UPDATE 3-Police arrest Malta businessman implicated in journalist murder -sources

Malta police arrested one of the country's most prominent businessmen on Wednesday as part of an investigation into the murder of journalist Daphne Caruana Galizia, two sources said.

Yorgen Fenech was detained as he tried to leave the Mediterranean island before dawn aboard his luxury yacht, sources with knowledge of the matter said. Prime Minister Joseph Muscat confirmed Fenech's arrest but declined to say on what grounds he had been detained.

The arrest came a day after Muscat offered to pardon to a suspected middleman in the murder of Caruana Galizia if he provided legally binding evidence of who was behind the killing. Muscat told reporters he had ordered additional police surveillance after news of the alleged go-between emerged.

"Had I not done that, today we might be talking of a person or persons of interest having potentially escaped," he said. Fenech's lawyer was contacted for comment but has so far issued no statement. Under Maltese law, the police have 48 hours to interrogate and charge him or release him.

Caruana Galizia, an eminent anti-corruption journalist, was killed by a car bomb near the Maltese capital Valletta in October 2017 - a murder that shocked Europe and raised questions about the rule of law on the small island. Eight months before her death, she wrote about a mysterious company in Dubai called 17 Black Limited, alleging it was connected to Maltese politicians, but offered no evidence.

A Reuters investigation https://tinyurl.com/y8coeu3x last year revealed that Fenech was the owner of the firm. PAYMENTS

According to a December 2015 email, uncovered by Maltese financial regulators, secret Panama companies owned by then Energy Minister Konrad Mizzi and Muscat's chief of staff, Keith Schembri, stood to receive payments of up to $2 million from 17 Black for unspecified services. Schembri and Mizzi both told Reuters last October they had no knowledge of any connection between 17 Black and Fenech. Fenech denied making any plans to pay any politician or any person or entity connected to them.

There is no evidence the payments went ahead. Muscat said on Wednesday there was no indication that either Schembri or Mizzi, who now serves as tourism minister, were involved in the murder.

"The country's institutions work, they work well," he said, referring to the ongoing investigation. Three men suspected of being Caruana Galizia's killers were arrested in December 2017, but the authorities have struggled to determine who commissioned the murder.

In a potentially major step forward in the probe, a man arrested last week as part of a separate investigation asked to see police dealing with the Caruana Galizia case and offered to provide the name of the mastermind in return for a pardon. Fenech is a director and co-owner of a business group that won a large energy concession in 2013 from the Maltese state to build a gas power station on the island.

His luxury yacht Gio left the Portomaso marina, five miles (8 km) north of Valletta, shortly after 5.00 a.m. (0400 GMT). However, the police swiftly intervened and forced it to return to port, the sources said. 

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