* Anti-graft journalist killed by car bomb in 2017
* Top businessman accuses officials close to PM Muscat
* Pressure builds on prime minister to resign
* PM’s former chief of staff released from custody (Recasts after offer of testimony in return for pardon)
By Stephen Grey and Chris Scicluna
VALLETTA, Nov 28 (Reuters) - A prominent Maltese businessman has offered to testify against top government officials over the 2017 murder of journalist Daphne Caruana Galizia, and said the prime minister had a conflict of interest in the case.
Lawyers for the businessman, Yorgen Fenech, on Thursday deposited in court a letter to President George Vella formally asking for a pardon.
In return, Fenech promised to supply information related to former government chief of staff Keith Schembri, former Tourism Minister Konrad Mizzi, Economic Affairs Minister Chris Cardona and other people “close to the prime minister.”
The lawyers for Fenech, who was arrested last week in connection with the killing, said Prime Minister Joseph Muscat should not be involved in deciding the plea for a pardon because he was among “persons who may have a an interest for such a pardon not to be granted.”
The layers said the president alone should decide on the pardon, without any involvement from Muscat’s cabinet. The court temporarily upheld this request until it considers the case in depth on Friday.
The court hearing on the pardon request ended while an emergency cabinet meeting, led by Muscat, was still in progress. Maltese media speculated that it was discussing Fenech’s request for a pardon, but this was not confirmed.
Fenech, unshaven and clad in a black coat, left the hearing in an unmarked black Peugeot 208 escorted by single police car.
“Cabinet ministers discussing a presidential pardon in the presence of Joseph Muscat will be all complicit in perverting the course of justice,” said opposition leader Adrian Delia.
Caruana Galizia’s killing by a car bomb near her home shone a spotlight on corruption in the EU’s smallest country. Three men were charged with planting the bomb and are awaiting trial, but authorities have so far been unable to say who hired them.
Fenech, one of Malta’s richest men, has told police Schembri was the mastermind behind the murder, two people briefed on the investigation said on Thursday.
Schembri was released from custody late on Thursday, He made no statement since his arrest but had previously denied any connection to the killing of Caruana Galizia, who wrote extensively about corruption.
Fenech’s lawyers on Thursday also called for removal of chief investigator Keith Arnaud, claiming he was close to Schembri.
The two-year-old investigation accelerated dramatically this month after fresh evidence was uncovered, leading to the arrest last week of Fenech, who was stopped as he tried to leave Malta on his luxury yacht.
The president cancelled a trip to London next week because of the crisis, while the prime minister pulled out of an event on Thursday evening.
Muscat repeatedly dismissed accusations of wrongdoing levelled at his inner circle over the past few years and is now facing growing calls to resign because of his alleged failure to hold friends and colleagues to account.
His tourism minister quit earlier this week while the economy minister suspended himself from the government as the murder probe continued. Both denied involvement in the case.
Delia, the head of the opposition Nationalist Party, met the president on Thursday to demand that Muscat stand down.
“I told the president this afternoon that with every hour of inaction, our country’s reputation is suffering irreparable harm,” Delia told reporters.
The government has already granted a pardon in the case to Melvin Theuma, the alleged middleman in the plot, who was arrested two weeks ago in a money laundering investigation and immediately offered information on the Caruana Galizia murder.
One of the men accused of planting the bomb has told investigators the three were paid 150,000 euros ($165,000) for the hit, according to a Reuters report.
Caruana Galizia had revealed the existence of a secret company owned by Fenech, who is involved in property, gambling and energy businesses. The secret company was named in emails as being a vehicle for depositing money into accounts of Panama firms owned by Mizzi and Schembri.
There is no evidence that money changed hands and Mizzi has said there are no links between him and Fenech’s company. ($1 = 0.9073 euros)
Reporting by Stephen Grey and Chris Scicluna; Writing by Gavin Jones and Crispian Balmer ; Editing by Jon Boyle and Marguerita Choy