Newly uncovered documents show infighting, intrigue, and payouts as Steward Health Care took over a controversial Malta hospital deal.
Disgraced U.S. hospital provider Steward Health Care agreed to pay over 15 million euros to its predecessor on a controversial Malta hospital contract to avoid public criticism of the deal, a confidential settlement between the two parties shows.
In 2018, Steward took over three public hospitals in Malta from Vitals Global Healthcare (VGH), a group of interrelated Malta-registered companies.
The deal was annulled in 2023 and is now at the center of the country’s biggest-ever corruption scandal, with dozens of officials including former Prime Minister Joseph Muscat charged with bribery and squandering public funds. They have all pleaded not guilty.
As Steward was negotiating the deal, it faced opposition from a VGH executive named Sri Ram Tumuluri. In a 2023 whistleblower filing with the U.S. government, Tumuluri claimed Malta’s then-government plotted to remove him and VGH from the concession in Steward’s favor.
A year of acrimonious exchanges and legal threats between VGH’s former management and Steward followed the U.S. company’s takeover of the concession, leaked emails show.
In February 2019, they reached a deal to resolve their differences. The details of that agreement have not been made public, but a leaked copy and internal emails show that Steward agreed to pay Tumuluri 10.5 million euros in exchange for keeping allegations of wrongdoing “confidential.” It was also agreed that Mark Pawley, another former VGH executive, would be paid 5 million euros.
Through a lawyer, Tumuluri told OCCRP’s media partner, The Times of Malta, that he had accepted the settlement so that “he and his family could safely rebuild their lives.” Lawyers representing Steward Malta Director Armin Ernst said they were not authorized to comment.
The leaked communications show that Tumuluri sought to leverage what he said was evidence of wrongdoing by Steward to reach the deal, and that he had threatened lawsuits in the U.S., UK, and Malta. Tumuluri alleged that Steward made threats and used intimidation during its takeover.
Steward, meanwhile, had compiled its own ammunition against Tumuluri. By November 2018, the company was circulating a three-page document called “Sri Ram Tumuluri – Bad Acts.” The document, circulated internally, detailed alleged VAT offences, “suspicious” contracts, “improper” payments to Tumuluri and Pawley, the “diversion” of funds, and “improper and excessive” expense claims.
The document further claimed “favoured employees” were awarded contracts, board meetings were held irregularly, and that loans and transactions were unsupported by documents and records.
Steward also alleged that VGH management had hidden certain liabilities and breaches prior to Steward’s February 2018 takeover, and claimed Tumuluri’s “fraud, gross negligence and wilful misconduct” cost them at least 50 million euros.
OCCRP was unable to independently verify the allegations.
Through his lawyer, Tumuluri said that Steward was fully aware of the concession’s assets and liabilities before taking it over, including outstanding VAT payments. He added that VGH had engaged licensed accountants and VAT specialists to ensure adherence to all applicable laws, rules, and regulations, including accurately filing all requisite returns.
“On taking the concession, it was then up to Steward to fulfil its responsibilities,” Tumuluri’s lawyer said.
Pawley, the other VGH executive, did not respond to questions sent by reporters.
Steward declared bankruptcy in the U.S. in May 2024 and also faces a U.S. federal grand jury investigation concerning alleged fraud. Reporting by OCCRP and partners, based on 300,000 leaked emails from inside Steward, has shown how investors and executives drained billions from the healthcare operator as it headed towards insolvency and patients suffered.
By the time the Malta hospital deal was annulled, Steward had been paid hundreds of millions of euros by the Maltese government.
Mediation Efforts
A Maltese criminal inquiry into the hospital deal alleged that Ernst, Steward Malta’s director, told Keith Schembri, who was Muscat’s chief of staff, that Tumuluri had misused government money to finance private deals.
Rather than immediately reporting this to police, investigators say Schembri appeared to have instead used the knowledge as “leverage” over Tumuluri, in an effort to get him to agree to the Steward sale and leave quietly.
Emails show that Tumuluri approached Schembri and Konrad Mizzi, who was then Malta’s tourism minister, to try to resolve the dispute.
“There is no value for anyone in dragging this in legal courts,” Tumuluri wrote in one June 2018 email to Schembri’s personal address, as well as to a recipient listed as “Frank Pillow.” (Maltese investigators allege “Frank Pillow” was an alias used by Schembri for back-channel discussions about the concession.)
Tumuluri told Schembri in the email that he had only agreed to the “forced sale of VGH” to Steward to appease him.
“While I was certainly disappointed with all the pressure and insistence to comply with the forced sale to Steward I still understood the political pressure PM, you and Konrad were under and complied to the sale reluctantly,” he wrote. “PM” was an apparent reference to Muscat.
“I went with it as you made a promise to me that all the liabilities of VGH will be paid by Steward and you will make sure that happens,” he added. “I clearly remember you saying to keep you as a friend not as an enemy. And on the basis of the latter I am now writing to you as a friend.”
Schembri did not respond to a request for comment. Mizzi said he could not comment as he was currently subject to a court order in relation to proceedings surrounding VGH.
In February 2019, Steward, Tumuluri, and Pawley signed the settlement, agreeing to keep all allegations of wrongdoing “confidential” in order to “avoid costs and uncertainties of litigation” by both Steward and VGH’s former management.
The agreement further stated that the payouts to Tumuluri and Pawley, which would be paid over three years, were being made in an effort to amicably resolve differences without any admissions of guilt.
It also said the existence of the settlement, and any negotiations leading up to it, must not be disclosed to unauthorized third parties.
An Uneasy Peace
Emails and legal letters between Steward and Tumuluri’s lawyers after the settlement suggest an uneasy peace.
Just one year later, media began to report that VGH had racked up about 36 million euros worth of debts during the two years it ran the hospitals. In a letter sent through his lawyers to Steward, Tumuluri accused the U.S. company of violating the agreement not to criticize one another.
In the letter, Tumuluri’s lawyers accused Ernst of intentionally making public statements to disparage Tumuluri, and to deflect criticism of Steward’s own management of the hospitals.
In internal correspondence, a Steward lawyer told Ernst and other executives that he had calmed the situation by denying that Steward had disparaged Tumuluri, and reminding Tumuluri’s representatives that settlement payments could be jeopardized by critical public statements.
“I concluded by saying that I couldn’t help but note that there are approximately 5,000,000 reasons… why their clients would not want to create a dustup in Malta,” the lawyer wrote.
Internal emails also show that when Tumuluri told Steward the National Audit Office (NAO), a government spending watchdog, was seeking information from him, it sparked a debate within Steward about what to do.
“(I)t may look bad (for us) if the other side goes to the NAO and says ‘Steward is objecting.’ Those optics may be something we want to avoid; and it may open a can of worms about the settlement agreement, which we would prefer not to open,” a Steward lawyer wrote.
Ernst agreed that trying to block Tumuluri from speaking to the NAO would be unwise. “Don’t see grounds and optics would be really bad,” the Steward Malta director responded.
In his submissions to the NAO, Tumuluri repeated claims he was forced to transfer his shares to Steward “under duress,” saying this pressure “forced him to leave Malta.”
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