BRUSSELS, 22 September 2003 — Four years after a sleaze row destroyed the last European Commission, prompting its unprecedented mass resignation, the nightmare has returned to haunt its successor.
Tomorrow an official report will explain how as much as 920,000 euro was allowed to vanish from EU records, as it was channeled into a secret slush fund.
The explosive case — one that has been described as the “looting” of the EU’s statistical office, Eurostat — has revealed a catalogue of failings and provoked the biggest crisis in the four-year term of the Commission president, Romano Prodi. So serious are the allegations that there are calls for the resignation of the Spanish Commissioner Pedro Solbes, the man ultimately responsible for Eurostat.
Luxembourg-based Eurostat produces EU statistics but also sold data to a network of private firms, some of which were controlled by senior staff or former employees.
Although Eurostat had been under investigation by the EU’s fraud buster, Olaf, since 2000, it was a staggering three years before European Commissioners say they learned of the looming scandal. That happened in May when Olaf tipped off French police who launched an investigation over a contract with a Paris-based firm, and the allegations burst into the open.
The inquiry centered on Eurostat’s incestuous relationship with a network of companies, including Planistat, Eurogramme, Eurocost and CESD. A host of contracts were hurriedly cancelled or suspended and the three most senior Eurostat officials — Yves Franchet, Daniel Byk and Photius Nanopoulos — were moved to different posts. All deny benefiting personally, arguing that the cash was spent on legitimate projects.
Tomorrow, in conditions of some secrecy, European commissioners will see the findings of a “Task Force” of top officials set up to investigate, and an interim report from the Internal Audit Service. There may also be preliminary findings from Olaf.
So sensitive is the information that it is not being circulated to officials in advance as usual and when MEPs see the findings the following day they will do so in a sealed room without a photocopier.
On Thursday Prodi faces an unprecedented grilling by senior MEPs.
Among the questions lingering are whether Eurostat officials benefited personally, or whether they used the cash for legitimate spending, albeit via illegitimate means.
It should become clear whether “phantom” bank accounts exist in other parts of the European Commission (leaks suggest not).
There should also be explanations of why commissioners failed to act sooner, and, crucially, whether the problems date from the period of the previous — rather than the present — Commission.
Yesterday the fight back began when Chris Patten, the European commissioner for external relations, said: “Is it the case that these off-budget funds were going to pay for mistresses’ furs or villas in the south of France? It does not appear to have been.”
At the very least, the scandal has revealed a catalogue of faults, with procedures so cumbersome that officials circumvented them simply to fulfill their tasks. Meanwhile, Olaf’s work appears painfully slow and obsessively secretive.
With its semi-independent status Olaf devoted its energies to building a legal case against individuals rather that telling its political masters what it was finding. Communication was often non-existent and the most senior officials in Brussels failed to follow up warnings.
Many MEPs believe this is simply not good enough. Chris Heaton-Harris, a Conservative MEP on the Parliament’s budgetary control committee, says that at least three whistle-blowers had pointed to potential problems at Eurostat whose difficulties featured in European Court of Auditors reports dating from 1993.
“There was so much noise around I find it hard to believe that they did not know something was wrong,” he said. “Either there was such a breakdown in communication that they are incompetent, or they are complicit in something dodgy.”
Parallels with 1999 are striking because that crisis took hold just before European Parliamentary elections, when MEPs were anxious to raise their profile. Euro-MPs face the voters again next year, knowing that they have the power to bring down commissioners if they wish.
In 1999 the last commission was forced to resign en masse after an inquiry concluded that it was “becoming difficult to find anyone who has even the slightest sense of responsibility”. Four years later no one seems willing to take the wrap.
There are differences between the cases, however. In 1999 the allegations were directed against commissioners, notably Edith Cresson who hired her dentist as a scientific adviser. This time commissioners are in the dock over what they failed to do.
In 1999 the entire commission was forced to quit because Ms Cresson refused to fall on her sword. Like all members of the current commission, Solbes pledged on appointment to resign if asked to by Prodi.
With limited political support in Madrid, Solbes is vulnerable, the more so since he infuriated MEPs with a complacent observation that he cannot be held responsible for things he did not know about.
Prodi, who is expected to return to Italian politics next year, has every incentive to show firm leadership and prove he is absolutely clean — by sacking his Spanish commissioner if necessary. The risk is that doing so might encourage critics to target two other commissioners: Neil Kinnock, the commission vice-president in charge of administrative reform, and Michaele Schreyer, the budget commissioner.
For the European Commission president it is a far cry from the heady days of 1999 when he came into office pledging “zero tolerance” on fraud and malpractice. That is a promise he may be regretting.
