To: Magda Aelvoet, President of the Greens in the European Parliament.
Forward: The presidents of the other political groups in the EP and the co-ordinators of the political groups in the Budget Control Committee.
From: Paul van Buitenen, assistant of the Internal Audit Unit in DG XX - Financial Control of the European Commission
Subject: How the European Commission deals with its internal irregularities and fraud.
Dear Magda, dear Members of the European Parliament,
It is with deep regret that I write this letter to you. As Commission official, I am not allowed under the staff regulations, to address myself directly to the European Parliament, on internal Commission matters. This subject, however, appears to surpass what could normally be designated 'internal' since the credibility and future of the Commission is at stake. This letter is the only way left open to me, to ensure that the Parliament is properly informed on the way the European Commission is dealing with its internal cases of irregularities and fraud.
As assistant internal auditor, I have expressed in a long series of internal notes and meetings my discontent with the way the Commission services are dealing with irregularities and possible fraud within the Leonardo da Vinci programme.
To broaden the picture, I looked also into other cases of fraud and irregularities within the Commission, to see whether this approach was similar in other cases. I was a member of the audit teams in the special audits of Tourism and Leonardo. I am also in charge of the Security Office file of our Unit. In our internal audit unit, audits are performed on all the departments of the European Commission. As I have spoken to many of my colleagues in my unit, but also in other units and DG's, I have been therefore in a "privileged position" to witness the incompetence and unwillingness of the Commissions administration to deal efficiently with fraud and irregularities, despite the persistence and willingness of my colleagues in DG IX, DG XX and UCLAF.
In fact, the result of this short and personal exercise was astonishing. Many indications were found that the Commission services did not deal efficiently with irregularities and fraud. In those cases, where good audit reports were written, and good administrative enquiries were undertaken, the UCLAF-, Financial Control- and DG IX hierarchy were not willing to give these exercises the proper follow-up. The situation around the Leonardo audit is not an isolated case. Also in the case of Tourism, ECHO, OPETS, MED, JRC, Security Office, etc. similar inefficiency is shown within the Commission administration, notably by the hierarchy. I refer to the continuation of this letter for a detailed description of the proceedings in each of these cases. This letter is an updated version of the document that was sent on 30.11.98 to Mr. Trojan and on 01.12.98 to President Santer and commissioners Gradin and Liikanen (annex-4).
I decided to present this picture, as incomplete as it may be, but to the best of my knowledge, on 30 November, to the Secretary-general of the European Commission, Mr. Trojan (annex-1). At the same time, I requested to inform the Cocobu by transmitting certain specified and existing internal Commission documents. The only answer I got, was the promise that Mr. Trojan would forward my findings to the Financial Control, to UCLAF and to DG IX, which are precisely the same services that were supposed to handle these cases before (annex-2). Furthermore, the Secretary-general threatened me with a disciplinary procedure if I would dare to pass this information myself to the Parliament. As chairman of the disciplinary committee he would recommend dismissal from the Commission services. This fact was later denied by Mr. Trojan in writing (annex-3).
On 31.03.1998, my Director wrote to me (annex-5) saying that I had informed my hierarchy sufficiently of irregularities in DG XXII and that I was discharged from any further obligation under article 21 of the staff regulations (annex-6). I replied in writing, that as a loyal official and as a Christian, I consider myself never discharged from the obligation to counsel my hierarchy and if necessary the proper authorities (annex-7).
I have made repeated requests, throughout the year, to my Director, to Mrs. Ventura and finally to Mr. Trojan, to adapt the scope of the Leonardo audit to the indications towards irregularities and fraud. In May 1998, the Commission refused to take into account the recommendation to postpone the approval on Leonardo-II to be able to take on board any results from the Leonardo-I audit (annex-8).
Following the Commissions reluctance to inform the Parliament, I have proposed on several occasions to inform the Parliament myself, especially after the summer break (annex-9) and on 28.10.98, before the plenary debate on Leonardo-II on 05.11.98 (annex-10). Each time, and notably on 03.11.98, just before the first reading on Leonardo-II, my hierarchy denied me the right to inform the parliament (annex-11).
The European Parliament is the only body with the power to grant discharge on the Commission budget. The Parliament is entitled to dispose of all the information necessary to be able to make a well informed decision. As established, that the Commission does not provide the Parliament with all the necessary information and even withholds certain information from the Parliament that could cause the Parliament to change its opinion on the granting of the discharge, I have decided to inform the Parliament myself, to the best of my knowledge, under reference to article 21 of the staff regulations. This article enables Commission staff to go against hierarchy instructions if hierarchy has been properly notified before and if these instructions are in breach of criminal law (annex-6). In that case, every citizen is obliged to inform the proper authorities.
A copy of this letter and its annexes will also be sent to the European Court of Auditors, with the request to start an investigation.
Magda, I hope that you and the other members of the European Parliament will appreciate the seriousness of the situation described in this letter, and will act with courage and strength in order to give a new impulse towards a more open co-operation between the European institutions.
Paul van Buitenen
Letter to the European Parliament 01
Art. 206 EC Treaty 05
I. Tourism 06
II. MED 09
III. ECHO 11
IV. PERRY LUX 12
V. Joint Research Centre (JRC) 14
VI. A commissioner 17
VII. Leonardo da Vinci - DG XXII 22
VIII. Nuclear 26
IX. Security Office (BDS) 27
X. Other cases 31
XI. UCLAF 32
irregularities & fraud
Promise to the EP under Article 206 of the EC Treaty
In his letter of 09/10/98 to President Gil-Robles, President Santer notes that Article 206 of the EC Treaty provides for the European Commission 'submitting to the European Parliament, at the latter's request, all information necessary'. Mr. Santer states that he wants to give Article 206 'its full effect' in the fight against fraud.
The Committee on Budgetary Control has instructed its Chair, German Christian-Democrat Dietmut Theato, to draw up a report on the handling of documents the European Commission forwards to Parliament to enable it to carry out its task of controlling the execution of the EU budget. The report will be drawn up on the basis of Article 206 of the Treaty which precisely states that, the European Commission shall forward to the European Parliament, at the latter's request, 'all necessary information' for the control of the execution of the budget and the granting of discharge for this execution.
Mrs. Theato stressed that the European Commission may not make a prior 'selection' of the documents it intends providing Parliament with; the latter must have free access to all documents, as 'the one being examined must not decide on what it will be examined', she said. The Commission must not therefore expect to receive the discharge 'automatically'.
Depuis les premières préoccupations en 1989 sur l'éventualité de fraudes et corruption au sein de son unité du tourisme, la Commission a omis de communiquer des informations importantes au parlement et à la Cour des Comptes, ou ne les a informés qu'avec un retard injustifié, quand elle ne leur a pas fourni des informations trompeuses. Des enquêtes internes ont été menées par l'administration de la Commission. Celle-ci n'a jamais informé de son plein gré les autorités judiciaires compétentes de ses soupçons et elle a retardé le déroulement des enquêtes. Des pratiques non satisfaisantes et irrégulières ont été tolérées durant une période prolongée par des gestionnaires de la Commission à tous les niveaux jusqu'à ce que l'opinion publique en soit informée. Le Parlement ne devrait pas exclure la création d'une commission d'enquête. (Quotes from the Wemheuer report PE222.170/def. 05/02/1998). The above quotes from the Wemheuer report are accurate.
Oversimplification of Tourism affair
The tourism case has been perceived in a too limited perspective by the Commission as well as by the Parliament. In the case of the Commission this was done deliberately. The Commission tries to limit its exposure. The Parliaments rapporteur however, Mrs. Rosemarie Wemheuer, had to depend largely on the very limited information she could get from the Commission, few other sources and a few incidental leakage's from Commission officials.
This caused that in fact the main concerns on irregularities and fraud in the tourism case were limited to the wheeling and dealing of the Greek Head of Unit George Tzoanos and French National expert, and later temporary A4 agent, Pascal Chatillon. Refer to page 17/18, § 5.3 of the Commission audit report on Tourism (14.07.98 SEC(1998) 1213 final).
