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Tuesday, 30 March 2004 - Strasbourg Final edition
Fight against fraud and protection of the financial interests of the Communities (2002)
P5_TA(2004)0223A5-0135/2004

European Parliament resolution the protection of the financial interests of the Communities and the fight against fraud - Annual report 2002 (COM(2003) 445 - C5-0593/2003 - 2003/2248(INI))

The European Parliament ,

–   having regard to the Commission's annual report for 2002 on the protection of the financial interests of the Communities and the fight against fraud (COM(2003) 445 - C5-0593/2003),

–   having regard to the report of the European Anti-Fraud Office (OLAF) for the year ending June 2003(1) ,

–   having regard to the annual report of the European Court of Auditors concerning the financial year 2002(2) ,

–   having regard to its resolution of 4 December 2003 on the Commission report on the evaluation of the activities of the European Anti-Fraud Office (OLAF)(3) ,

–   having regard to the proposal for a Regulation of the European Parliament and of the Council amending Regulation (EC) No 1073/1999 concerning investigations conducted by the European Anti-Fraud Office (OLAF) (COM(2004) 103),

–   having regard to Article 276(3) and Article 280(5) of the EC Treaty,

–   having regard to Rule 47(2) and Rule 163 of its Rules of Procedure,

–   having regard to the report of the Committee on Budgetary Control (A5-0135/2004),

A.   whereas the number of cases of fraud and irregularity reported in 2002 has risen by 13% and the established amounts by 35.8%; whereas, compared with the previous year, the number of cases relating to traditional own resources has increased by 13% and those in the agricultural sector by 36%; whereas the number of cases relating to structural actions has more than quadrupled, which is a reflection of the conclusion of the programmes for the period 1994-1999 and whereas the number of cases detected relating to direct expenditure rose by 21% (see Annexes 1 to 4 to report A5-0135/2004),

B.   whereas the total volume of cases of irregularity and fraud listed in the Commission's annual report for 2002 amounted to just under EUR 2.12 billion, EUR 1.18 billion of which was reported by the Member States and EUR 0.94 billion by OLAF; the cases reported by the Member States can be broken down as follows:

   - own resources: EUR 324.544.459 (2001: EUR 238.908.883)
   - EAGGF Guarantee Section: EUR 198.079.000 (2001: EUR 140.685.000)
   - structural actions: EUR 614.094.000 (2001: EUR 201.549.000)
   - direct expenditure: EUR 42 605 000 (2001: EUR 42.548.000),

C.   whereas, in the period covered by the report, in the sphere of traditional own resources cases involving a total of EUR 324.54 million, in the sphere of the EAGGF Guarantee Section cases involving a total of EUR 171.58 million and in the sphere of structural policy measures cases involving a total of EUR 368.29 million were reported with a view to recovery, and whereas, in the sphere of traditional own resources, a sum of EUR 80.6 million, i.e. 24.8% of the amounts established in 2002, was recovered,

D.   whereas, in 2002, OLAF opened investigations into 415 cases and concluded 652 cases; whereas the amounts implicated in the cases concluded in that period was an estimated EUR 937 million,

E.   whereas the Community completed the financial year 2002 with a budget surplus of EUR 7.4 billion (2001: EUR 15.0 billion, 2000: EUR 11.6 billion), which was chiefly attributable to the Member States" having overestimated their Structural Fund expenditure by EUR 4.8 billion, but also to the over-estimation by EUR 1.8 billion of planned expenditure involving resources directly administered by the Commission,

Reporting of irregularities and fraud by the Member States

1.  Regrets the fact that, in the wake of the Eurostat affair, the Commission lacked the determination and strength to overcome the resistance within its administration and make the necessary revisions to its policy of decentralising responsibility for financial management; notes that, in the absence of independent and effective balancing checks, this decentralisation will pose serious risks to the Community's financial interests;

2.  Recalls that in 1999 the Commission came into office trumpeting a policy of zero tolerance as regards fraud and corruption, but notes that it will bequeath to its successors in the fight against irregularities and fraud an unprecedented welter of sometimes contradictory rules and newly established units and bodies, making turf wars and mutual buck-passing inevitable;

3.  Expects that one member of the future Commission will be exclusively responsible for budgetary control in order to underline the importance of this task and to avoid any possible conflict of interest from the start;

