Monday

23rd Sep 2019

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.

Read and decide

Join EUobserver today

Support quality EU news

Get instant access to all articles — and 18 year's of archives. 30 days free trial.

... or join as a group

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

News in Brief

  1. Doubt cast on new Maltese inquiry into slain reporter
  2. March by Slovak Catholics seeks abortion ban
  3. 600,000 stranded on holiday as Thomas Cook collapses
  4. Egypt: hundreds of protesters arrested over weekend
  5. Global car industry fears no-deal Brexit shock
  6. France: de-escalation between US and Iran priority
  7. Spain demands UK 'reciprocity' on resident rights
  8. Ireland: right Brexit deal is 'not yet close'

Stalling on VAT reform costing billions, says Commission

German media outlet Correctiv, along with other newsrooms, have revealed how criminals annually cheat EU states out of billions in VAT fraud. The EU Commission says solutions exist - but member states refuse to budge on tax unanimity.

Stakeholders' Highlights

  1. UNESDASoft drinks industry co-signs Circular Plastics Alliance Declaration
  2. FEANIEngineers Europe Advisory Group: Building the engineers of the future
  3. Nordic Council of MinistersNew programme studies infectious diseases and antibiotic resistance
  4. UNESDAUNESDA reduces added sugars 11.9% between 2015-2017
  5. International Partnership for Human RightsEU-Uzbekistan Human Rights Dialogue: EU to raise key fundamental rights issues
  6. Nordic Council of MinistersNo evidence that social media are harmful to young people
  7. Nordic Council of MinistersCanada to host the joint Nordic cultural initiative 2021
  8. Vote for the EU Sutainable Energy AwardsCast your vote for your favourite EUSEW Award finalist. You choose the winner of 2019 Citizen’s Award.
  9. Nordic Council of MinistersEducation gets refugees into work
  10. Counter BalanceSign the petition to help reform the EU’s Bank
  11. UNICEFChild rights organisations encourage candidates for EU elections to become Child Rights Champions
  12. UNESDAUNESDA Outlines 2019-2024 Aspirations: Sustainability, Responsibility, Competitiveness

Stakeholders' Highlights

  1. Counter BalanceRecord citizens’ input to EU bank’s consultation calls on EIB to abandon fossil fuels
  2. International Partnership for Human RightsAnnual EU-Turkmenistan Human Rights Dialogue takes place in Ashgabat
  3. Nordic Council of MinistersNew campaign: spot, capture and share Traces of North
  4. Nordic Council of MinistersLeading Nordic candidates go head-to-head in EU election debate
  5. Nordic Council of MinistersNew Secretary General: Nordic co-operation must benefit everybody
  6. Platform for Peace and JusticeMEP Kati Piri: “Our red line on Turkey has been crossed”
  7. UNICEF2018 deadliest year yet for children in Syria as war enters 9th year
  8. Nordic Council of MinistersNordic commitment to driving global gender equality
  9. International Partnership for Human RightsMeet your defender: Rasul Jafarov leading human rights defender from Azerbaijan
  10. UNICEFUNICEF Hosts MEPs in Jordan Ahead of Brussels Conference on the Future of Syria
  11. Nordic Council of MinistersNordic talks on parental leave at the UN
  12. International Partnership for Human RightsTrial of Chechen prisoner of conscience and human rights activist Oyub Titiev continues.

Join EUobserver

Support quality EU news

Join us