The reality is that there have been identified at least five main area's of concern, where irregularities or fraud could take place, or where the Commission disposes of clear indications that would justify referral to the national authorities :
·The Tzoanos linked files,
·The Chatillon linked files, to be seen separately from Tzoanos, as these files do not necessarily belong to the same sphere of influence
·The interference of former Director AAAA and his assistant BBBB (now Head of Unit in DG V), which was very apparent in the Euro-Conseil case,
·The interference of former Director-general CCCC and his assistant DDDD (now Head of Unit in DG XXIII),
·The numerous outside partners/beneficiaries that took the opportunities available, notably Euro-Conseil. These include also irregularities and fraud not necessarily linked to internal corruption in the Commission.
Unavailability of documents to auditors.
The Commissions auditors sometimes do not get all the information they need. Files may have disappeared before a special audit is finally launched (examples : the tourism case, The ECHO case and the TAO Leonardo case, all due to a very late start of the exercise). The lack of application of uniform standards of registering and archiving of documents does not facilitate an audit exercise. On some other occasions, the auditors are deliberately kept from certain information by the hierarchy. One example is shown later on in this document (in the Security Office case), another example follows below.
There exists a note of 26 pages from June 1995, written by George Tzoanos (annex-12). This is an extensive note, and it makes reference to 90 annexed documents. In this note, Mr. Tzoanos gives very detailed indications towards irregularities committed by other staff of DG XXIII. It is not clear to whom Tzoanos has written this note, although I am informed that at least a few MEPs must have received a copy. Two members of the Special Tourism Audit team did discover this note only by chance two years later (1997), when they were reviewing the files left by Secretary-General Mr. Williamson (annex-13).
Even then, this note was not made available to the audit team for thorough examination. Nevertheless, a copy of this note is in my possession. Unfortunately, the annexes as a whole have not been found. Some annexes can be recovered from other files, I have seen some of these annexes in other files. This note contains substantial incriminating details towards former Director AAAA and his assistant BBBB and to a lesser extent towards former Director-General CCCC and his assistant DDDD. It does not appear that this note has been used in any internal administrative inquiry. In any case, it was certainly not used in the special audit on Tourism, the way it should have been.
Euro-Conseil Technical Assistance
The Commission only admitted in their final internal report on Euro-Conseil and in their audit report of 14.07.98 to the Parliament (page 12) that there have been irregularities. They never admitted that there has been fraud in connection with Euro-Conseil, notwithstanding the fact that the Special Audit Team (SAT) established that Euro-Conseil (who provided technical assistance for the EYT- European Year of Tourism) indeed committed fraud by charging costs to the Commission that it did not incur (annex-14). In addition, there were found several other indications of fraud or at least an active attempt at fraud (D&D, Réunion). Please compare the earliest versions of the internal DG XX audit report on Euro-Conseil (annex-15) with the final report. Especially the UCLAF contribution watered down the conclusions of the DG XX audit report (annex-16).
It was also found that, contrary to an earlier answer provided by the Commission to a parliamentary question, Euro-conseil had indeed a strong link with someone from within the European Parliament (annex-17). Did the Parliament ever receive this special report on the role of Euro-Conseil?
Disciplinary procedures (1)
The Commission did only carry out disciplinary procedures on staff that were already identified as the main actors in the irregularities taking place in the Tourism fraud affair (Tzoanos and Chatillon). Many of the audit actions were geared towards concentrating on the cases where these two officials were involved. In this light it is noteworthy to see that in the period 05/09/95 to 20/01/97, an "allocation de depart" was paid to Mr. Chatillon for a total amount of BEF 5,633,807 (annex-18). This makes one wonder what one has to do to actually lose these rights. In the case of Mr. Tzoanos, it did not appear that any serious attempt was undertaken or prepared to take away the pension rights. Why did Mr. Tzoanos spend over a year in a Belgian jail when he had not been convicted of an offence?
Disciplinary procedures (2)
Although the immunity was also lifted of two other officials, who appeared to be directly involved with serious irregularities, former Director AAAA and his Assistant BBBB, they did not appear to have been subject of any serious internal disciplinary investigations by the Commission services (UCLAF or DG IX) and apparently neither by the Belgian juridical authorities. The Commission used a false argument in this case (last paragraphs on page 19 of the tourism audit report of 14/07/98), namely that internal disciplinary procedures would have to wait for the findings of the Belgian judicial authorities procedures. An argument that is invoked for AAAA and BBBB, but apparently does not count for Tzoanos. Furthermore, suggesting to wait for the findings of the Belgian investigations is hypocritical, as the Commission never made a serious effort to supply the Belgian authorities with sufficient information on the Euro-Conseil case, to enable the Belgian authorities to carry their investigations further. The interview that AAAA had with the Belgian Police was only based on the allegations and material brought in by Tzoanos to the Belgian police (annex-19).
Disciplinary procedures (3)
In all cases where there is no indication of evidence directly linked to fraud, but where irregularities have been spotted, a disciplinary investigation, could and should have been started immediately.
Allegations MEP McMillan-Scott
On 4th January 1998, MEP McMillan-Scott wrote a letter to the Court of Auditors, in which he repeated (for the Xth time) his information about bribes being sought in return for favourable assessments of national EYT projects by Euro-Conseil. As member of SAT, I have doubts whether this information, that was already communicated for the first time in May 1990 (!), has ever been thoroughly investigated in all its aspects (annex-20).
The Fabra Vallès report notes that there was a network of firms that managed to take over de facto control and implementation of a whole policy. This was actively promoted and/or at least tolerated by European Commission officials. These were not, in his opinion, exceptional affairs brought to light but a well tried system that has worked with the full knowledge of the whole hierarchy.
The parliamentary committee calls in particular, and for the third time, upon the European Commission to transmit the whole dossier to the Belgian, French and Italian judicial authorities before 1 December 1998. Failing this, Cocobu proposes that the Parliament should examine the possibility to transmit to the legal authorities, by its own means, the elements of the dossier available to it, and at the same time introduce action for incompetence against the European Commission, under Article 175 of the Treaty. The Fabra Vallès report was discussed in plenary in the session from 16 to 20 November in Strasbourg. The Parliament has adopted this proposal during its November session in Strasbourg.
The Directors-General charged with the inquiry came to the conclusion that they were unable to find any evidence to suggest that the officials in question had been guilty of fraud. The D-G's (they acted 'ultra-vires' i.e.) assumed powers to which they had no entitlement: establishing whether a crime has been committed is something for the juridical authorities. (Amendement-2 by Mrs. Kjer Hansen, PE 228.289/Rev./Am.1-11)
The Commission noted, with approval, this outcome of the administrative inquiry and bears responsibility for covering up misdeeds of the officials in question. (Amendement-3 by Mrs. Kjer Hansen, PE 228.289/Rev./Am.1-11 of 20/10/98)
Calls on the Commission for the third and last time to forward the entire file, including new, additional evidence of serious irregularities. (Amendement-6 by Mrs. R. Wemheuer, PE 228.289/Rev./Am.1-11 of 20/10/98)
Aufgrund des bisherigen Verhaltens der Kommission sind die Voraussetzungen für eine Untätigkeitsklage gemäß Artikel 175 des EG-Vertrages erfüllt. (Amendement-8 by Mrs. E. Müller, PE 228.289/Rev./Am.1-11 of 20/10/98)
Again the Parliament has arrived at the right conclusions.
What were the consequences of the findings in MED? Which disciplinary procedures were launched for the responsible hierarchy. Refer also to the notes on UCLAF at the end of this letter.
Was the Parliament properly informed? Did the Parliament get all past, recent, internal and external audit reports on the MED case? There were many reports. Does the Parliament know that DG IB internal auditors were hindered in their audit duties by the hierarchy? Please refer to the note on the next page.
Obstruction of internal audit by hierarchy
In 1997, the Head of Internal Audit of DG I-B, unit IB/01, writes an internal and confidential note to the Director-General of IB, Mr. EEEE.
