Friday

9th Dec 2022

Massive fraud of EU funds rarely reported by member states

Public authorities in member states are sealing their lips when it comes to passing on allegations of fraud, corruption, and criminal activities to the EU anti-fraud office, Olaf.

“The decrease of information from public authorities is something which is worrying us,” Olaf’s director-general Giovanni Kessler told reporters in Brussels on Tuesday (July 3).

Read and decide

Join EUobserver today

Become an expert on Europe

Get instant access to all articles — and 20 years of archives. 14-day free trial.

... or subscribe as a group

  • Olaf investigators recovered €388 million of EU funds from an EU-funded highway project in Italy's Calabria region. (Photo: OLAF)

Of the 1046 reported leaks from both public and private sources in 2011, only 54 came member state authorities. More than half came from companies, lawyers, and anonymous individuals.

Kessler noted public sources are becoming more reluctant to denounce fraud because of an inherit fear of being labelled corrupt at the EU-level.

Olaf, which audits how EU funds are spent and scrutinizes ethics within the EU institutions, said unspent structural funds attracts the vast majority of fraud and usually involves criminal organisations spread across the EU and the world.

The structural funds, which make up the bulk of the EU budget, are entirely managed by member state or regional authorities without any oversight from the European Commission.

“The mechanism of control on how the money is spent is the weakest and where we see most of the problems,” said Kessler.

Olaf’s investigations led in 2011 to the recovery of €691 million - over a ten-fold increase compared to 2010. Over €520 million of the money came directly from EU structural funds alone. In comparison, the total amount recovered from structural funds in 2010 was €32 million.

Italian mob nicks €388 million

The single biggest haul came when the investigators uncovered a racketeering scheme on a EU-funded highway construction project, near Salerno, in southern Italy’s Calabria region.

Olaf, along with the Italian investigators, found evidence of transport authorities who had written off €388 million in EU funds.

The investigators uncovered conflicts of interests where Italian officials were awarding contracts to companies they also worked for.

Judicial trials are on going but an Olaf official told EUobserver that the money returned to the EU budget invariably came from the Italian taxpayer.

The Olaf official also pointed out that most of these cases come to light when audits are carried out at the end of the EU’s seven-year multiannual financial framework budgetary cycle.

Meanwhile, customs fraud jumped from €7.6 million recovered in 2010 to €113.7 in 2011. The recovery of funds from agricultural subsidies also increased from €11.4 to €34.

Another anomaly, compared to 2010, is the recovery of funds from EU staff. In 2010, Olaf recovered around €100,000 whereas in 2011 they netted €600,000.

In one case, Olaf received allegations that a EU official employed as a project manager in a European Commission delegation was accepting bribes from contractors.

Criminals shop weak EU member states

Criminals also actively seek out member states where criminal legislation is weak, riddled with loopholes, or where prosecution is uncommon.

“Criminals choose the member states where to pay the bribe according to the legislation of the member state,” said Kessler.

Bribes are not necessarily cash stuffed in envelopes but rather payments made to a fake company placed in another member state.

Kessler declined to cite which member states are the preferred bribery point by criminals but EUobserver understands that Hungary, Romania, Bulgaria, and the Czech Republic top the list.

”If only one member state has inappropriate legislation, it could affect the whole of Europe,” stated Kessler.

The European Commission, for its part, will table a “substantive criminal law” directive in July that will specifically target financial fraud.

The Commission is also hoping to set-up its European Public Prosecutor office in the first half of 2013. The office would initially have the power to investigate and indict crimes that affect the EU budget but could eventually expand to other sectors.

Greek orthodox head defends Church over tax scandals

Taxes in Greece continue to slip through state scrutiny as some corporations, wealthy Greek-ship owning families, and the Greek Orthodox Church are either exempt or use loopholes to hide millions of euros.

Opinion

A plea to the EU from inside Tehran's Evin jail

As a result of my peaceful civil activism, I have been arrested 13 times, undergone five trials, and been sentenced to 34 years of imprisonment and 154 lashes in total. I am currently in Evrin prison, without the slightest regret.

Illegal pushbacks happening daily in Croatia, says NGO

More than 1,600 testimonies of alleged illegal pushbacks of migrants and refugees throughout the EU has been published, collated by the Border Violence Monitoring Network and the Left party — adding to the mounting evidence of abuse.

Stakeholders' Highlights

  1. Nordic Council of MinistersLarge Nordic youth delegation at COP15 biodiversity summit in Montreal
  2. Nordic Council of MinistersCOP27: Food systems transformation for climate action
  3. Nordic Council of MinistersThe Nordic Region and the African Union urge the COP27 to talk about gender equality
  4. Friedrich Naumann Foundation European DialogueGender x Geopolitics: Shaping an Inclusive Foreign Security Policy for Europe
  5. Obama FoundationThe Obama Foundation Opens Applications for its Leaders Program in Europe
  6. EFBWW – EFBH – FETBBA lot more needs to be done to better protect construction workers from asbestos

Latest News

  1. A plea to the EU from inside Tehran's Evin jail
  2. EU lets Croatia into Schengen, keeps Bulgaria and Romania out
  3. Energy crisis costs thousands of EU jobs, but industrial output stable
  4. Illegal pushbacks happening daily in Croatia, says NGO
  5. No, Bosnia and Herzegovina is not ready for the EU
  6. EU takes legal action against China over Lithuania
  7. EU Commission shoring up children's rights of same-sex parents
  8. The military-industrial complex cashing-in on the Ukraine war

Stakeholders' Highlights

  1. European Committee of the RegionsRe-Watch EURegions Week 2022
  2. UNESDA - Soft Drinks EuropeCall for EU action – SMEs in the beverage industry call for fairer access to recycled material
  3. Nordic Council of MinistersNordic prime ministers: “We will deepen co-operation on defence”
  4. EFBWW – EFBH – FETBBConstruction workers can check wages and working conditions in 36 countries
  5. Nordic Council of MinistersNordic and Canadian ministers join forces to combat harmful content online

Join EUobserver

Support quality EU news

Join us