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2nd Apr 2020

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EIB 'maladministration' verdict over VW fraud report

  • European Investment Bank president Werner Hoyer in 2017. The EIB has so far refused to publish an anti-fraud report into their €400m loan to Volkswagen Group (Photo: EU2017EE Estonian Presidency)

EUobserver should have been granted access to a fraud investigation into a €400m EU loan to Volkswagen Group (VW), and recommendations on how to avoid future misuse, the European Ombudsman has concluded.

The European Investment Bank's (EIB) refusal to make the documents public constituted "maladministration", according to the Ombudsman's conclusions.

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  • 'The Ombudsman found that there was a very strong public interest in disclosure of the relevant documents,' she concluded. (Photo: European Union)

"The Ombudsman found that there was a very strong public interest in disclosure of the relevant documents and that this overrode the EIB's concerns," it said in a statement published on the Ombudsman website on Monday (1 April).

Ten years ago, the EIB granted the loan to VW to finance a project aimed at reducing emissions.

While the loan was repaid in 2014, the following year VW admitted to having cheated on emissions tests in a scandal which became known as Dieselgate.

The EU's anti-fraud body, the European Anti-Fraud Office (Olaf) investigated the case. In mid-2017, Olaf sent the EIB a report in which it said VW had misled the bank because it asked for the loan while also planning to cheat the EU's emissions tests.

This website had asked both Olaf and EIB to release this report, and filed an access to documents request.

After the EIB had twice refused access to the conclusions of the investigation into the loan, EUobserver complained to the European Ombudsman, an independent watchdog of the EU institutions.

The Ombudsman, Emiliy O'Reilly, and her team, found after a year of investigating the case that the bank's fears of negative consequences of publishing were ungrounded - and did not outweigh the "very strong public interest in disclosure".

"The case concerned serious misuse of €400m of public funds and misrepresentations by a leading European company as to their purpose," she said.

"The public interest therefore in knowing the details of how such money was acquired and used was both obvious and significant," she added.

The Ombudsman had opened her investigation a year ago this month and had several meetings with the EIB to find a solution.

One complexity in the case is that the EIB felt it needed permission from Olaf to publish the report - something the anti-fraud agency was not willing to give, out of fears that publication would undermine how Olaf carries out its investigations.

"Concerning the protection of investigative functions, the EIB stated that disclosure of investigative reports risks revealing the methodology or modus operandi of investigations, with a consequent risk of weakening the impact of the investigation," said the Ombudsman.

She said that she shared the concern of not giving away how the EU is uncovering fraud, but said that in this case Olaf's investigative activities had been "quite normal and routine for any investigative body".

In response to the Ombudsman inquiry, the EIB published a summary of the Olaf report in February 2019.

However, the Ombudsman still considers the full report should be made public, as well as Olaf recommendations on measures the EIB should take to prevent being misled in future.

The only redaction which the Ombudsman said would be acceptable, would be personal data.

"The Ombudsman proposed that the names of persons who worked for Volkswagen should be redacted for the protection of their personal data rights," she said.

Internal EIB papers

She also said that two internal EIB notes on the case, written in October, should be made public.

Initially, the Ombudsman had accepted the EIB's wish to keep those internal documents private, because the bank was still considering how to follow up on the Olaf report.

But in December 2018, the EIB had announced that it reached an agreement with the German carmaker.

The agreement included that EIB would "conclude its investigation" - which according to the Ombudsman means that the internal papers can now be made public, since there is no risk that the EIB's follow-up action is undermined by their disclosure.

The deal involved Volkswagen to "voluntarily not participate in any European Investment Bank project during an exclusion period of 18 months" and to contribute €10m to "environmental and/or sustainability projects in Europe".

To put this financial figure in perspective: VW's sales revenue in 2017 was €230.7bn.

The Ombudsman's recommendations are legally non-binding.

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