In this note, the Head of IB-Internal Audit, expresses his deep disappointment with the lack of priority that Mr. EEEE shows towards the work of his unit. The Director-general appears to ignore systematically the internal audit reports of this unit on individual projects and the evaluation reports on the decentralised programmes of DGIB.
This note was instigated by the fact that Director-General EEEE decided to interfere with the preparations of an audit on a decentralised programme of DGIB-B/C, on Latin America and Asia. EEEE accused the Head of internal audit of harming a well run programme by expressing reservations on the administrative management of this programme. EEEE also accuses him of exposing DGIB again to the same menaces that have already hit the MED programmes of DGIB-A.
Following this, the Head of internal audit draws his conclusions and decides that he can no longer work under EEEE. He finishes his note by announcing his early retirement from the Commissions services (annex-21).
For some interesting press quotes, please refer to annex 22.
From consultation of DG XX files, from conversations with colleagues, auditors and investigators, I have drawn the following picture:
The Commission tried to conceal knowledge of irregularities for the Parliament.
Auditors get specific instructions from hierarchy to limit the scope of their audit.
Auditors are frustrated about limited follow-up given to audit findings.
Co-ordination between the investigating services of ECHO, DG XX, UCLAF, DG IX and DG IV was hindered through instructions by hierarchy.
Available findings on involvement of hierarchy and Commissioners with irregularities have been concealed for the Parliament. Indications exist that this is still the case.
Internal briefing on ECHO irregularities are trimmed down.
Irregularities in ECHO are still ongoing with knowledge of hierarchy.
Recommendations were made by auditors to expand audit scope to all staff contracts in ECHO.
Mrs. Cresson seems to be heavily involved, not only through the Onidi-link and the Berthelot-link, but also in another way.
Proof was found that active action had been undertaken to conceal the facts that had taken place. Reference was also made to the observations of the Court of Auditors, as well as of one of the DG IX disciplinary investigators, that within ECHO, specific instructions were given that would obstruct the investigations that were carried out only recently.
Among the companies providing submarines, the name of "James Duncan" also appears. This company is also known to have provided submarines in other DG's (I know besides ECHO also of DG I-A and DG XXIII (annex-12)). As this was also the case with Perry, apparently, the European Commission knows at least some kind of efficiency and co-ordination in the area of irregularities
Much of the above mentioned elements can be found in two internal notes of the Financial control: a note of 6 November 1998 that was not signed by the hierarchy (annex-23) and a note of 18 August 1998, indicating the reluctance of ECHO hierarchy to commit itself to the audit findings of DG XX in 1996 (annex 24).
Some other findings :
A note from 1992 from Head of Unit H. Onidi to Director S. Gomez-Reino is quoted, in which Onidi already warns Gomez-Reino for the illegal situation that exists and the possible danger of discovery.
A note from 1994 from Gomez-Reino to Commissioner Marin is quoted, in which Gomez-Reino asks permission for a temporary prolongation of this situation (of which Commissioner Marin knows that it is irregular).
Recoveries issued as a result of the irregularities would be insufficient.
IV. PERRY LUX
In the European press (Libération, Le Soir/Le Soir Illustré, Süddeutsche Zeitung, Focus, etc.) some very disturbing and detailed articles appeared on the Perry Lux case. Initially the information seemed to come from a leaked UCLAF report on ECHO and the information was concentrated on 4 contracts, apparently fictitious, under the ECHO programme. Initially possible fraud seemed to be limited to one Head of Unit, later a few other Commission officials were subject to further investigations as well.
The European Commission, notably Mr. Santer and Mrs Bonino have always explained that this was an isolated case and have veraciously attacked the media which dared to suspect otherwise. (refer to a summary of press articles in annex-25). The Commission always considered the press articles as an unfounded campaign (annex-26).
However, recently, new publications appeared, notably in Le Soir Illustré of 24/11 (annex-27) and 01/12 (annex-28), and in Focus of 07/12 (annex-29 and 30). These articles add a new dimension to the allegations: large scale cooruption in the Commission and physical threats to whistle-blowers. In the framework of my present exercise, and just before the sending of this letter to the European parliament, I took the initiative to check the reliability of these new allegations and to gain access to the source documentation on which the allegations in the press were based.
Observation : normally, UCLAF should take this initiative and immediately track down all possible leads resulting from serious press publications, especially if investigations in these area's are already ongoing.
Preliminary findings can be summarised as follows:
1. To view the massive press coverage of the ECHO case in the proper perspective, the observation should be made that part of the press revelations appear to originate directly from Mr. Perry himself. I have been confronted with strong indications towards the existence of an invoice of a journalist, who charges his expenses to Claude Perry for services rendered to support the present press campaign that Mr. Perry apparently is pursuing against the European Commission.
2. Nevertheless, the conclusion seems justified that the Perry case is much bigger than the picture that is presented by the Commission to the Parliament. It is not just 4 fictitious contracts or just a few officials that have been corrupted by Perry (Onidi, De Gaultier and one or two others that the Commission admitted so far). From the original source documentation that was presented to me, I learned that the number of corrupted officials, temporary agents and other staff could be close to one hundred (!). I sincerely hope that UCLAF is seriously looking into this.
3. The allegations made in return by Mr. Perry (annex-25), that European officials claim presents in order to grant contracts to external temporary staff providers, is only part of the truth. In reality Mr. Perry seems to have a systematic approach with providing presents, of a wide-ranging nature, to European officials, who, once having accepted these gifts, are exposed to pressure from Mr. Perry and his companies to obtain contracts from the Commission through these officials.
4. An audit report from early 1996 exists, in which clearly the magnitude of these irregularities is presented. The author of this report claims to have submitted a document, explaining the irregularities, in February 1996 to 3 Commissioners, the Court of auditors and the Commissions Security Office. Indications exist that at least one of the addressees indeed received this document before mid 1996.
From all this it appears that some Commissioners probably must have known of the magnitude of the irregularities taking pace in several DG's connected to Perry. If this were the case, than this could mean that a deliberate misleading of the European parliament took place on the actual situation concerning ECHO and PERRY LUX.
V. Gemeinsame Forschungsstelle
03.11.1998. Wieder gerät eine Abteilung der Europäischen Kommission wegen Begünstigung und Vetternwirtschaft ins Zwielicht. Ein neuer Fall von Vetternwirtschaft bringt die EU-Kommission in Bedrängnis. Es geht um die Gemeinsame Forschungsstelle (GFS) in Ispra/Italien. Laut einem Bericht des Europäischen Parlaments ist es in insgesamt sechs Fällen zu Unregelmäßigkeiten gekommen. Unter anderem hat ein Mitarbeiter der GFS seine Ehefrau mit lukrativen Aufträgen versorgt. Die EU-interne Abteilung für Betrugsbekämpfung Uclaf ist eingeschaltet worden.
Offensichtlich ist bei der GFS nach einem ähnlichen Muster verfahren worden wie beim Amt für Humanitäre Hilfe (Echo), das vor einigen Wochen für Wirbel sorgte: Externe Firmen bieten Dienstleistungen an, um an EU-Haushaltsmittel heranzukommen. Die Kontrollen sind oft mangelhaft. Auch bei der GFS war die Ehefrau des beschuldigten Mitarbeiters angeblich an der Gründung einer Firma beteiligt, die dann von den Aufträgen profitierte. Nach Erkenntnissen der Uclaf können durch diese Konstruktion persönliche Verbindungen und Begünstigungen leicht verschleiert werden. Denn das Geld fließt zunächst nicht an eine konkrete Person, sondern an eine Firmenadresse…
Der Generaldirektor der GFS, Herbert Allgeier, räumt Unregelmäßigkeiten ein. Er bestreitet jedoch ein Versagen der GFS-Leitung. 'Wir haben sofort ein Disziplinarverfahren eingeleitet", sagte Allgeier. The Euro MPs who compiled the report have, praised the authorities at the JRC for reacting quickly to reports of irregularities and instigating their own inquiry.