4.  Notes with great concern that numerous Member States do not take communication, reporting and follow-up of irregularities and fraud seriously; points out that, in not doing so, those Member States are acting contrary to the law;

5.  Notes that only a small part of national inspection services and investigative departments are assigned to fighting combat fraud and calls on the Member States to reconsider their position in this respect;

6.  Is frustrated that progress in this area is still totally unsatisfactory after numerous years. As the Commission states: "The practices of the national administrations still vary despite the efforts made at harmonisation. The data communicated by the Member States is often incomplete, in particular a number of cases do not include any mention of the amounts or of references to the identification of the products concerned. Also the distinction between "frauds and other irregularities remains due to the fact that the Member States do not always have the same view of criminal risk. Consequently, communications refrain, in a not insignificant proportion, from identifying the case as a fraud or a simple irregularity"(4) ;

7.  Notes that Germany, Greece and Spain are in breach of current law(5) and do not communicate irregularities in the agricultural sector to OLAF in digital form, whereas Germany and Spain are responsible for 52% of the total number of communications; calls on the Member States concerned to send their communications in digital format;

8.  Notes, as regards traditional own resources (total implicated amount of EUR 324 544 459), that goods put into free circulation (cigarettes, bananas, sugar, aluminium) are particularly affected by irregularities;

9.  Notes with incredulity that, in the agricultural sector (total implicated amount EUR 198 079 000), the product concerned could not be identified in 50% of cases; in addition, most irregularities occurred in relation to fruit and vegetables;

10.  Notes, as regards structural actions (total implicated amount EUR 614 094 000), that the main causes of irregularities were billing for ineligible expenditure, failure to complete the measure and missing or incomplete supporting documents;

11.  Emphasises that the recovery of monies unduly paid does not represent a penalty and that on grounds of deterrence alone it is vital that the Commission and OLAF should urge the competent national authorities to initiate criminal proceedings when instances of attempted fraud occur;

Recovery of amounts paid in excess or in error (6)

12.  Notes that almost EUR 2.2 billion are to be recovered from the areas below:

   - Own resources: EUR 243 981 821 from 2002 (EUR 1.24 billion from 1998 to 2001(7) ); in 2002, the irregularities were mainly attributable to Germany, the Netherlands and Italy;
   - Structural actions: EUR 368 287 000 from 2002 (EUR 337 656 000 from previous years); in 2002, the irregularities were mainly attributable to Germany;

13.  Asks OLAF to clarify by the end of March 2004 whether a Tempus-Phare training seminar for senior Romanian civil servants, which was organised by the Université Libre de Bruxelles and scheduled to be held in Bucharest in 2002, duly took place;

14.  Notes the Commission's statement (answer to Written Question E-3812/03) that OLAF has resumed its investigations of the case involving Tempus training seminars for senior Romanian civil servants; emphasises that the Université Libre de Bruxelles must be called on to pay back the funding allocated for this programme should no adequate evidence be provided that senior civil servants did indeed take part in the relevant seminars;

15.  Notes, further, in connection with this case, the Commission's statement (answer to Written Question E-3812/03) that the relevant allegations were initially the subject of an anti-fraud audit conducted by a private auditing firm, whose findings OLAF then used as the basis for its investigation; looks to OLAF to include, in its next activity report, a list of all the cases in which it has agreed to audits by private firms instead of immediately initiating its own investigations;

16.  Welcomes the fact that the Commission reviewed the procedural systems for reporting and following up irregularities under the Structural Funds in November 2002 and January 2003 and came to the following conclusions which should be translated into practice in the next few months(8) :

   systematic and immediate reporting of all irregularities should be the norm;
   there should be systematic monitoring of the follow-up of irregularities and their reporting, enabling OLAF to update the communications;
   the information contained in the notification should be accurate and complete;
   at national level, coordinating measures should be taken or consolidated to ensure harmonised interpretation and procedures;
   at national level, instructions should be drawn up for dealing with irregularities, they should be worded more clearly and expanded;
   electronic data transfer to the Commission should be introduced as quickly as possible;
   updated systems descriptions should be forwarded to OLAF in order to implement Regulation (EC) 1681/94(9) (Article 2);
   an accounts receivable register should be established; the paying agencies should start to forward the necessary reports on recovery of payments and take these into account in the statements of expenditure;

