Q and A: Eurostat scandal

As European Commission President Romano Prodi faces questions over financial irregularities at the statistics agency Eurostat, BBC News Online explains the details of the scandal.

What is alleged?

Eurostat is accused of using a double accounting system and siphoning off large amounts of money into secret bank accounts outside the scrutiny of auditors.

Investigators discovered that the value of some contracts issued by Eurostat was artificially increased and others did not exist at all.

The illegal activities took place mostly in the 1990s, before Mr Prodi took office, but the commission's reports confirm that irregular contracts and secret accounts continued after that date as well.

There is evidence of a clear breach of the financial regulation and in that case then the commissioner in whose department this has happened should resign Graham Watson European Parliament Liberal group

Disciplinary procedures have been opened against Eurostat Director General Yves Franchet and two aides, Daniel Byk and Photius Nanopoulos. They have been moved to different posts.

No evidence was found of any irregularities in other departments or directorates general of the commission since 1999.

The European Parliament's budget committee, meanwhile, has been active in trying to call the commission to account, saying its members knew about the problems as early as 1999 but failed to act.

Monetary Affairs Commissioner Pedro Solbes, Administration Commissioner Neil Kinnock and Budget Commissioner Michaele Schreyer are all seen as sharing some responsibility by MEPs.

Mr Solbes, as the commissioner in charge of Eurostat, is particularly in the firing line.

"There's no evidence of personal enrichment," said the parliament's liberal group leader Graham Watson. "But there is evidence of a clear breach of the financial regulation and in that case then the commissioner in whose department this has happened should resign."

How much money is involved?

Investigators have focused on around 400 contracts signed between the 1990s and late 2002.

Eurostat is thought to have siphoned off almost five million euros, most of which went missing between 1996 and 2001. Around 1.2 million was recovered in 2001.

Who profited?

Mr Franchet, Mr Byk and Mr Nanopoulos deny any fraud, claiming that the secret bank accounts simply enabled them to pay contracts on time by bypassing lengthy EU bureaucratic procedures.

The commission's reports issued on 23 September say there is no concrete evidence of personal enrichment at Eurostat, but the auditors found a "total lack of an audit trail" which made it impossible to find out where the money went.

The reports told how one company, Eurocost, falsified its accounts and neglected to pay more than 700,000 euros owed to Eurostat.

Less than half of three million euros was recovered by Eurostat in its dealings with another company, CESD Communautaire.

How does the scandal compare with that which brought down members of Jacques Santer's commission in 1999?

The crisis is the most serious to hit the EU executive since members of the previous commission resigned in 1999 over fraud and nepotism charges.

All 20 commissioners, led by commission president Jacques Santer, resigned on 15 March 1999 after a damning report by a committee of independent experts said all of them had been unaware of malpractice within the services they were supposed to be running.

The resignations were described as a political act of taking responsibility.

Following the resignations, new President Romano Prodi pledged to turn the commission into a modern, responsible and reliable administration. One of his key reforms was a "zero tolerance" policy towards fraud and irregularities.