1. The Financial Control of the Commission audited Ispra in 1997. During that audit, there were indications reported on irregularities, which showed exactly the same kind of irregularities that are now reported by the Parliamentary report. Please refer to the following pages for quotes from the audit report (trimmed down version of March 1998) and the internal DG XX correspondence referred to.
2. So far, the Commission services did not issue a final report on the 1997 audit at Ispra. Apparently, UCLAF was not informed (despite recommendations from the internal audit to do so) and neither was the Cocobu of the Parliament. Again refer to the following pages for quotes from internal DG XX correspondence relating to the follow-up of the performance audit.
3. Apparently, there is an UCLAF investigation on the JRC ongoing. It is not clear whether the irregularities reported by the DG XX auditors have been taken into account. The auditors themselves are not aware of it.
4. So apparently, the European Commission authorities did not react so quickly to reports of irregularities that resulted from the DG XX audit, and they did not immediately instigate all necessary inquiries (including co-ordination between services) when these irregularities were reported at Ispra.
Quotes from the JRC audit report of the performance audit in 1997 :
In the 68 page comprehensive report of the performance audit of JRC, 1997, version Draft 2c n° PA2JRC, 20 March 1998, XX.2/F/PA2JRC/D2c(97), some brief remarks can be found that refer to the irregularities reported. This comprehensive report was an annex to the 30 page executive report of 30 March 1998. In this executive report, the references to these irregularities have been suppressed.
On 24/11/1998, the Director-General of DG XX still refused to issue the audit report officially.
From the executive summary (page 3).
This performance audit of the Joint Research Centre, was carried out from March to November 1997. The audit report is based on evidence gathered at the institutes IRMM and EI, HQ in Brussels and ADIN at Ispra.
From § 9.5 Contracting out (page 60).
The audit has established that in both the institutes examined extensive outsourcing occurs to fulfil contractual obligations. Indications suggest this observation might be globally applicable in the JRC. Cases of outsourcing to ex-personnel such as post doctoral students were observed. Contracting out to insiders also occurred. It was however considered to be outside the immediate scope and resources of the performance audit to make a detailed assessment of these problems.
From annex 1: Possible topics for future examination (page 63)
The desirability of letting contracts to ex-personnel or small firms with relations inside JRC should be carefully examined to ensure adequate transparency. Refer to annex-31 (JRC 1997 audit report, pages 1-4 and pages 60-63). An example of the common process of changes that occur in the respective drafts of an audit report :
Draft 1 : "Outsourcing to ex-personnel and insiders should be carefully examined, perhaps with the support of UCLAF".
Draft 2c: "The desirability of letting contracts to ex-personnel or small firms with relations inside JRC should be carefully examined to ensure adequate transparency".
Draft 2d : "The desirability of letting contracts to firms with relations inside JRC should be carefully examined to ensure adequate transparency".
From internal DG XX correspondence and notes
The first draft audit report on the JRC performance audit was discussed with JRC representatives and sent to the Financial Controller on 22/12/97 (annex-32).
A four months long review occurred before the audit was sent to Mrs. Ventura
On 24.02.98 a note from the auditors stated that they had indications that irregularities relating to contracts management was a general problem within JRC: Names had been supplied on several cases where the persons involved had obtained contracts (possibly at their own instigation) to pursue work which arose out of tasks assigned to them during prior service at JRC or through personnel connections. It was clearly stated that it is not within the remit of the Performance Audit to investigate or pass judgement on such potential irregularities, and that Audit Management was recommended to inform UCLAF on these observations.
There is an executive report of 31.03.98 and there are several drafts of the comprehensive report, of which the latest version (draft 2d) dates from 28.04.98. Neither draft covering letter (3.4.98 and 15.4.98) seems to have been sent by the Director-General.
What is for a performance audit merely an indication of mismanagement could form the scope for years of fraud investigations.
In November 1998 it was asked to summarise what documents relating to potential fraud in the JRC have been sent to the Director-general of Finacial Control and to UCLAF. Effectively no notes have been sent to UCLAF, whereas it has been recommended that UCLAF would be informed about the observations of the audit team.
On 23.11.98 the Financial Controller finally motivates her refusal to validate and issue the audit report by stating that she considers the reports methodology unsatisfactory (annex 33).
The Financial Controller has validated and issued other audit reports that were made by the same auditors and following the same methodology (annex 34).
It should be born in mind that, extensively, the same observations have been made by a (later) parliamentary examination which would serve as an external validation.
VI. A Commissioner
The following chapter presents a non-exhaustive list of "links" of commissioner Cresson with known cases of irregularities in the Commission. I do not want to insinuate that Mrs. Cresson would have been direct and actively involved in these irregularities. The list just presents cases where consultants, experts or cabinet members of Mrs. Cresson appear to be involved in irregularities. Neither do I want to insinuate that Mrs. Cresson would be linked in some way to more irregularities than other Commissioners. As I happened to work for one of her services, I received more information on Mrs. Cresson than of any other Commissioner. Following conversations with colleague-auditors, I am afraid that a similar picture could be made of some of the other commissioners as well. For quotes from the press on Commissioner Cresson, refer to annex 35.
In some of the fraud cases under investigation by the Court of Auditors, UCLAF and the Financial Control, there are indications towards an involvement of beneficiaries or staff members that are close to Mrs. Edith Cresson. Please refer to the following:
01. Cresson links in ECHO
- A Head of Unit, Hubert Onidi, has been suspended in June for his active role in the serious irregularities and fraud in connection with the fictitious contracts with the Perry Lux company for humanitarian aid. Hubert Onidi is the father of one of the recent cabinet members of Mrs. Cresson, Mr. Olivier Onidi. Two of the persons that were hired under these fictitious contracts, and who had no relevant experience or qualifications in the area of humanitarian aid work, were proposed only on the basis of their friendship with Olivier Onidi (from the UCLAF report, annex-36).
- Claude Perry, director of Perry Lux, a company involved, made direct accusations on the involvement of people from the direct circle of this commissioner. He claimed to have been obliged to pay such persons a salary without them working for Perry Lux. One of these persons is Mr. René Berthelot, a former dentist from Châtellerault. It is said that Mr. Berthelot is a very close friend, who lived together with Mrs. Cresson. Indeed in the Commission accounting system Sincom, Mr. Berthelot is registered on the same address as commissioner Cresson, and indeed a contract between Berthelot and Perry existed.
- Recent investigations (October 1998) by DG IV auditors performed on the four fictitious ECHO contracts, are said to show a further involvement of the entourage of Mrs. Cresson through another link. This report is in possession of Commissioner Liikanen since end October 1998.
02. Cresson link in MED
One of the two external companies (FERE Consultants) that was involved in irregularities in connection with technical assistance provided for the MED programme (annex 37), is headed by advisers to Mrs. Cresson, Mr. François De Lavergne and Mr. Philippe De Lavergne. They also appear as advisors in the Cresson initiative on European 2nd chance schools (annex-38, letter to TAO Leonardo (!) and annex 39 conference paper). Following an audit of the Commission at FERE Consultants, a recovery order of a few hundred thousand ECUs was initiated in 1997. FERE is connected to an Italian company who is in a legal fight with the Commission on recoveries following serious irregularities within another MED programme (annex-40).
03. Cresson link in TOURISM
The company that was involved in serious irregularities (and fraud) in connection with the technical assistance for the 1990 European Year for Tourism (Euro-Conseil), was linked through a common shareholder to another company (EURO 2C, annex-41). This other company (EURO 2C) is also subject to a criminal investigation in France (annex-42). One of the present cabinet members of Mrs. Cresson, Mr. J-M. FFFF was a major consultant and representative for EURO 2C. In a recommendation letter, Mr. FFFF was also mentioned as the correspondent for France of Euro-Conseil (annex-43). The wife of the major shareholder in Euro-Conseil and Euro 2C, Roland GGGG, used to work for Philippe de Lavergne and FERE in MED and Interreg-I.
