Part VIII: A scandal 'for the next 10 years'

Looking back to European Commission president Jose Manuel Barroso’s own words, Dalli had become “politically untenable” and had to go.

Barroso had read a summary of the Olaf report and called a meeting with Dalli after which Dalli immediately left his post. The commission chief issued a press release the same evening and called a press conference the next day.

Barroso, in his EU court testimony in July 2014, looked even further back - to 1999.

He recalled that his predecessor, Jacques Santer, 15 years ago was forced to resign along with his whole team in the worst corruption scandal in EU history.

He said he feared that if the Dalli story leaked to press before the commission took action there might have been a Santer II.

And so, the Dalli events unfolded in haste.

“I’m not here to defend Mr Dalli. It is not my role to find out if he is innocent or not. What I find interesting is how the investigation was done,” Graessle told this website.

She does not endorse Dalli’s big tobacco plot theory.

But she says there are signs that Olaf, the tobacco industry, and the commission worked together to oust the Maltese politician.

This is in itself a serious charge.

Even though it is part of the commission, Olaf’s mandate says it must remain strictly independent in its investigations.

Taking instructions from the EU commission president or anyone inside his circle would be a clear violation.

If the instructions originated from the tobacco industry the violation would be even more grave.

“We will prove that the commission was interfering, this will be the final outcome, and this is what they [the commission and Olaf] fear,” Graessle told EUobserver.

Doing Sicily in Brussels

Graessle is an expert on Olaf.

The 53-year old first came to Brussels as an MEP in 2004. She had good relations with the anti-fraud office until Giovanni Kessler became its new chief in 2010.

Kessler is a former Italian public prosecutor specialising in anti-mafia cases in Sicily.

Those who know him say he can be direct to the point of being abrasive - a quality they both dislike and admire.

When his name came up for the post, Graessle voted against him on grounds he was ill-suited for the EU post.

“I thought a French judge would be good, somebody who knows Olaf, somebody who knows the weaknesses of the [EU] house, but also its strong points,” she told EUobserver.

For the German MEP, Olaf’s worst sin is orchestrating and recording the 3 July 2012 phone call between Estoc (European Smokeless Tobacco Council) secretary general Inge Delfosse and Silvio Zammit.

Delfosse made the call, on her private phone to Zammit’s mobile, while sitting in Olaf’s HQ in Brussels surrounded by Kessler’s sleuths.

“Alberto Potenza [a senior Olaf investigator] guided her [Delfosse] on what to ask, how to ask, how to insist. This is not how ‘we collect proof’, this is how ‘we make a proof’,” Graessle told this website.

She said Kessler’s anti-fraud bureau has no EU mandate for carrying out such anti-mafia type operations.

She added that it broke Belgian law, which says you cannot tape people without their knowledge, and that it violated article 7 of the EU’s Charter of Fundamental Rights.

In comments to other media she referred to it as “wire-tapping”.

The taped conversation disclosed nothing useful to Olaf.

But it is also a clear example of its co-operation with big tobacco on Dalli’s ouster, feeding suspicion of ulterior motives in the case.

MEPs are not alone in their concerns.

Olaf ‘father’ also unhappy

A confidential report by Olaf’s supervisory committee - composed of five independent experts tasked to oversee that it does its work properly - also found serious faults in the Dalli probe.

One of its members is Austrian Herbert Bosch, who knows Olaf due process even better than Graessle - in fact the former centre-left MEP wrote the blueprint for Olaf’s existing administrative structure.

EUobserver understands that, like Graessle, the supervisory committee report complained about Olaf’s handling of the Delfosse-Zammit phone call.

It also complained Kessler gave the committee just 48 hours to read his Dalli report - scant time to evaluate its probity - before he formalised it by sending a copy to Maltese authorities.

It added that Olaf, long berated by MEPs for its slow bureaucracy, acted with suspicious haste on Dalli: Kessler got moving just 48 hours after the European Commission told him that Swedish Match, the snus maker, had filed a complaint.

It also said Olaf failed to work in an independent way.

But, to make matters worse, the same could be said of the Bosch committee.

It subsequently emerged that Rita Schembri, one of Bosch’s colleagues, also crossed the line.

Instead of overseeing Olaf’s work on Dalli, the 48-year old Maltese auditor played a direct role in the investigation.

Schembri, at the same time as holding her Olaf post was also the head of the Maltese prime minister’s internal investigation service, Afcos.

In a classic example of conflict of interest, she took part in Dalli-related interrogations and helped Olaf get access to Zammit’s call records.