European Agricultural Guidance and Guarantee Fund (10)

17.  Notes that on 1 December 2003(11) , the total amount to be recovered under the EAGGF - Guarantee Section was EUR 2.08 billion, and that EUR 657 million of that sum originated in irregularities already reported in the period before 1995;

18.  Notes that the Commission has made some progress in clearing the backlog of such cases;

19.  Notes, in this context, Commission Decision 2003/481/EC of 27 June 2003(12) on the financial implications of irregularities committed by economic operators, according to which of a total irrecoverable amount of EUR 73.6 million, only EUR 5.6 million (i.e. 7.6%) were attributable to Member States" negligence, while the remainder was charged to the Community budget;

20.  Asks the Court of Auditors, in anticipation of further decisions of this type, to examine whether the Commission may have been too lenient with the Member States in its above decision of 27 June 2003, and to submit a special report on the subject as soon as possible;

21.  Notes that more than two thirds (EUR 1.40 billion) of the total amount of EUR 2.08 billion to be recovered was attributable to Italy alone;

22.  Points to the case-law of the European Court of Justice which, in its judgment of 11 October 1990 (Case C-34/89, Republic of Italy v. the Commission)(13) recalled the obligation of general diligence placed on the Member States, by virtue of which Member States must take steps to rectify irregularities promptly as, otherwise, there is a risk that it will become difficult or impossible to recover sums paid in excess;

Export refunds for live cattle intended for Lebanon

23.  Notes that, in 2002, 226,867 live cattle were exported to Lebanon, resulting in the payment of more than EUR 52 million in export refunds; 121,026.6 tonnes of live cattle were thus exported to Lebanon; Doubts that the Lebanese market can absorb such a high volume of beef and veal imports and doubts, therefore, that Lebanon is the sole destination of the live cattle; Calls on the Commission, therefore, immediately to halt the payment of export refunds for live cattle intended for Lebanon until it has been established that the export refunds in question are not being misused;

24.  Calls on OLAF to embark on an investigation into the obvious irregularities in connection with export refunds for live animals intended for Lebanon;

25.  Calls on the Commission to take prompt measures to abolish the system of export refunds, which is prone to abuse; looks to the Commission to put forward a timetable for this process; calls on the Council to support Parliament in its efforts to secure the abolition of export refunds, in the interests of the public;

26.  Welcomes the measures taken by the Commission in the agricultural sphere to halt the use of export refunds to support the legal, but ethically unacceptable, practice of importing agricultural products into one of the 10 new Member States and transporting those products back to their country of origin following the accession of those Member States;

OLAF's annual activities report and its information policy

27.  Is disappointed with OLAF's annual activity report for the year ending June 2003, because, although it contains a large number of tables and diagrams and some examples of specific cases, it does not facilitate an overall assessment of the results and the success of the investigations carried out by the Anti-Fraud Office;

28.  Regrets, in particular, that probably the most important case during the reporting period - the Eurostat case - was actually expressly omitted from the report;

29.  Criticises the fact that the reporting period selected, from mid-year to mid-year, makes it unnecessarily difficult to gain an overall comparative view in conjunction with the Commission's annual report on the protection of the Community's financial interests; calls therefore for the reporting periods to be brought into line with each other;

30.  Recalls the fact that Parliament had called on OLAF to inform it about internal and external investigations on a quarterly basis(14) ; criticises the fact that this was not done in 2003;

31.  Also criticises the fact that the summary tables are constantly changing format, which makes it impossible to follow cases over several reporting periods; makes it clear therefore that, in future, the summary tables must show the following columns: CMS (Case Management System) number and date of entry, organisation/company concerned, allegation/suspicion, evaluation: beginning-end, investigation: beginning-end, current status, possible financial loss; recommended follow-up: disciplinary proceedings/criminal proceedings/recovery; actual follow-up and result;

32.  Notes that internal OLAF information was passed to the press on several occasions; also notes that OLAF published a press release on 27 March 2002 which, among other things, explained that an internal investigation was being launched and that "it is not excluded that payment may have been made to somebody within OLAF ... for these documents"(15) ; a journalist working for a German weekly magazine, in which several articles concerning OLAF cases had appeared, felt that he had been libelled and lodged a complaint with the European Ombudsman;