04. One of the Cresson links in RESEARCH
- Mr. René Berthelot was also granted consultancy benefits for so-called advisory work in the area of medical research. Serious doubts on the validity of this consultancy was reported during one of the past audits of the Financial Control of the Commission. He appears to have had contracts with DG XII as well as with the JRC. Also the son of Mr. Bethelot has benefited a contract within the services of Mrs. Cresson.
05. Cresson link in ECHO/BUREAU DE SECURITE
- Mr. René Berthelot was recommended to Mr. Claude Perry by Mr. Claude Willeme from the Bureau de Securité of the Commission. Mr. Willeme, nr. 2 of the BDS, is now subject of a disciplinary investigation in another case.
- Mrs. R-M. HHHH, one of the people working for ECHO/Perry, was recruited by Mr. Hubert Onidi at ECHO on recommendation of Mr. Pierre Eveillard of the Bureau de Securité (annex-44). Mr. Eveillard is now also subject of a disciplinary investigation in another case.
06. Cresson links in EDUCATION & TRAINING
- A Communication Cell was imposed on several DG's by the cabinet of Mrs. Cresson (annex-45). A serious irregularity happened in 1996 and was reported in 1997 to UCLAF in connection to a selection procedure for beneficiaries of framework agreements applicable to these DG's. Notably the then Head of the cabinet, Mr. IIII, now Adjunct Director General of DG IA, and the cabinet member responsible for Education & Training, now the assistant of the Secretary General, Mr. JJJJ are said to have been directly involved. UCLAF did not want to investigate this.
- Drafting and application of White Paper on Education & Training was surrounded by irregularities. This process was managed by the cabinet and consultants of Mrs. Cresson, notably professor Jean-Louis Reiffers (F), later cabinet member Mr. P. KKKK (annex-46) and Head of Unit Mr. A.-G. LLLL. Notwithstanding the reply of Prof. Reiffers that was published in the French newspaper Libération of 20/11/98, he has indeed been involved in irregularities (annex-47). Again, UCLAF did not follow-up requests for investigation.
- The Technical Assistance Office for the Leonardo da Vinci vocational training programme, managed by Mr. R. XXXX, is heavily involved in irregularities, likely connected to fraud. This was confirmed by several audit reports in 1997 (annex-48; report DG XXII) and 1998 (annex-49; report DG XX). Finally UCLAF has picked this up. There are indications towards an involvement of the cabinet of Mrs. Cresson with the management of this Office. Apparently, the services of Mrs. Cresson are opposing the recommendations of the Financial Controller of the Commission, to terminate the contract with the present technical assistance office (annex-50 not yet attached and annex-66). The cabinet of Mrs. Cresson is also interfering in the issuing of the audit report (annex-61 and annex-62).
- A proposal of Mrs. Cresson for a 3 billion ECU follow up programme, proposes again a Technical Assistance Office. The Commission adopted this proposal on 27.05.98 despite my note of 11.05.98 to the cabinets of Gradin and Liikanen, in which I asked for a postponement of the approval, to permit inclusion of the recommendations of the ongoing Leonardo-I audit (annex-8). This programme will soon be in the Parliament for second reading. As these TAO's tend to follow themselves up in the consecutive programmes, one must include anti-fraud measures to avoid a continuation of these irregularities.
- Head of Unit, Mr. A.-G. LLLL was found to be in possession of paedophile material on his portable computer (annex-51). This computer is said to have been supplied by the above Technical Assistance Office. An internal disciplinary procedure has not been carried out. He is said to have been transferred to a European Institute in Maastricht. He would have been protected by the Cresson Cabinet. He knows very much about the irregularities taking place.
07. Cresson link in DG V - SOCIAL DIALOGUE, etc.
Mr. J.M. FFFF, member of Cresson cabinet, was external consultant to DG V. I am informed that Mr. FFFF has been involved in irregularities in connection with several DG V operations. I was told by another source that a 1996 recruitment of Mr. FFFF, on a temporary A-post in DG XXII, got blocked because apparently some recovery orders still remain to be reimbursed by Mr. FFFF.
J.M. FFFF was linked to many (former) Commission beneficiaries, supported by DG V, DG XXII, DG XXIII and other DG's. Refer to the following beneficiaries, of which some (not all) were involved in irregularities :
EURO 2C, Européenne Conseil et Communication; 82 Boulevard Haussmann, 75008 Paris, and addresses in Belgium, Luxembourg and France (annex-43)
08. Cresson link in PHARE/TACIS
According to press articles that appeared on 16.11.98 (annex-55), the company S.I.S.I.E. received some beneficial contracts under the Phare/Tacis programmes from DG IA and DG XVII, notably from 1995, when Mrs. Cresson became Commissioner. One of the main programme managers is her former Head of Cabinet, Mr. Francois Lamoureux. The company S.I.S.I.E. (Service Industries et Stratégies Internationales et Environnement is closely linked to Mrs. Cresson. She used to be managing Director of S.I.S.I.E. and sold her shares in that company 5 days before she was installed as commissioner, still according to the press article. Also mentioned are the names of nine of her close collaborators from the past, who are said to have had a position in S.I.S.I.E. Some of them would still be in place within the company.
From research at the World Wide Web, it appears that S.I.S.I.E. is indeed involved in Phare/Tacis contracts and preparations :
From the Commissions accounting system it appears that indeed the payments to S.I.S.I.E. are concentrated in the period after Mrs. Cresson became commissioner (total payments of about 2.6 million ECU, annex-56).
Further revelations on 23.11.98 in Belgian, German and French press (annex-57) revealed that also other acquaintances of Mrs. Cresson benefited contracts from the European Commission, such as Mr. Spinetta (member of cabinet and national expert) and also her driver and her bodyguard, and according to the press, under irregular conditions.
I was told by a colleague that an other serious irregularity in connection with Cresson popped up during a Financial Control audit. Colleagues did not want to inform me any further on this, as they feared that I would report on this. I was told this had to be kept secret.
There is also an internal note of 31/03/1998 written by me on alleged irregularities in DG XXII. This note included 41 annexes, and mentions involvement of consultants and cabinet members of Mrs. Cresson in irregularities (annex-58, refer also to next page on the Leonardo case).
VII. Leonardo da Vinci
The Commissions Financial Control launched a special audit in March of this year, following several reports and complaints about irregularities that would take place in DG XXII and its TAO Leonardo. Unfortunately, this audit focused only on the TAO Leonardo. For a better understanding of the Leonardo case, the MEP's may want to refer to the attached chronology (annex-59).
The following 5 points are quotes from a 22 page note of 26.03.98, that I wrote to Mrs. Ventura (Director-General DG XX) and Mr. Knudsen (director UCLAF). This note has 41 annexes and contains many allegations towards irregularities in DG XXII itself, that should have been investigated (annex-58). Some of the listed allegations in this note concerning the TAO Leonardo were taken from an internal DG XXII audit report of October 1997. Although this will be denied, DG XXII refused to follow the recommendation of the auditor to forward this report to the Financial Control and to UCLAF. Some officials had to pull (in DG XX) and push (in DG XXII) to get the report officially to the surface.
1. White Paper of Mrs. Cresson
The Commission approved on 29.11.95 a White paper on Education and Training: "Teaching and Learning, towards the learning society". This White paper lists five objectives and a number of specific recommendations for projects to be launched. The Cresson cabinet organises direct support towards project proposals that are in line with these objectives. If necessary, the applicable procedures for the submission and selection of projects, not only within the Leonardo da Vinci programme, but also in other programmes, are circumvented. Many of these cabinet supported initiatives, were submitted by French lead consortia. This White paper was written by French advisers of Mrs. Cresson, who also play a role in the application of the White paper objectives as well as in the project proposals that are based on these objectives. This puts into question the objectives of these initiatives.
2. The influence of the Cresson Cabinet
The influence of the cabinet on the daily procedures and selection processes in DGXXII is greater then under other cabinets. The creation and working of a so-called "Cellule de Communication" is an example of this cabinet control mania. The total production and dissemination of all information related material for DGXXII and most likely also for the three other DG's under the competence of this cabinet, is controlled by this Cellule. More than six framework agreements were launched by this unit with only Brussels and Paris based companies as a result of the tendering. One of these tenders is already proven to be irregular. Very detailed cabinet approval procedures are in place for other expenditure like studies, conferences etc.
