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Newsnight Monday, 30 June, 2003, 17:09 GMT 18:09 UK
EU corruption claims investigated
European Commission conference hall in Brussels

Robin Denselow presented a special investigation into allegations of corruption at the heart of the EU, while UK Commissioner Neil Kinnock joined us in the studio.


ROBIN DENSELOW:

Bad accounting, along with bad management, nepotism and the fraud that resulted from it, brought down the entire European Union Commission, then headed by Jacques Santer, just four years ago. The new team, headed by Romano Prodi and Neil Kinnock, promised that affairs would from now on be very different.

ROMANO PRODI:
I promise to launch a new era of change.

NEIL KINNOCK:
Reform is the top priority so I want to get on with it quickly and vigorously.

DENSELOW:
But today, the Commission is again faced with scandal and allegations of financial mismanagement and serious fraud, centred on this nondescript office in a bleak, modern suburb of Luxembourg. It's the headquarters of Eurostat, the EU statistics agency. On the face of it, Eurostat is a department as dry and tedious as its name. It publishes economic and financial data and statistics across Europe. But it's very powerful. The figures that it publishes can determine who gets regional aid. And it's now the centre of a fraud enquiry that threatens to negate all those promises of a new clean European Commission. The allegations, which are being investigated by the EU's anti- fraud office OLAF and by authorities in Luxembourg and France, centre on Eurostat's dealings with a series of other companies to whom they subcontracted work. One of them, Planistat, based in France, sold on Eurostat data quite legally. But it's alleged by EU investigators that some 920,000 euros ended up in an account outside EU financial scrutiny. Commissioner Pedro Solbes, the monetary affairs commissioner who is responsible for Eurostat, told a committee of MEPs last week, on the record, that OLAF, the EU anti- fraud agency, had given him this information. Another company, Eurogramme, based in Luxembourg was said to have falsified its financial history to win contracts with Eurostat. Commissioner Solbes told the same committee of MEPs that he had received this from Eurostat itself. This man, who still works at Eurostat, first tipped-off the authorities about the problems there, two years ago. At his request, we have concealed his identity. In an exclusive interview with Newsnight, he told us how money has been wasted.

UNNAMED MAN:
Companies were beinset up doing the work that the staff were doing before.

DENSELOW:
So what was the point of these companies?

UNNAMED MAN:
To get more money. What is the point of a director general? It's to get a bigger budget, not a bigger car or house but a budget is more important.

DENSELOW:
Can you prove directors were taking money for themselves?

UNNAMED MAN:
No not for themselves but it's a case of cronyism more than a case of putting money direct into their own pocket.

DENSELOW:
Eurostat has an annual budget of over 100 million, but we were told the accounting system is still simply inadequate.

UNNAMED MAN:
I think it is well known there are problems with this accounting system, although now they say they've corrected it. But I don't believe really they have corrected it.

DENSELOW:
So what was wrong with the accounting system?

UNNAMED MAN:
It had no double check system.

DENSELOW:
No double checks?

UNNAMED MAN:
No.

DENSELOW:
The Eurostat investigation centres around two men, Director-General, Yves Franchet, who was also the chairman of one of the companies who got work from Eurostat, and Director, Daniel Byk. Both men were, at their own request, transferred to new posts last month - within the Commission to DG Admin for which Neil Kinnock has responsibility. The Commission stresses the presumption of innocence while investigations continue. Within the Eurostat office, it's claimed the problems had been common knowledge for years.

UNNAMED MAN:
Everybody was talking about it in private or in the cafeteria, it was very easy to know. But you could not know everything but you knew a lot of things were running.

DENSELOW:
And how many people were directly involved in fraud? A large amount?

UNNAMED MAN:
I should think six or ten something like that.

