “bankruptcy” thing. This very morning, for example, there were three stories on this subject: all neatly placed side by side, on the portal of this same newspaper. So… let’s look at them one by one, shall we?
In chronological order, the first concerned the recent arrest and trial of Ryan Schembri: one of the former owners of the now defunct “More Supermarkets” chain, who had previously fled the county after running up debts of around 40 million euros.
As for the other two: well, you probably guessed it already. One concerned Bernard Grech’s candid admission, on television this week, that the Nationalist Party owes a handsome “32 million euros” (that is, only eight million less than the amount owed by Schembri);
…and the other centered on a very useful suggestion from Pierre Portelli – who, as the former head of his media empire, should know a thing or two about the financial situation of the PN – that the party should “ go into compulsory liquidation.
Hmmm. Personally, I’ve always taken the word “forced” to mean that the decision itself is usually “made on your behalf by others” (and usually, without you being particularly “thrilled” by the prospect either) …and in this particular case, those “others” could include a court-appointed liquidator, etc., etc.
But as I said earlier: one step at a time. So back to Ryan Schembri, for now.
I imagine you probably won’t need many reminders about this particular case – it was, after all, the most calamitous financial crash this country has seen since the ‘PriceClub’ affair of the early 1990s. 2000 – but suffice it to say that ‘More Supermarkets’ had clearly bitten a lot ‘more’ (ahem) than he could actually chew.
As the same article notes:[Schembri] is suspected of having borrowed large sums of money from contractors, before realizing he was unable to repay the loans. The result was that he ended up being sued by over 50 rather pissed off creditors… with the result that: a) he himself had to hide abroad, and; b) the holding company finally suffered the fate described by Pierre Portelli, above (and not, I would add, on its own initiative).
That said, however: the latest twist appears to have less to do with the above background story, than with the various other criminal charges Schembri now faces separately in court (which also extend to the ” fraud”, “falsification”, “money-laundering”, etc.)
But still: the whole sequence of events, leading up to Schembri’s arrest, can be traced directly to the financial difficulties of his former supermarket chain some eight or more years ago.
And if you interpret it as a “cautionary tale” on the same subject… the moral seems to be that there are (or should be, anyway) some rather serious consequences, which anyone who accumulates this kind of stuff has to face of unpayable debt.
Not just for the defaulters themselves, by the way (although, if found guilty, Schembri faces a fairly long jail term.) Because, at the risk of a minor generalization: this sort of thing tends to touch a lot of other people there too, you know. And in the case of More Supermarkets: we can even name some of these “other people”, as well as quantify some of their individual losses.
In 2014, for example, this newspaper reported that: “[More’s] creditors include Prime Trading Ltd, which owed €8,000; Agdel Ltd to whom €380,000 are due; the entrepreneur Alexander Farrugia to whom we owe 1.5 million euros; and Edmond Mugliette to whom the company owes 2 million euros. Joseph Vella, the owner of the former Ta’ Natu supermarket in Mosta, sued the company earlier this year after he failed to pay €32,000 in energy bills and €187,700 in unpaid rent. Cint Operations Ltd also took out a loan of €560,000…”
And that’s just a small sample, of a whole trail of other companies that had also “lost their asses” in the More Supermarkets crash of 2014. So, back to our little cautionary tale: this isn’t so much that… well, that Shakespeare (as usual) was right, all along, when he advised us to: “Neither lender nor borrower, be…”
No, it’s also that bankruptcy – in this case, on a scale that has punched a huge “40 million euro hole” in our economy, no less – can (and usually does) have an effect of rather blatant drive, isn’t it, across the spectrum of economic activity.
From this perspective, More Supermarkets may not even be the best example. Because if the amounts at stake were certainly much lower (only 8 million Lm; or about twice as much in euros), the collapse of PriceClub, about a decade earlier, was undoubtedly much more devastating financially, in its era.
In 2014, economist George Mangion even estimated that “the impact of the PriceClub collapse on the island’s business world is probably equal to, if not greater than, that of the possible impact of the Tesco scandal”. (Note: a scandal that not only erased £2.9bn from the value of Britain’s most notorious retail giant; but also resulted in “huge losses for pension funds – traders – small investors and the thousands of employees who own the shares…”. )
BUT…as I said at the very beginning: Bankruptcy is a funny old thing, really. So funny, in fact, that if you were to apply the same “cautionary tale” approach to those other two stories I mentioned… you might just end up coming to the opposite conclusion.
OK: I’ll keep this part brief, as the point has been made extensively before (not just in this article; but in several others I’ve written on the same subject over the years).
Truth be told, we didn’t even need to juxtapose these three articles to illustrate how there are clearly two different sets of weights and measures when it comes to bankruptcy in this country.
For example: for a purely commercial entity, the consequences of getting involved in debt (whether as “borrower” or “lender”) are almost certainly going to be…well, severe. And not just for multimillion-euro companies like “More” or PriceClub”, by the way: because, as far as I know, company law applies to virtually all companies registered on the entire island (including, I might add, commercial media on both sides…).
In legal terms, what this law actually contemplates includes things like “forced liquidation” (and generally: not because you “yourself suggested it”). And, if there are any “properties” or “other assets” to be sold – or otherwise “stripped” – in this process… they will certainly not be chosen by the debtor himself (as Bernard Grech seems to suggest , with his idea of simply “selling a few kazini, here and there”.)
Meanwhile, there may be other far worse repercussions. You could be sued by as many as 50 separate creditors at once; you might – as Schembri was – be driven into exile by an angry, pitchfork-wielding mob; or, if you’re reckless enough to approach the wrong people for “assistance”… you might even find yourself at the bottom of the sea with both feet encased in cement…
If, on the other hand, you’re a political party, facing the exact same predicament (and facing roughly the same amount too!)…well, it seems you’re not only perfectly free to accumulate debts of more than 30 million euros, without even having been able to see the inside of a courtroom (let alone a prison cell)… but there is a good chance that these debts will not be probably never called at all!
And in fact, it is precisely this aspect – much more than the “double standard” (which, let’s face it, we all knew anyway) – that baffles me the most, in all of this. Looking through these business names again in this list – and it is no coincidence, by the way, that ‘Ta Natu in Mosta’ is described as an ‘old supermarket’ – will give you a rough idea of the type companies that were really bearing the brunt of the collapse of More Supermarkets eight years ago (and unsurprisingly, these are different levels of the ‘supplier/distributor’ network chain).
So the question, I suppose, becomes: who is really bearing the weight of the PN’s colossal 32 million euro debt? Who is all this money even owed to, anyway: given that, a) they must be damn rich, to be able to so easily afford to go without literally millions of dollars, in unclaimed dues… and, b) I’m not seeing much evidence of corporations and/or other business entities, facing the same type of consequences as the victims of these other bankruptcy cases I mentioned…despite the having also pumped so much money into what is effectively a bottomless pit of debt. Are you?
And OK: I could also ask much the same question about the Labor debt. Because even though the amount owed may be slightly less – but then again, it might not be (who knows, really?) – well, it’s still money that’s still owed, and unpaid, to SOMEBODY over there…
It is, in a nutshell, a “multi-million euro hole” that has been dug into the local economy: no doubt, to the detriment of countless other affected business entities further down the chain. supply…
Yet where the “hole” punched by More Supermarkets (and PriceClub before it) had sent shockwaves through the entire economy…this one seems to have had no discernible “ripple effect”.
And I don’t know about you, but… from what I can see, something isn’t quite right.