French staff are important in the irregular processes that take place under the cabinet Cresson; 3 Heads of TAO's, Head of DGXXII Financial Unit and internal audit (Pascal MMMM), advisors of Mrs. Cresson (Prof. Reiffers, the two de Lavergne's of FERE), Head of Unit A.-G. LLLL in directorate B. Noteworthy is the relatively high number of French contractors in projects and partnerships on certain important areas.
3. The Technical Assistance Offices of DGXXII.
All three TAO's of DGXXII are lead by French staff.
The Head of the TAO Leonardo is the former Head of the TAO FORCE, French R. NNNN.
The Head of the TAO Socrates is the former adjunct director of the TAO COMETT, French M. OOOO.
The Head of the TAO Eurydice, is French L. PPPP, also the wife of DGXXII's French Head of finances, Pascal MMMM.
The tenders for these TAO's ran simultaneously. Although not proven, it is common knowledge among DGXXII staff that the outcome of the selection of these tender procedures was pre-determined.
4. Irregularities in the Leonardo TAO (by Agenor SA)
Consultancy contracts are sometimes irregular (unjustified payments, non-traceable services, oral agreements). Many consultants are related to Agenor.
Fraudulent payments. Payments have been made to staff and service providers, based on false invoices, with as only objective to prevent budget surplus's to be rendered to the Commission in consecutive financial years. Non-approved reimbursements of fees and travel costs were made
Belgian Social Security. Some staff members are working under an illegal independent statute. Agenor has the obligation to pay Social security contributions, which it does not do. A complaint was filed.
Belgian VAT regulations. International staff use foreign invoices exempted from VAT. This is illegal, as they are actually based in Belgium. The Belgian VAT control services have started an investigation against Agenor.
Conflict of interest. Some beneficiary organisations, have experts in the evaluation committees and among the TAO staff. There are TAO staff members and experts that unite conflicting interests, they also represent different beneficiaries and in some cases render paid services to the TAO through another company.
Irregular selection/evaluation processes on Leonardo project proposals, to arrive at selection results that please certain networks. Also influence of cabinet Cresson.
Commercialisation of products. The TAO enables contractors to commercialise the products, that have been developed with community funding, for their own benefit instead of a wide dissemination as envisaged by the Commission.
Efficiency of the programme management is poor. In the area of hardware, software, databases, networks and services, the TAO has spend important amounts without being able to answer the Commissions' requests.
5. Irregularities and incompetence of DGXXII staff.
Knowledge of irregularities taking place in the Leonardo TAO, already after the audit results on the FORCE programme in 1995 and 1996 (also by Agenor).
Incompetence in handling the problems with the TAO. Hierarchy that was confronted with complaints from their staff did not wish to act. Breaching of contract conditions by TAO was not dealt with.
Tender procedures. Two cases, not directly related to the TAO, have been identified by me as irregular. In one case, the contractor selected was informed throughout the tender process, and acted accordingly on information provided by DGXXII. In another case, the selected contractor did contribute beforehand to the specifications of the tender. There is suspicion, but no prove yet, that the tender leading to the selection of Agenor was also irregular.
Favouritism to contractors of a certain nationality or network by managers of certain budget-lines within DGXXII.
Irregular grants. For at least one Head of Unit, Mr. A.-G. LLLL, indications exist that contracts are granted irregularly and that this is done intentionally. Indications exist against other staff members in DGXXII.
If my recommendations, to change the scope of the DGXXII special audit and to reinforce the audit team, as indicated by me, are not taken into serious consideration, I feel obliged to consider the forwarding of this report to the European Court of Auditors and the Budget Control Committee of the European Parliament. (Remember that these are quotes from the 26.03.98 note (annex-58). These were not yet proven facts at that time, but the allegations also included irregularities taking place in DG XXII itself. Also these allegations should have been under investigation)
The Members of the European Parliament received at the end of October 1998 an extensive anonymous letter, containing allegations towards irregularities taking place in the management of the Leonardo da Vinci-I programme. Although some allegations made in this letter are not proven or perhaps not accurate, this letter contains very valid observations towards irregular network organisations that govern the management of the Leonardo-I programme (compare Fabra Valles remark on MED). Many of the allegations were already confirmed by the findings of the Financial Control audit that took place early 1998.
The Commission is reluctant to inform the Parliament on this issue. The person who wrote this letter wanted the Parliament to be informed on the serious irregularities that take place in the Leonardo programme. This letter was anonymous due to the enormous risk the writer took by sending this letter. The staff of the Leonardo Technical Assistance Office, the staff of DG XXII and the staff of DG XX, who wanted to expose the irregularities taking place, have been threatened or pressurised in different ways. The irregularities and threatening are still happening at present (annex-60, under embargo, not yet available for distribution).
The Commission will present only a summary report on Leonardo TAO audit to the Parliament (annex-49). This report is not complete. Important issues relating to possible irregularities on a higher or policy level (DG XXII or the Cresson Cabinet) have been left out. Also many details and examples have been left out. In fact this audit report focuses only on the TAO, avoiding any link to irregularities in the Commission services.
As mentioned before, the Cresson cabinet is interfering in the elaboration of the final audit report as well as in the timing of the issuing of the report to the European Parliament (annex 61 and annex 62).
The Commission should have submitted the comprehensive draft report of July 1998 (annex-63) to the Cocobu before the 5 November plenary EP-debate on Leonardo-II. This draft report was never really contested by DG XXII on its findings (annex-64). In my opinion the Commission is withholding relevant information from the Parliament.
The Commission (DG XXII and DG XX) failed to terminate the TAO management contract with Agenor SA. Considering the findings of the audit, this contract should have been terminated at the earliest possible date allowed by the contract (annex-65). This means a 6 moths notice (art. 4) or without notice in case of serious failure of the TAO, which appears to be the case here (art. 7(2) of annex-1 of the contract: general terms and conditions). DG XX also proposed to DG XXII for them to launch a new tender, but DG XXII wrongly advised against this way of proceeding (annex-66).
Wegen "Schlampigkeiten" bei milliardenschweren EU- Programmen zu Verbesserung der Reaktorsicherheit in Osteuropa droht die deutsche Grünen-Europaabgeordnete Hiltrud Breyer der EU-Kommission mit einem Mißtrauensvotum. "Die Ausführung der beiden Hilfsprogramme ist schlichtweg ein Fiasko", sagte Breyer. Der Bericht des EU-Rechnungshofes attestiere der EU-Kommission weitgehende Unfähigkeit und lese sich "wie ein Kompendium der Vetternwirtschaft und Geldwäscherei". Über Jahre hinweg habe die Behörde "einen Selbstbedienungsladen für Berater, Beschaffer und Dienstleister betrieben, in dem ein Großteil der Aufträge unter dem Tisch vergeben wurde".
From 1992 to end-1997, the nuclear safety strategy was largely determined, not by EU bodies, but by a consortium of western electricity companies. The EP's examination of the court's report could lead to the sacking of the Commission. If the EP refuses to approve the accounts, that could be seen, the source close to the court said, as "tantamount to a vote of no confidence in the Commission".
The draft report of the Court of Auditors (annex-67) and the final Special Report 25/98 of the Court of Auditors (annex-68) show some remarkable differences. The draft report speaks of :
l'enregistrement d'operations fictives (point 2.6, page 12),
ce qui a créé des situations de conflit d'intérêt (point 2.7, page 12),
permettent aux contractants de l'UE de réaliser des marges importantes et incontrolables (point 2.12, page 14),
L'interposition d'un tiers entre la Commission et les opérateurs de cebtrale de l'UE n'est ni efficace, ni indispensable pour faire respecter les procédures de mise en concurrence. Ce dispositif …a diluéles responsabilités, et sa complication a engendre des couts superflus (point 4.5, page 24/25),
Conflit d'intérets: Pour l'administration des procédures d'achats relatives aux contrats (pour la plupart des services) qu'elle a conclus directement, la Commission a retenu, sans respecter les procédures de mise en concurrence, un consultant également titulaire d'autres contrats de services importants, notamment en tant qu'agence d'approvisionnement pour les contrats de fournitures. Plusieurs des actionnaires de cette société de services bénéficient également de contrats avec la Commission. Malgré le conflit d'intérêts, la Commission l'a chargée de préparer les contrats à conclure avec l'un de ses actionnaires pour la mise en place de la JMU (Joint Management Unit) en Russie (1 Mio ECU). (point 4.13, page 27/28),
These sentences were either seriously watered down or have disappeared altogether from the audit report after the contradictory procedure with the Commission.
