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30th Sep 2020

Hungary tops EU anti-fraud investigation list

  • OLAF's anti-fraud work also led to the seizure of more than 307 million cigarettes in 2018 (Photo: European Commission)

Hungary tops the list of the EU's anti-fraud agency's number of closed investigations into the misuse of EU funds, according to the annual report of the agency, OLAF published on Tuesday (3 September).

Hungary also tops OLAF's list of countries where the agency made a financial recommendation to recover EU funds in the period between 2014 and 2018.

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In these four years, OLAF concluded 52 probes into misuse of funds and recommended to the EU commission to recover 3.84 percent of payments made to Hungary under the bloc's structural and independent funds and agriculture funds.

Slovakia comes in second with 2.29 percent of payments, where 14 investigations found some sort of irregularity. Romania saw the highest number of probes, 66, but only 0.4 percent of the payments were recommended by OLAF to be recovered.

The total financial recommendations made by OLAF is 0.45 percent of payments under these funds during these four years.

As a result of the investigations closed during 2018, the agency recommended the total recovery of €37m to the EU budget.

OLAF can raise these concerns with the commission which then is expected to act on the recovery of funds.

OLAF can also make legal recommendations to the national authorities and prosecutions if they find misuse of EU funds. It is, however, the national authorities' decision whether to investigate and prosecute the cases.

In 2018, OLAF concluded nine probes in Hungary and in seven cases found irregularities.

The report describes a case where OLAF received allegations concerning two closely-related companies which had received EU funds for developing circular broadband networks in rural Hungary with a total value of €12m.

Investigators discovered that both beneficiaries subcontracted 100 percent of the works to the same general construction company.

This contractor further subcontracted both jobs through a complex chain involving four layers to disguise the transfer of €4.9m back to one of the original beneficiaries in Hungary through a third party in another member state, the report said.

The two beneficiaries created artificial circumstances in order to increase the project value and to receive undue EU funding, OLAF concluded, and the agency recommended that the commission recover the misused amount of around €3.6m.

On the 2018 list, Greece comes in second with eight investigations and six cases were irregularities were found, Poland with also six investigations but only three follow-up recommendations.

In Romania, Bulgaria, Italy and the Czech Republic, OLAF closed four probes and found two irregularities each.

Linking funds

Hungary's government has come under scrutiny before over the handling of EU funds.

In 2017 OLAF concluded an investigation into possible irregularities related to 35 EU-funded lighting projects that at the time involved Hungarian prime minister Viktor Orbán's son-in-law - who maintained that the project was conducted properly.

Last November, the Hungarian police closed the investigation, saying there was no evidence that a crime was committed. In February, Hungarian authorities decided not to submit invoices for EU funds related to the project.

Former German MEP Ingeborg Grassle, who at the time chair the parliamentary committee overseeing the use of EU funds, this January warned about the way Orban's government uses EU funds.

Grassle said Hungary "has a problem with fraud, with corruption, with public tendering and with the fact that the justice system doesn't want to deal with crimes, perhaps because there are people protecting the criminals there".

The EU commission and most recently the Finnish presidency of the EU has argued for linking the EU funds in the next long-term EU budget to the rule of law, an idea that Hungary dismisses.

In 2018, around 36 percent of the cases it submitted to national judicial authorities have led to indictments in the EU, OLAF's report said. In Hungary, that rate was 48 percent between 2012 and 2018. In Bulgaria, the rate is 8 percent, and for instance, in Germany, it is 21 percent.

EU self-policing

OLAF also has the right to investigate EU institutions. According to the report, nine cases were closed in the European Commission, seven with a recommendation.

In the European Parliament, eight probes were conducted, with two closed with recommendations. Five investigations were launched in various EU agencies, three closed with some sort of recommendation.

The EU's top court and the EU's external service also came under investigation in two cases, and two irregularities were found in each institution.

Investigators also looked into the committee of regions in one instance, but none were closed in the economic or social committee.

According to its report, the agency last year concluded 167 investigations, issuing 256 recommendations to the relevant national and EU authorities.

The parliament's budget control committee will hold a hearing with OLAF Director-General Ville Itala on Wednesday on the report.

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