Wednesday

17th Jan 2018

Up to €2.2bn of public funds stolen in eight EU states

  • An Olaf commissioned study identified bid rigging, kickbacks, conflict of interest, and deliberate mismanagement of EU funds in eight member states (Photo: wikipedia)

Up to €2.2 billion was stolen in public and EU funds in eight member states in 2010, according to a report commissioned by the EU anti-fraud agency Olaf.

The figures, released on Tuesday (1 October) at a European Parliament conference on corruption, represent the estimated overall direct costs of corruption in public procurement in five major sectors like construction and water treatment.

Thank you for reading EUobserver!

Subscribe now for a 30 day free trial.

  1. €150 per year
  2. or €15 per month
  3. Cancel anytime

EUobserver is an independent, not-for-profit news organization that publishes daily news reports, analysis, and investigations from Brussels and the EU member states. We are an indispensable news source for anyone who wants to know what is going on in the EU.

We are mainly funded by advertising and subscription revenues. As advertising revenues are falling fast, we depend on subscription revenues to support our journalism.

For group, corporate or student subscriptions, please contact us. See also our full Terms of Use.

If you already have an account click here to login.

The results of the study, conducted jointly by accountancy firm PwC EU Services and Ecorys with the support of the University of Utrecht, is based on a methodology that allows for the probability of corruption to be estimated for the product groups.

France, Hungary, Italy, Lithuania, the Netherlands, Poland, Romania and Spain were selected at random for the study.

Speaking at the conference, EU anti-fraud commissioner Algirdas Semeta, said the study proposes a new approach that focuses on calculating the costs of corruption.

“The study puts concrete figures to what we have long recognised as a threat to public finances and it confirms that once a procurement project is affected by corruption, the public losses increase substantially,” he said.

The study said the cost of corruption is equivalent to 3 to 4 percent of the total procurement budget.

“This seems at first sight a higher estimate than the commission first published two years ago,” said Semeta.

The commission put the estimate at 1 percent.

Semeta explained the difference because the study looked at eight member states in five specific sectors most exposed to risk of corruption.

“For the commission, its findings are a useful counterpart and we are committed into looking further into why so few cases are reported by member states,” he noted.

Member states reported nine cases of suspected or established corruption of EU funds in 2012.

He noted that the commission is finalising its first anti-corruption report due sometime in November. The report will look specifically at corruption into public procurement.

The Olaf-sponsored study was critical of the fragmented nature of public procurement procedures and lack of transparency. It noted that no organisation or body is tasked to fight corruption during the process.

Also missing is a national or EU-level authority to integrate all data public procurement for people to scrutinise.

Among the most common ways to steal money is to artificially inflate the price of a contract beyond the actual market value.

One case involves a procurement to reconstruct a historic city centre. The tender had a budget ceiling of €4.32 million. The only bidder submitted an offer for €5.4 million, which was rejected.

The procurement was then relaunched with the same bidder winning the €4.32 million contract.

But later on, costs increased by €1.08 million, making the price of the project the same as the company’s original offer.

Another case involves 10 civil servants from different municipalities who handed over confidential information to a construction company concerning several invitations to a tender on road projects.

In return for the confidential information, the civil servants were rewarded with cash and VIP seats at football matches and Formula One races and flight tickets to exotic destinations.

A legal revolution

To combat conflict of interests, the EU developed a definition, which they included in a revised version of the public procurement directive.

Tabled in 2011, the directive is under legislative scrutiny at the European Parliament.

A high-ranking commission official at the conference said the definition, which covers actual, potential or perceived conflict of interests affecting staff members of the contracting authority or of procurement service providers, would create a legal upheaval in some member states.

“I was told by a series of member states that such a broad concept would be a legal revolution in their systems,” said Joaquim Nunes De Almedia, director of the public procurement department in the commission’s directorate-general on the internal market.

The reformed directive includes setting up national oversight bodies to ensure contracts worth at least €1 million are properly implemented but De Almedia noted that corruption is largely a question of culture and of social acceptance of corrupt practices.

“To change this we need much more than new laws and new databases,” he said.

This article was corrected on Wednesday 2 October at 10:00. The original title 'Up to €2.2bn of EU funds stolen in eight member states' was changed to 'Up to €2.2bn of public funds stolen in eight member states'. The study looked at both national budgets and the EU budget

LuxLeaks whistleblower Deltour acquitted

The court confirmed a sentence of €1,000 fine for Deltour's fellow leaker Raphael Halet, raising pressure on the European Commission to come forward with proposals to protect whistleblowers.

MEPs target exports of cyber surveillance tech

MEPs have introduced a human rights clause into the export of cyber surveillance technology as part of EU-wide reforms to prevent abuse by autocratic regimes. The Strasbourg plenary will vote on the bill on Wednesday.

Stakeholders' Highlights

  1. AJC Transatlantic InstituteAJC Calls on EU to Sanction Iran’s Revolutionary Guards, Expel Ambassadors
  2. Dialogue PlatformRoundtable on "Political Islam, Civil Islam and The West" 31 January
  3. ILGA EuropeFreedom of Movement and Same-Sex Couples in Romania – Case Update!
  4. EU2017EEEstonia Completes First EU Presidency, Introduced New Topics to the Agenda
  5. Bio-Based IndustriesLeading the Transition Towards a Post-Petroleum Society
  6. ACCAWelcomes the Start of the New Bulgarian Presidency
  7. Mission of China to the EUPremier Li and President Tusk Stress Importance of Ties at ASEM Summit
  8. EU2017EEVAT on Electronic Commerce: New Rules Adopted
  9. European Jewish CongressChair of EU Parliament Working Group on Antisemitism Condemns Wave of Attacks
  10. Counter BalanceA New Study Challenges the Infrastructure Mega Corridors Agenda
  11. Dialogue PlatformThe Gülen Community: Who to Believe - Politicians or Actions?" by Thomas Michel
  12. Plastics Recyclers Europe65% Plastics Recycling Rate Attainable by 2025 New Study Shows

Stakeholders' Highlights

  1. European Heart NetworkCommissioner Andriukaitis' Address to EHN on the Occasion of Its 25th Anniversary
  2. ACCACFOs Risk Losing Relevance If They Do Not Embrace Technology
  3. UNICEFMake the Digital World Safer for Children & Increase Access for the Most Disadvantaged
  4. European Jewish CongressWelcomes Recognition of Jerusalem as the Capital of Israel and Calls on EU States to Follow Suit
  5. Mission of China to the EUChina and EU Boost Innovation Cooperation Under Horizon 2020
  6. European Gaming & Betting AssociationJuncker’s "Political" Commission Leaves Gambling Reforms to the Court
  7. AJC Transatlantic InstituteAJC Applauds U.S. Recognition of Jerusalem as Israel’s Capital City
  8. EU2017EEEU Telecom Ministers Reached an Agreement on the 5G Roadmap
  9. European Friends of ArmeniaEU-Armenia Relations in the CEPA Era: What's Next?
  10. Mission of China to the EU16+1 Cooperation Injects New Vigour Into China-EU Ties
  11. EPSUEU Blacklist of Tax Havens Is a Sham
  12. EU2017EERole of Culture in Building Cohesive Societies in Europe