Commission admits huge Eurostat fraud

The Commission acted after receiving two reports on Monday providing evidence that "serious wrong-doing on a much more widespread scale than previously thought may have taken place".

The Commission has decided to open proceedings against three Commission officials and, as a precautionary measure, a number of Eurostat managers will be moved to advisory functions.

It was also decided that the current General Director of Translation, Michel Vanden Abeele will take over as head of Eurostat.

Inquiry team

The Commission has further decided to set up an "inquiry team" of twenty officials to look into the Eurostat case.

The overall coordination will continue to be overseen by a group chaired by the Secretary General David O'Sullivan, who will also report on a monthly basis to the Commissioners responsible.

Some of the Presidents of the different political groups in the Parliament have expressed reservations about Mr O' Sullivan's role in the investigation, sources said.

Diemut Theato, head of the budgetary control committee, told the EUobserver that she would have preferred the internal auditor to do the job.

The Commission also suspended all contracts with Planistat, which is a French economic and statistical consultancy responsible for managing Eurostat’s sales to some private users. It has received 41 million euro from the Commission over 10 years.

Monetary affairs Commissioner Pedro Solbes said there are around 40 to 50 contracts between Eurostat and Planistat. The company also has a number of different contracts with several other departments of the Commission as well.

Financial envelopes

The Commission has discovered that some Eurostat officials proposed a fake sum of money to be used for contracts and then spend the leftover money as they pleased - this practice was used only with certain 'trustworthy' contractors.

The EUobserver was told that money was used to fund the Commission's volleyball team, for missions of officials and lunch receptions.

The paper notes that it was "relatively extensive practice in Eurostat until 1999 to set up irregular reserves (known as financial envelopes) through a number of contracts held with various specific contractors".

In 1999, when this came to light, the Eurostat senior officials asked that this practice be stopped. However, this instruction was delivered orally and no systematic following-up or monitoring notes the paper.

Some of the money may have been lost due to bankruptcy of the companies in question, but it seems that some of these secret bank accounts still exist.

Murky practices

OLAF has for some time been examining the case of Yves Franchet, the former Director-General of Eurostat, and Daniel Byk, a former departmental director, who are accused of siphoning Union money into a private account during their tenure of key posts at the Luxembourg-based organisation.

As part of the general attempt to be more transparent towards the Parliament, which recently approved the Commission accounts without knowing about the Eurostat affair, the paper notes that the Parliament must be kept informed of developments.

The question remains as to what extent the Commissioners were aware of the Eurostat scandal even as the Parliament was asked to approve the accounts.

The President of the European Parliament, Pat Cox said that the list of problems arising left him with a sense of deja vu and that he was "deeply disappointed" that four years after the resignation of the previous Commission, they found themselves in this situation.

For their part, MEPs in the budgetary control committee will hold a meeting within the next few days to assess these extraordinary revelations.