This week’s “Panama Papers” leak highlighted the activities of notable citizens in many countries. The recent revelations only confirm what everyone (and we mean, everyone) in Malta has been talking about for the past several weeks: Energy Minister Konrad Mizzi and the Prime Minister’s Chief of Staff, Keith Schembri both have connections to companies in Panama. As a seasoned advisor to government officials and politician’s BCI’s Carlo Binda has some thoughts on how the Maltese governing Labour Party has lost the plot.

 

The current Labour Party of Malta is embroiled in a scandal worthy of study in a political ethics class. Political crisis managers know that there should have been resignations as soon as the story broke, just to stave off further damage presented by the potential facts of the case. Let’s be clear, there is no evidence that anyone broke any laws, but when you are a government minister or serve a political master, you are rightfully held to a higher standard.

Panamanian companies are established by people trying to avoid or evade taxes, by criminals laundering money, or corrupt officials hiding ill-gotten gains, but also, presumably, by honest people. But why would a government minister and the chief of staff choose to expose themselves, their government, and their party to the scandal of being lumped in with evaders and criminals, especially if they were completely above board? And that’s the big problem for the Labour government. People will speculate. The speculation will become perception; and perception is the lifeblood of political narratives.

An honourable and worthy political hack would have resigned the minute they became the story or liability for their political master. Fair enough, the prime minister may be showing loyalty to a friend and comrade in not firing or asking for a resignation, but he does so at a huge cost to his personal political credibility and that of his party and government as a whole.

In not being decisive and holding to a high ethical standard, the damage has been done.

No result of an investigation now will substantially change what people have come to believe, and that’s because the issue wasn’t shut down sooner; suspicion allowed to fester, and narratives constructed.  This presents a bigger problem for the prime minister and the Labour party. Unfortunately, people have come to expect some corruption in government, and if the Panama issue had been dealt with decisively early on, the PM and government would have mitigated any long-term damage and potentially benefitted from having done the right thing. But because he didn’t act sooner the PM risks being characterised as indecisive, weak, politically tone deaf, and more interested in his friends than the Labour party – which even if he was, he shouldn’t want that perception in the main.

The lessons learned for the political ethics class are the following:

• If you are a government minister or chief of staff to the Prime Minister, don’t do stupid and ethically caustic things like set up shell companies in jurisdictions favoured by tax cheats, money launderers, and corrupt officials.
• If you care about the health of your party and longevity of your government, step aside if you become the focus of a story that has huge negatives, even if you are innocent. If proven nothing wrong, you can always come back, but left too long the stink of scandal is much harder to be rid of.
• A Prime Minister must appear to hold his self and his government, for whom he is ultimately responsible, to a high standard.
• Act quickly to remove the perception of condoning wrongdoing even if it means having valuable lieutenants step aside temporarily. You don’t even need to fire someone who has become the center of a potentially damaging story (though it is advised), they could be placed on administrative leave pending resolution – best not be paid leave either.