Here also, the presence of a body similar to a TAO, creates an extra opportunity for irregularities to take place (refer to above remarks and also point 5.4, page 32 of final report). See TAO's of MED, Tourism and Leonardo.
IX. Bureau de Sécurité (BDS)
IX. Bureau de Sécurité (BDS)
In 1992, irregularities in the Commissions Security Office, were reported by a staff union representative to Mr. Nicolas of the cabinet of Jacques Delors in October 1992. The Delors cabinet (Mr. Lamy) informed the Financial Controller about this, and a special audit was launched by the Financial Control in 1993 (audit report ready on 07/07/93).
There are contradictory statements on the nature of the irregularities reported as well as on the persons it was reported to. In any case, the auditors were not fully briefed on all the irregularities that took place (whether this was done on purpose is not clear). It was therefore that the 1993 audit report mentioned only some irregularities with reference to the tender procedure and contract conditions and more serious findings in relation to the annexes and indexation of the Group4 security contract with the Commission (value 70 million ECU over 5 years). No reference was made to the fraudulent manipulation of the winning offer that took place between the deadline for submission of tenders, and the date of opening of the offers. After the tourism example, this is another example where I noticed that the Commission auditors did not get all the relevant information they needed to perform their audit properly.
A good and very detailed description of the irregularities and fraud that took place (including an immense listing of friends that got jobs in the Commissions environment and even including payment of possible hush money), can be found in the report of the internal administrative inquiry, that was headed by Director-general Mr. Reichenbach. This confidential report (30 pages) was issued on 14 July 1998 (annex-69, please do not distribute any further).
A preliminary conclusion that can be drawn from this, is that the internal Commission services (UCLAF as well as an administrative inquiry committee) are not the instruments best placed to investigate possible criminal acts. The competent national judicial authorities are. However, as there are many links with the Belgian police services and leading Belgian politicians in this file, this is a potentially very problematic case, which means that the referral to the Belgian Judicial authorities is no guarantee for a proper treatment of this file.
Before the Reichenbach report, an interim UCLAF report was issued on the BDS fraud in March (annex-70, just first pages with contents, French version). This report did not address all the allegations as appears from an internal Financial Control note of 23/04/98.
Some quotes from this internal Financial Control note of 23/04/98 (annex-71):
In the various press articles there are many references to the dubious connections of Mr Eveillard (the former assistant of the BDS) to people and organisations connected to extreme right wing organisations in Belgium - However, whilst this issue is briefly touched upon in the UCLAF report, no in-depth investigation has been carried out.
Apparently, the method of recruitment of Mr Lhost as head of the Security unit in the BDS was doubtful. The Commission services were alerted to this individual by a parliamentary question of Mrs R. Dury in around 1986/87 who was surprised to learn that a former national guard officer of the extreme right (Mr Lhost has appeared in front of the Commission investigating the Brabant killings in connection with suspected extreme right wing activities) had been recruited by the Commission. After some time, Mr Lhost was removed from the BDS, but at present, is still working in DGXII.
Apparently, Mr Lhost got Mr Eveillard to arrange a job for Mr Lhost's ex-wife (Mme Peyman) so that he (Mr Lhost) could get out of having to pay her maintenance. (note: this seems to be confirmed by the findings in the Reichenbach report).
There are also serious allegations about Mr Thomas (who exercises a similar function in the Council as Mr Eveillard did in the Commission) and how Mr Eveillard was connected to him (and other extreme right wing figures) via the extreme right wing organisation of Mr Latinus.
Mr Robert Thomas was one of those responsible for the supervision of the security contract which was also concluded with Group 4 Securitas by the administration of the European Council in 1992. Mr Thomas has been known for years because of his exploits with guns. In the 1980's he belonged to practical shooting clubs which were investigated because they had been infiltrated by people from the extreme right wing. Even long after he was in employment as an official of the European Council in the security service, Mr Thomas was hired by the Front de la Jeunesse and the neo-nazi militia the Westland New Post of Paul Latinus. He is even alleged to have used Council buildings to organise weapon exhibitions and make use of the diplomatic pouch for unauthorised activities.
Additionally, allegations say that Mr Eveillard also used his position at the BDS of the Commission to ensure that his brother (a policeman in Etterbeek, who had been suspended whilst another matter was investigated by the police) became liaison officer with the Commission for the Commission buildings situated in Etterbeek and used this position to claim excessive overtime. UCLAF did not want to take this up in their report because it was considered to be just one more example of abuse of position and conflict of interests.
Quotes from a recently published book: "Het Gevaar Demol",
During the weekend of 2-3 January 1982, heavy, specialised and secret anti terrorism material was stolen from the heavily guarded Gendarmerie Headquarters in Brussels. The robbers were well up to date with the patrol schemes and the whereabouts of the secret weaponry. On 12-01-1982 Major Demessemakers, independent from the involved Mobile Legion unit, was charged with the investigation. On 18-02-82, he is being replaced by Lieutenant-Colonel Gérard Lhost who is from the Mobile Legion and Head of the Dyane Special Intervention Forces. From then on, the Gendarmerie systematically neglected any possibility to investigate towards extreme right wing connections or towards the possibility of inside co-operation with the robbers. The Gendarmerie decided who could be questioned.
Lhost was questioned by the Parliamentary committee-II on banditry. His declarations are very doubtful and full of contradictory statements. Lhost claims (under oath) to have examined the extreme right wing connections thoroughly, but appears to have done nothing in this area. A so-called search warrant from Lhost to conduct a search of the premises at "Forces Nouvelles", shortly after the robbery, does not appear to exist. Two closely involved investigators deny the existence of such an order.
Investigators, when being questioned by the Belgian parliamentary committee, explained that they were struck by the flagrant negligence of Lhost towards the traces of extreme right. Lhost appears to have had close contacts with "Forces nouvelles" during his service as Gendarmerie district commander in Liège.
End 1985, Lhost suddenly left the Gendarmerie. He went to the internal security service of the EU institutions in Brussels, which happens to be a meeting point of Belgians who belonged to the Gendarmerie or other police forces. Half a dozen of them are known for their extreme right sympathies. Lhost, who is still a Commission official, found as colleagues ex-policeman Pierre Eveillard (ex-cabinet Vanden Boeynants), Robert Thomas (a specialist in political violence, who gave training to extreme right wing organisations like Front de la Jeunesse and Westland New Post) and also, the in the mean time deceased, Roland Maffioli (ex-member of the political section of the Brussels BOB, who helped infiltrating neo-nazi Paul Latinus into the State Security Service).
Additional considerations and background information
In 1997, much more serious allegations were made public in the press on fraud at the Security Office on the tendering of the guarding contract, as well as towards direct staff links with extreme right wing criminal organisations, as described above (annex-73). A new investigation was launched as a direct result of the press publications. This investigation was limited to the alleged irregularities with the Group4 tender on the guarding contract. Other allegations towards links with criminal activities and organisations were never fully investigated.
As a result of this, not all the formerly involved officials of the Security Office have been subject to disciplinary investigations.
The Parliament probably never got all the relevant audit reports (UCLAF report March 1998) and results of the internal disciplinary investigations (Reichenbach report July 1998).
There are indications that the BDS has received reports on the visitors to UCLAF that have witnessed on this case.