33.  Notes that OLAF's opinion has proved to be an untenable assertion, which prompted the Ombudsman to recommend in June 2003 that "OLAF should consider withdrawing the allegations of bribery that were published and that were likely to be understood as directed at the complainant"(16) ; regrets the fact that OLAF has not acted on that recommendation, but instead has repeated, in a press release dated 30 September 2003, that there is suspicion of bribery, stating merely that no evidence had come to light 'thus far';

34.  Points out that OLAF may open investigations only in cases where suspicions are properly founded and that, pursuant to Article 6 of the OLAF regulation, such investigations must be conducted continuously over a period proportionate to the circumstances; calls on the OLAF Supervisory Committee to deliver an opinion as to whether these provisions have been breached in this case and as to whether the investigation may have been misused to exert pressure on or intimidate journalists;

Revision of the OLAF Regulation (EC) No 1073/1999 (17)

35.  Points out that the President of the Commission announced on 18 November 2003 that legislative proposals would be forthcoming which could be adopted by Parliament and the Council before the European elections, thereby contributing to restoring public confidence, which was destroyed by the Eurostat affair;

36.  Recalls its abovementioned resolution of 4 December 2003 on evaluating OLAF's work, in which it supported the Commission President's announcement of giving greater priority to OLAF's core tasks, improving the flow of information between OLAF and the institutions, doing more to safeguard the rights of defence of persons under investigation and enhancing the role of the OLAF Supervisory Committee;

37.  Cannot understand that the Commission has forwarded the progress report pursuant to Article 15 of the OLAF Regulation more than one year late and, following the adoption of Parliament's abovementioned resolution of 4 December 2003, that the Commission took over two months to adopt a package of proposals on 10 February 2004 (COM(2004) 103); notes that this delay has made it impossible to improve the OLAF Regulation before the European elections;

38.  Notes that the legislative proposals submitted by the Commission point to some extent in the right direction but that the following points are totally unacceptable and must almost be regarded as provocation;

   a) instead of stipulating that OLAF should finally carry out to the full extent its long-neglected core task of internal investigations, the Commission's proposal expressly offers OLAF the possibility of not opening internal investigations even when there is sufficiently strong suspicion that acts of fraud or corruption or other illegal acts have been committed to the detriment of the financial interests of the Community;
   b) instead of assigning the secretariat of the OLAF Supervisory Committee administratively to the secretariat of the European Parliament, the Commission now proposes that the secretariat should be administratively assigned to the Commission, thereby calling into question the independence of the Supervisory Committee;
   c) instead of strengthening the rights of persons subject to an internal investigation, they are to be deprived of the possibility hitherto provided by the OLAF Regulation to appeal to the European Court of Justice, if OLAF, in the course of its investigations, acts in a way which adversely affects them; this would open the floodgates to abuses of power (e.g. opening an investigation without sufficient grounds, inordinately long investigations) as such offences would no longer be subject to the scrutiny of a court;

39.  Notes, moreover, that the Commission proposal puts forward changes relating to Regulation (Euratom, EC) No 2185/96(18) concerning on-the-spot checks and inspections, which could delay its prompt adoption by the Council; takes the view that the shortcomings revealed in the application of the above Regulation should be remedied by directly amending that Regulation and not indirectly by amending the OLAF Regulation;

40.  Emphasises that during the intervening period the current provisions of the OLAF regulation must be strictly applied;

41.  Emphasises in particular, in that connection, that Article 10 of the OLAF regulation explicitly requires the Director of OLAF to forward to the judicial authorities information liable to result in criminal proceedings; stresses once again that the regulation does not confer any discretionary powers on the Director in this regard (paragraph 16 of its resolution of 4 December 2003 on the evaluation of the activities of OLAF), but leaves the decision entirely in the hands of the competent national judicial authorities;

42.  Emphasises once again the substance of paragraph 18 of its resolution of 4 December 2003, which states that priority must be given to investigations in those areas where the national authorities have no particular interest or no powers, that is to say investigations within the institutions and agencies and in connection with activities administered directly by the Commission; stresses that investigations in those areas must, as a matter of principle, be conducted in accordance with the strict rules governing internal investigations, because in such cases possible involvement or negligence on the part of EU employees has to be investigated;

