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EU staff investigations
Internal investigation leads to judicial proceedings and financial recovery
OLAF received information from an EU institution that one of its members had been filing claims for the reimbursement of his travel expenses based on supporting documents that seemed to have been manipulated.
OLAF opened an internal investigation and analysed the reimbursement claims. Two on-the-spot checks were carried out in travel agencies that had provided travel services to the member. The aim was to compare the tickets that the member had submitted to his institution as supporting documents with the documentation stored by the travel-service providers.
OLAF established that the ticket receipts had been forged with help from an employee of one of the travel agencies. This enabled the member to claim and receive reimbursement for travel that was higher than the costs actually incurred. It was established that between October 2006 and July 2013, over EUR 182 000 was wrongly refunded to this member.
The institution ceased reimbursement to this member, following OLAF’s suggestion for precautionary measures, thus preventing the unjustified payment of a further EUR 50 000. Following OLAF’s judicial recommendations, the relevant national judicial authorities informed OLAF in July 2014 that a criminal investigation was in progress. OLAF also recommended that the institution launch procedures to recover the undue payments. In November 2014, the institution informed OLAF that the full amount had been recovered. The institution also introduced improved control mechanisms to mitigate the risk of future damage to the EU budget.
OLAF discovers complex fraud involving medical equipment funded through the European Regional Development Fund
OLAF opened an investigation based on a series of investigative journalism articles on EU funding for the construction and the equipping of a medical centre in Hungary. The European Regional Development Fund (ERDF) provided EUR 674 000 for medical equipment for the centre.
The OLAF investigation revealed that the supplier of the equipment had purchased the medical devices for EUR 262 000 from a company in Slovakia. Subsequently, the supplier sold the equipment to the centre for EUR 1.7 million, and this was the amount declared on the application for EU funding. The supplier then paid EUR 1.3 million of the sale price in ‘intermediary fees’ to a company registered in the Seychelles.
In return, the latter provided an interest free loan of EUR 1.26 million to the medical centre. By doing this, the supplier and the medical centre quadrupled the declared prices of the medical devices and appear to have defrauded the EU budget and circumvented the obligation on the medical centre to provide a financial contribution. The OLAF investigation also revealed that much of the equipment was not used at all and other equipment was found to be located at sites outside disadvantaged regions, in breach of the objectives of the programme governing the project.
In 2014, OLAF recommended to the Commission and the Hungarian authorities that they make arrangements for the full recovery of the ERDF subsidy and the national funding provided for the centre. OLAF also made recommendations to the Hungarian judicial authorities.
Abuse of experts’ CVs in an EU-funded African project
OLAF opened an investigation after it had received information from an EU delegation in an African country, alleging irregularities in a procurement procedure. The information concerned a service contract assigned to an EU-based company responsible for the selection of experts to direct and supervise roadworks financed by the EU budget.
OLAF carried out checks and found that the EU-based company had systematically altered the CVs of its experts, to ensure that they would meet the award criteria. OLAF also found that controls were deficient. There had been a high turnover of experts and their qualifications and competences were not checked as required. There was a general failure to ensure continuity.
By examining other contracts of the same European company in another three African countries, the same modus operandi was discovered, including the substitution of highly qualified experts with unqualified last-minute replacements.
OLAF made recommendations for the recovery of the amounts, by means of financial damages and penalties of up to 10 % of the contract, amounting to a total of EUR 3 million. OLAF also recommended the exclusion of the contractor from EU funding for a period of time and that databases of experienced experts in projects financed by EU funds should be set up and that compulsory financial sanctions should be applied in such cases.
Export refunds claimed for sugar exported to Croatia via Kaliningrad
Export refunds enable the EU to sell surplus agricultural products at prices which are competitive on the world market.
In 2007, the Belgian customs authorities became aware of regular large shipments of sugar being exported out of the EU to Croatia via the Russian port of Kaliningrad. The exporters declared that Russia was the final destination for the sugar, which was therefore eligible for export refunds totalling several million euros.
At OLAF's request, the Russian authorities investigated the company in Kaliningrad and confirmed that the sugar did not stay in Russia, but was re-exported to Croatia (which meant it was not eligible for export refunds).
OLAF carried out a control visit in cooperation with the Croatian customs authorities and found that over 3,400 tonnes of sugar had been imported into Croatia under this scheme.
Based on OLAF’s findings, the Belgian paying agency proceeded to recover unduly paid export refunds totalling €1.2 million. A further €1.5 million was blocked by the paying agency.
Investigation and international cooperation lead to the discovery of a complex trans-shipment fraud via Thailand
In 2011, the EU decided to impose anti-dumping duties (ADDs) on open-mesh fabrics of glass fibres due to Chinese companies dumping the product in the EU at prices lower than the product’s normal value (i. e. the domestic prices or the cost of production). OLAF has a mandate to investigate cases in which EU importers evade such duties.
OLAF opened an investigation into the suspected trans-shipment of these products through Thailand, done to evade ADDs in particular. All Member States were asked to identify and collect information about such imports. The evidence was collected during joint OLAF/Member State operations carried out in Thailand in close cooperation with the Thai authorities.
The facts that were established demonstrated that the Chinese goods had been trans-shipped in the free commercial zone in the area of Laem Chabang. The goods were reloaded into new containers. They had not been subject to any processing or manufacturing activity in Thailand and therefore were not entitled to Thai origin, either preferential or non-preferential.
Certain imports had nevertheless been declared with Thai certificates of preferential origin on the basis of false information provided to the issuing authorities. Some of these imports were falsely declared under the classification of another product not subject to ADDs. The investigation also revealed that certain goods trans-shipped in Thailand had come from Malaysia.
The OLAF investigation established evidence that enabled 13 Member States to start recovery proceedings for a total of EUR 3 million in evaded ADDs and conventional customs duties. This case is an example of a comprehensive investigation in the customs area with the involvement of Member States, non-EU countries and companies. It required considerable investigative and multinational legal expertise that is available,at EU level, only in OLAF. This investigation is one of several that concern the fraudulent import of the same type of products originating in China and consigned from various non-EU countries.
OLAF coordinates efforts to fight tobacco smuggling across the EU and in non-EU countries
For several years, OLAF had investigated suspicious activities that led to the discovery of a major cross-Europe cigarette smuggling network. OLAF cooperated in the criminal investigations, jointly organised by the competent Italian and German authorities.
As part of this work, OLAF organised a coordination meeting in autumn 2013 involving German and Italian judicial and law enforcement authorities, and worked with Belgium, Lithuania, Hungary, Poland, Romania and Slovakia, as well as Moldova and Ukraine. The smuggling network produced cigarettes in the EU. It then simulated fictitious exports or carried out real exports to non-EU countries and subsequently smuggled the cigarettes back into the EU, thus avoiding customs duties and taxes.
In November 2014, the network was dismantled through joint work by the Italian Agenzia delle Dogane and Guardia di Finanza and the German Zollkriminalamt Köln and Zollfahndungsamt Berlin. Prosecutors in Turin and Frankfurt/Oder also coordinated a search by law enforcement officials of an ostensibly legitimate cigarette factory that produced cigarettes destined in part for the illegal market. Investigations are continuing. More than 10 people have already been arrested. The estimated damage to the Italian budget alone is in excess of EUR 90 million. The final figures are likely to be much higher.
OLAF brings significant added value to operations like these, where contraband networks operate across borders and can only be countered by coordinated EU-wide efforts.