X. Other cases
X. Other cases
1. DG XXI - TCP.
TCP : Transit Computerisation Project
The recent audit report on DG XXI - TCP (annex-74; not yet attached) starts with the observation that a letter with allegations in irregularities was sent to President Santer. The auditors underline that this document did not play an important role. It did not instigate the audit and was considered as just one of the many sources of information. The scope of the audit was not changed and UCLAF was not involved in the audit. It was stated that UCLAF did their own investigation and that there was co-ordination. These observations illustrate the reluctance to take properly into account any serious allegations that are brought forward.
In general : if there is a suspicion that serious irregularities take place, it is basic audit practice and rule to change the scope of the audit as well as the audit methodology applied!
2. DG XVII - OPETS
OPETS : Organisations for the Promotion of Energy Technology.
Note of 17.10.1997 from 3 Directors-General to 3 Commissioners on the failure of officials to comply with financial management procedures (annex-75). This followed from a DG XX audit of the management of the associated measures relating to the THERMIE programme. The officials concerned are one Director General, one Director, one acting Director, one Head of Unit and one deputy Head of Unit.
Apparently, an administrative enquiry took place as a result of the OPETS audit. I was told that this did not result in any disciplinary sanctions against any official involved as the evidence found was not considered convincing enough. The auditors that performed this audit where very disappointed with the follow-up and the outcome as a result of their reports. The indications towards fraud were convincing.
From my perspective as an internal auditor, the functioning of UCLAF was inefficient and lax. I will illustrate this with day-to-day examples as experienced during the special audits in tourism and Leonardo, and as I perceive it from the Security Office and MED files.
The role of UCLAF in the tourism case seems to be characteristic. Most of the following observations are from my own experience or witnessed by other members of the SAT team (audit tourism). Although I can not substantiate these allegations with documents, they are to be taken seriously. My colleague's of DG XX or DG XXIII would witness to support these allegations if they would be under oath during a parliamentary inquiry.
UCLAF take no initiative to investigate, but wait until they are pushed by other services (in this case by DG XX or DG XXIII).
I was told that UCLAF did not transmit of its own initiative files to the national juridical authorities of Greece, Belgium, Italy, Germany, Spain and Luxembourg.
UCLAF only forward files to the national judicial authorities if they see clear proof of fraud. This argument is often used by the Commission. This caused the prevention of submission of files to the judicial authorities. In fact the Commission should already launch a national procedure when there is a suspicion towards serious irregularities, as so far, only the national judicial authorities have the powers to investigate properly until UCLAF has been transformed to OLAF.
It did not appear that UCLAF did carry out any independent investigation in the Tourism case. They often limit themselves to reviewing material from DG XX, DG XXIII and the Court of Auditors.
The files in UCLAF are handled on a level that apparently is not adequate to enable the investigators to decide independently to go for new impulses in the investigation.
UCLAF appeared not to handle their information efficiently. Sometimes the same information was asked several times. Of the more than 140 separate Tourism cases that have been referred to UCLAF by SAT, about 70 files are acknowledged by UCLAF as having fraud indications. All these 70 files are classified in their informatics system IRENE under one and the same Tourism case, with as only main feature Tzoanos/Chatillon. This causes information that is not relevant to the Tzoanos/Chatillon cases, to be considered unimportant (example: Euro-Conseil), and is not followed up and appreciated on its own merit. Also was UCLAF not able to reply on questions regarding whether or not the Belgian authorities did launch an investigation against Euro-Conseil or its management.
UCLAF never reported back to DG XX or DG XXIII in a clear and official way. Often contacts with the other services or with the national authorities are informal, vague, or off the record.
Commission services that refer files to UCLAF for further investigation have no way of checking whether UCLAF is actually pursuing the matter and whether UCLAF did refer these files to the National authorities.
UCLAF easily vetoes proposed audits of other services because of a risk of interference with their own investigations (AGTE Greece (annex-76; not yet attached), World Systems Luxembourg.)
The vast majority of the files that are referred to UCLAF remain virtually untouched after first examination. This caused substantial delays on many files. When SAT asked about the state of the UCLAF investigations, it appeared that these were still under investigation, which means that in fact nothing is happening.
UCLAF has an exaggerated resistance to label an irregularity as fraud. They consider only the case of a commission official having enriched himself, as a case of fraud. In fact the label of fraud should be attached to every serious irregularity where a deliberate attempt has been undertaken to falsify documentation or files, whether committed by an official or by a beneficiary. The definition of "fraud" is very important, because then the individuals behind a beneficiary organisation, that no longer exists, can still be pursued (example Euro-Conseil ! annex-16).
Especially the follow-up of the French EYT cases, that were already reported by the Court of Auditors in their report of 1996, was very negligent. Just as an example: UCLAF only recently asked permission to the Court to forward the working papers of the Court to the French judicial authorities, although these papers where already in the possession of UCLAF in 1995. Apparently, an important new analysis of these cases by SAT in 1998 were not appreciated by UCLAF and were not transferred to the French authorities.
Even when Mr. Freitag states in the IPK case before the Court of first instance (noted in the courts minutes) that there was bribery money involved for the Greek Tourism agency, UCLAF apparently sees no reason to start investigating this.
Observations on UCLAF taken from the Leonardo case
I myself experienced an unwillingness to take on allegations for investigation, when the evidence is not delivered with the allegations.
In 1997 and early 1998, UCLAF was visited by at least three different officials from DGXXII complaining about the irregularities that take place. UCLAF did not undertake any action after these visits (besides opening a file).
UCLAF did only decide to attribute staff to the case after DGXX decided to launch a special audit.
UCLAF appointed two French officials to handle the case, which seems less appropriate with reference to the heavy involvement of French DG XXII and TAO staff and French cabinet members in this case.
UCLAF was not co-ordinating its actions with DGXX. Sometimes DG XX staff discovered UCLAF had been visiting DG XXII just after their visit, asking the same questions as they did (and even wanting to know what DG XX had asked).
UCLAF apparently do not concentrate on major issues of the case.
Observations on UCLAF, taken from the MED case
20. Liikanen informed the Parliament that the Commission refuses to transmit the whole MED file to the competent national judicial authorities. He argues that UCLAF, so far, has not established a sufficient presumption of fraud and that therefore there is no basis to submit the MED file to the competent authorities. Commissioner Liikanen often makes this mistake. As explained before with the Tourism case, UCLAF lacks the necessary investigative powers to be able to establish a sufficient presumption of fraud. It is therefore that the possibility exists to transmit a file to the competent authorities when there is only a reasonable suspicion for irregularities, which is evidently the case with MED. The national judicial authorities possess the necessary powers to investigate and perform the necessary interviews with outside organisations that were possibly involved in a case of irregularities or fraud.
21. This way, willingly or not, UCLAF serves as a filter for the Commission, in order to prevent too many files being transmitted to the competent national judicial authorities, which enables the Commission to keep the dirt inside.
22. This way also, again willingly or not, UCLAF does only investigate allegations towards irregularities and fraud that are plate-readily served for further processing and do only concern internal corruption. I have experienced myself that UCLAF refuses to investigate serious allegations if the proof is not hand-delivered with the allegations.
Conclusion on UCLAF :
UCLAF is not capable to handle a fraud investigation effectively by themselves. This is probably due to understaffing, a lack of professional accountancy skills, a lack of investigative powers and a lack of independence from the Commission.
To avoid any misunderstanding, I only intend the improvement of UCLAF's performance by expressing my criticisms on UCLAF present functioning. The replacement of UCLAF by an independent and more efficient OLAF, with proper investigative powers, and beyond any control of the Commission, is very important ! In fact this body should only have to answer to the European Parliament, and having as competent external auditor the European Court of Auditors. The present proposal of the European Commission on OLAF does not seem to meet these criteria sufficiently.
The main reason for leakage's to the Parliament or to the press is the way the Commission deals with internal allegations and audit reports. The time between the first draft report and the approval by the hierarchy of the final report is much too long. A period of one month should be sufficient for the contradictory procedure and the finalising of an audit report. Remaining disagreement on the audit report should be attached to the report.