43.  Points out that the budgetary authority appended the following remark to the OLAF establishment plan, which authorises a total of 329 posts for 2004: "Of which 80 posts for internal investigations pursuant to Article 4 of Regulation (EC) No 1073/1999. These investigators are to be grouped together within a special directorate"; looks to OLAF to complete the requisite internal reorganisation by July 2004 at the latest;

44.  Points out that OLAF sometimes makes headlines with investigations outside the Community (e.g. on the possible misuse of aid payments to the Palestinian National Authority); calls for this matter to be dealt with as part of the proposed revision of the OLAF regulation;

45.  Takes note of a tendency on the part of the Court of First Instance, in its rulings, to reject actions brought by officials and other servants against OLAF as inadmissible if the relevant OLAF investigations have not led to the imposition of disciplinary penalties; points out that Article 14 of the OLAF regulation explicitly provides for judicial review of measures taken by OLAF as part of an internal investigation, without laying down specific conditions governing such a review; calls on the Commission to point out clearly in future proceedings before the Court of First Instance that it had been the intention of the legislator to offer to persons concerned a reliable protection under the rule of law already during the period of investigation;

46.  Asks the newly elected Parliament to make the revision of the OLAF Regulation a matter of priority as of September 2004;

Combating fraud in the European Central Bank and the European Investment Bank

47.  Recalls the judgments of the Court of Justice of the European Communities of 10 July 2003 (Cases C-11/00 and C-15/00), ruling that the OLAF Regulation (EC) No 1073/1999 is applicable to the European Central Bank and the European Investment Bank;

48.  Calls on both banks, without delay, to take the decisions provided for in Article 4 of the OLAF Regulation concerning internal OLAF investigations and to implement the standard decision on internal investigations;

49.  Draws attention to the fact that, even without such a decision on internal OLAF investigations, both banks are required, pursuant to Article 7 of the OLAF Regulation, to forward to OLAF without delay any information relating to possible cases of fraud or corruption or any other illegal activity;

50.  Takes the view that both banks must, without delay, make the notifications they have so far failed to do, so that OLAF obtains a comprehensive picture of all cases of irregularity and fraud which have occurred in the banks since OLAF was set up in 1999; expects OLAF to submit a report on this subject by September 2004 at the latest;

51.  Takes the view that the judgments of the Court of Justice apply, mutatis mutandis, to the European Investment Fund as well; calls on the Investment Fund to take the requisite decisions;

Contracts with external firms

52.  Notes that, between 1998 and the first half of 2003, the Commission paid a sum of almost EUR 115 million to the five most important international consultancies; two of these five companies received more than EUR 77 million, i.e. more than two thirds of the money ; points out that these figures clearly relate only to expenditure directly administered by the Commission; calls on the Commission to compile statistics which also contain details of payments involving Community expenditure not directly administered by the Commission, in particular under the Structural Funds;

53.  Recalls the bad impression left by the award in 2002 of a contract to the ASCII consortium with a total value of EUR 23 million because a Commission spokesman, who at the time was an official granted leave of absence "on personal grounds", had profited therefrom(19) ;

54.  Calls on the Commission to reconsider its policy of outsourcing Commission activities in the light of such high sums for consultant contracts and the negative experience of awarding contracts to external firms in the past; notes that contracting external firms to carry out work on behalf of the Commission should only be done in exceptional cases;

55.  Recalls Title V (Article 89) of the New Financial Regulation which states that "all public contracts .. shall comply with the principles of transparency, proportionality, equal treatment and non-discrimination" and that all procurement contracts shall, as a rule, "be put out to tender on the broadest possible base"; points out that, according to experts, the failure to issue or the manipulation of invitations to tender in respect of public contracts can lead to substantial additional costs to the European taxpayer;

56.  Looks to the Director of OLAF to report all instances of breaches of the rules governing tender procedures to the competent judicial authorities and no longer to accept the explanation that such breaches were the result of ignorance or incompetence or were not committed with a view to personal enrichment;

57.  Points out that Article 314 of the Belgian Criminal Code is also applicable to invitations to tender issued by the European institutions which have their seat in Brussels: on that basis, the mere fact of using fraudulent means to exclude potential tenderers from participation in a tender procedure constitutes a criminal offence, with no need to meet the generally difficult requirement to prove the size of the resulting loss or that corruption and personal enrichment were involved;