DENSELOW:
And if everyone in Eurostat seemed to have known what was going on, it's amazing that everyone here in Brussels didn't know likewise. After all, concerns about Eurostat were first passed to Santer's Budget Commissioner six years ago. Then two years ago, in August 2001, there was a further warning to the new Commission. This came from Paul van Buitenen, the official whose revelations on fraud had helped to bring down the Santer Commission, and who had now been briefed by the whistle-blower inside Eurostat. He reported his concerns about Eurostat to DG Administration, and the note was passed to Commission Vice President Neil Kinnock. Another copy came here to OLAF, the anti-fraud body set up by the new commission. OLAF, already examining possible problems at Eurostat, now launched a series of new investigations and later informed prosecutors in Paris and Luxembourg where the sub-contracting companies were based. OLAF would not discuss the matter with us. OLAF the office for the fight against fraud, had certainly been warned that there were problems at Eurostat two years ago. But what about the Commissioners themselves? Warnings had been passed to, among others, Neil Kinnock, who is in charge of administrative reform. And it's argued that they could have done more. Last week, the European Parliament's Budget Control Committee had their chance to grill three key commissioners on what they knew about the investigations into Eurostat. Surprisingly, they didn't all seem that well informed. Michaele Schreyer, the EU budget commissioner, said she only found out about the investigation into Planistat's dealings with Eurostat in April, after OLAF had approached the French prosecutors. Pedro Solbes, the Monetary Affairs Commissioner, formally in charge of Eurostat, said he'd only found out that Eurostat officials were under suspicion by reading about it in the press. And Neil Kinnock, who is in charge of reforming the Commission, suggested there should be a code of procedure on who should be told what about OLAF investigations. All of which raises a whole series of questions. Why were Eurostat officials not moved from their posts earlier, once OLAF investigations were under way? And why had the Commissioners clearly not all known what the OLAF investigators were doing? One Conservative MEP argues that OLAF has been used as a device to allow the Commissioners to avoid difficult issues.

CHRIS HEATON-HARRIS:
Sometimes I perceive the Commission use OLAF as a useful tool to kick something into the long grass. Because if you refer it, it's going to take time to investigate. And they use it as a tool.

DENSELOW:
Behind all of this, there's a far broader question - after all the scandals that brought down the EU Commission back in '99 - has the EU now established an accounting system that can detect fraud? Marta Andreasen thinks not. She was hired as the EU's Chief Accountant in January last year, but suspended four months later after claiming the system was open to fraud. She was accused of flouting staff regulations by contacting MEPs rather than discussing her concerns with superiors. She had asked for an independent audit of EU finances, and says she was not surprised to learn about Eurostat.

MARTA ANDREASEN:
I told the Commission more than a year ago that the system was vulnerable and from there on if nothing had been done, we can expect mismanagement to appear everywhere. One of the most important issues is the computer system is not secure, so many people can access it. There's no traceability. So this means when people access it, you can't see who and when.

DENSELOW:
So people can change the figures in the computer, or look at the computer without people knowing?

ANDREASON:
People can change information. They can do it on today's figures but they can also do it retroactively for many years and there is no trace in it.

DENESLOW:
From their side, the Commission would argue that they are tackling the Eurostat issue. The OLAF investigations are on- going, and meanwhile the EU Internal Audit Service will examine a sample of some 400 Eurostat contracts, and the awarding of grants. A move that perhaps led to the resignation this week of Jules Muis, the EU Chief Auditor, who is to leave in April. He is known to be concerned by fraud and it's rumoured in Brussels that he wanted a far more in-depth inquiry. The whistle-blower at Eurostat certainly argues that more needs to be done.

UNNAMED MAN:
There needs to be a truly independent audit, because I've no trust in the accounting and audit by the internal service of the Commission.

DENSELOW:
Marta Andreasen also wants an independent audit and complains how she has been treated as a whistle-blower. She is obliged to reside in Brussels but is not allowed in Commission buildings. And because she has been disciplined there are further restrictions.

ANDREASON:
They've treated me as if I've committed a serious action, for a serious crime. If you look at the treatment of the Eurostat officers, they have been moved to give them time to defend themselves before the Court of Justice, while I was suspended.

DENSELOW:
On Monday, MEPs will quiz the boss of OLAF about the investigations, and a week later they hope to question the Eurostat bosses, amidst growing concern that the EU is again being tainted by allegations of fraud and failing to take appropriate action.

Newsnight can be seen on BBC Two at 2230 BST 2130 GMT, or in Real video, either live or on demand, by clicking on the latest programme button.

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Robin Denselow
presents an investigation into alleged corruption at the heart of the EU

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