Kessler strikes back

For his part, Kessler is not taking the criticism lying down.

The EU anti-fraud chief, speaking to EUobserver in October 2014, said Graessle is wrong on the Delfosse-Zammit phone call: "Olaf did not - and does not - carry out any telephone tapping”.

His press office explained that “wire-tapping” is when you put a bug in a suspect’s phone, not when you record a call without the suspect’s knowledge.

Kessler added that the Olaf supervisory board also disagrees with Graessle on whether Zammit’s rights were breached.

"The Olaf supervisory committee did not say that Olaf breached fundamental rights. It noted that 'it does not seem' that Olaf 'conducted a legal analysis of the legal provisions empowering Olaf to gather evidence by way of recording private telephone conversations' and 'recommended Olaf to make such a legal analysis’,” Kessler told this website.

“Olaf has carried out such legal analysis," he said.

EUobserver understands that Olaf made further rebuttals in a confidential reply to the oversight board’s confidential criticisms.

The rebuttals say Olaf did not break Belgian law by secretly recording Zammit because it did not collect any private data and the recording was not cited as evidence in its final report.

They note that Olaf alerted the oversight committee’s chairman by phone on 16 October 2012 that its Dalli report existed and that it was going to send it swiftly to Malta.

They also say there is nothing odd about the fact it launched the Dalli probe just two days after the commission tipped it off.

They add that between February and October 2012 alone Olaf acted with similar speed in 48 cases.

Internal letters

An internal letter exchange between Kessler, the heads of the EU institutions, and Graessle shows the extent of the grief.

Kessler in a letter sent in late July complains about an interview Graessle gave to Europolitics, a Brussels-base journal. In it, he says Graessle told the reporter that Olaf needs “tidying up” and cites the people in Olaf who worked on the Dalli case.

“If confirmed, such statements, coming from a high institutional figure in the European Parliament, constitute very serious and personal threats to members of Olaf staff,” he writes.

The letter was addressed to Martin Schulz, president of the European Parliament, Barroso, Italy’s prime minister Matteo Renzi holding the EU presidency, and in-coming European commission president Jean-Claude Juncker.

Schulz, Barroso, and Renzi, with Juncker in copy, responded by assuring Kessler that Olaf will remain fully independent and free from any political interference.

Graessle shot back at Schulz, Barroso, and Renzi with a letter sent in October.

In it, she notes Olaf engaged in an “illegal recording of a telephone conversation” between a witness and a person under investigation. She also cites parliament resolutions on the legal basis of the recording.

“You, honourable Presidents of the three most important European institutions, did not react to any of these reports and resolutions – but you sent a letter to Mr Kessler on the October 14th in which you support him,” she writes.

Graessle adds she has no intention of scaling back her public criticism of Olaf, which she argues does not represent interference with its independence.

Independence-lite

Amid the swirl of alleged plots, collusions, violations, accusations and denials, the EU is now preparing to weaken Olaf oversight and independence further still.

In summer 2014, the EU’s anti-fraud commissioner, Algirdas Semeta, tabled a proposal to create a new “Controller of Procedural Guarantees”.

He told MEPs the new post is needed to boost public confidence in Olaf.

It would have two roles.

First, to review complaints from people under Olaf investigations.

Second, to ensure that Olaf first asks the new controller for permission before it enters the offices of elected or appointed members of the EU institutions.

Semeta said the controller “would remain fully independent”.

But Graessle believes the appropriate reaction to Olaf’s Dalli faults would be for Kessler and his top investigators to resign.

She told EUobserver that Semeta’s proposal is a move backward.

“This review advisor is not placed within Olaf but in the secretariat general of the commission. It is an incredible step to put a hand on Olaf, to go against the independence of Olaf”.

She added that the full implications of the Dalli scandal are yet to unfold.

“Even in 10 years we will be dealing with the Dalli case,” she said.

In this series of eight articles, EUobserver reporter Nikolaj Nielsen takes a closer look at events which, in the words of one MEP, will haunt Brussels for the next 10 years to come.

Introduction - EU smoke & mirrors

Part I - From Peppi's to Barroso's

Part II - Malta's 'Mr Teflon'

Part III - Actors assemble for EU melodrama

Part IV - EU judges, Maltese mysteries, and Christians in the Caribbean

Part V - Dalli’s big tobacco theory

Part VI - A circumstantial EU hanging

Part VII - €60mn Valentine's Day gift

Part VIII - A scandal 'for the next 10 years'