Other remarks

58.  Welcomes the Commission's detailed account of the form in which the accession countries were involved in the policy of preventing and fighting fraud;

59.  59 Welcomes the opening of the OLAF investigation into the financing of Parliament's buildings in Brussels including all payments between the developer, SA Forum Léopold, and WestLB (which provided the financing) and possible payments to third parties; expects that, if necessary, the competent judicial authorities will provide all necessary assistance should the parties under investigation invoke banking secrecy;

60.  Asks the Commission to inform the competent Parliament committee in writing of the measures to stem cigarette smuggling, including the complaints pending before the US courts, together with measures to protect the euro and intellectual property;

61.  Calls for clarification of the status of negotiations with Switzerland concerning the combating of fraud; calls for clarification in particular as to whether:

   - Switzerland continues to refuse to carry out administrative checks on economic operators resident in Switzerland;
   - Switzerland is prepared to adopt the Council of Europe standards for judicial cooperation in the field of customs and tax offences, and
   - Switzerland continues to regard the laundering of profits from tax fraud through Swiss financial institutions as a legal activity;

62.  Stresses once again(20) that an 80-page list of new national provisions to achieve the aims of Article 280 of the EC Treaty is of little value as long as it is not analysed by the Commission with a view to highlighting any shortcomings in the protection of the Community's financial interests; calls for the annual report for 2003 to contain a section which undertakes such an analysis and in which the Commission highlights the areas still in need of urgent action;

63.  Notes that Commissioner Solbes forwarded the Eurostat action plan for 2004 to the chair of the Committee on Budgetary Control on 21 January 2004; takes the view that an independent administrative and management audit of the new Eurostat structure should be carried out once OLAF's investigations are complete;

64.  Calls on the Commission to ensure that the spirit of preferential trading schemes with neighbouring states is not undermined by support for exports to an accession country of certain goods which should, in fact, remain in the European Union;

o
o   o

65.  Instructs its President to forward this resolution to the Council, the Commission, the European Court of Justice, the European Court of Auditors, the European Central Bank, the European Investment Bank, the European Investment Fund, the OLAF Supervisory Committee and OLAF.

(1) http://europa.eu.int/comm/anti_fraud/reports/index_en.html.
(2) OJ C 286, 28.11.2003, p. 1.
(3) P5_TA(2003)0551.
(4) COM(2003) 445, Title III, point 10.1. See also point 11.
(5) OJ L 67, 14.3.1991, p. 11.
(6) See also Annexes 5 to 7 to report A5-0135/2004.
(7) It is unclear whether parts of these amounts have already been recovered for these years.
(8) Commission, DG Regional Policy and OLAF, summary report on the review of the systems and procedures for the reporting and follow-up of irregularities in the context of the Structural Fund of 19 December 2003.
(9) OJ L 178, 12.7.1994, p. 43.
(10) Letter of 30 January 2004 from Commissioner Schreyer to the rapporteur.
(11) Letter D (2004) 3541 of 30 January 2004 from Commissioner Schreyer.
(12) OJ L 160, 28.6.2003, p. 83.
(13) ECR 1990, I-3603.
(14) Paragraphs 140 and 142 of Parliament's resolution of 8 April 2003 containing the comments accompanying the decision concerning discharge in respect of the implementation of the general budget of the European Union for the 2001 financial year (Commission) (OJ L 148, 16.6.2003, p. 21).
(15) http://europa.eu.int/comm/anti_fraud/press_room/pr/2002/2002_03_en.html.
(16) http://www.europarl.ep.ec/ombudsman/recommen/en/021840.html
(17) OJ L 136, 31.5.1999, p. 1.
(18) OJ L 292, 15.11.1996, p. 2.
(19) According to information published by Agence Europe, 30 September 2002, point 29
(20) Paragraph 56 of the European Parliament resolution of 13 March 2003 on the protection of the financial interests of the communities and the fight against fraud - Annual report (2001) (OJ C 61 E, 10.3.2004, p. 392); see also the European Parliament resolution of 29 November 2001 on this subject (OJ C 153 E, 27.6.2002, p. 325).

Last updated: 18 October 2004Legal notice