Fraud office recovers €700m of misused EU funds

The European Anti-Fraud Office recovered almost €700m of misused European Union money in 2011 and its investigations led to prison sentences totalling more than 500 years, according to its annual report. It also revealed that the agency, known as OLAF, takes on average almost two-and-a-half years to complete an investigation and spends two-thirds of its €58m administrative budget on staff salaries.

Overall in 2011, OLAF closed 208 cases in its role investigating the suspected criminal use of money from the EU budget and alleged fraud or corruption by staff in EU institutions. Its Investigations led to the retrieval of €691.4m of EU funds last year. Most of it – more than €500m – was from misused structural funds. Meanwhile just over €100m was from customs fraud and €34m from agricultural funds. On the back of OLAF's conclusions and recommendations, EU member states imposed prison sentences totalling 511 years, and fine of almost €155m.

"Thanks to our investigations, a considerable amount of money was recovered to EU taxpayers and a large number of criminal were brought to justice in national courts for crimes against the EU budget," said OLAF director general Giovanni Kessler. "In this financial climate, the fight against fraud and corruption is of particular importance and should be a priority in all member states."

In more than half of the cases closed, OLAF recommended that EU institutions or national authorities respond – usually with judicial action or financial penalties. At the end of 2011 it had 463 ongoing cases. Of those, 122 related to staff, 89 to the use of farm subsidies, 67 to external aid and 64 to structural funds. As part of an attempt to improve its efficiency, the agency – established in 1999 – focused on closing old cases and opening fewer new ones, the report says. On average OLAF investigations take more than 29 months.

Last year, OLAF had 437 staff and an administrative budget of €58.2m – of which €38.3m went on salaries. It had €23.5m available for programmes including training, the protection of euro banknotes and coins, and other anti-fraud activities. In the foreword to the report, Kessler said: "Due to the general economic climate, the human and financial resources available to OLAF are not expected to increase in the future. At the same time, the protection of EU money and the fight against fraud remains a key priority for the EU institutions and member states alike."

Among the example cases outlined by the report is that of an EU-funded project to build a plant in Bulgaria. Allegations emerged that the consortium that won the tender misrepresented its experience and qualifications. Following an investigation, OLAF found that incorrect and misleading information had been provided during the bid process. It recommended that €34m of EU funding be cancelled and an advance payment of €7m repaid. Bulgarian authorities have opened a criminal investigation.

In a second case, an EU-based parent company of a Chinese plastic bag producer complained that its name was being used illegally by other Chinese exporters so that they benefited from reduced duties. The anti-fraud office discovered that more than 2,000 metric tonnes of plastic bags worth €3m had been imported in a scheme to evade €1m of duties that should have been paid into the EU budget. Follow up action is underway, OLAF said.

Meanwhile, one high-ranking European official sent the questions and model answers to the selection test for an EU agency to a candidate who was a friend. The official resigned following an OLAF investigation and disciplinary proceedings. Another EU official – a project manager in a European Commission delegation – allegedly demanded and obtained brides to give participants favourable treatment. A criminal investigation was opened.