OLAF /10/10 Brussels, 11 October 2010
At the court of Pordenone in Italy, two men have been found guilty of fraud, involving about €20 million of evaded levies under the European Union milk quota scheme. They were both sentenced to three and half years' imprisonment.
The fraud scheme involved a network of companies with the sole purpose of simulating commercial operations of sale and purchase of milk in order to evade the extra levy on milk and milk products that is paid by all EU milk producers exceeding a certain milk quota. The milk quota scheme aims at balancing the supply and demand for milk and milk products in the EU.
Some of the persons involved in the fraud scheme in Pordenone had already been prosecuted in a similar case in the court of Saluzzo. The court decisions in these two cases represent significant judgements in creating a case law for similar cases in Italy, where milk quota fraud schemes have resulted in over €100 million in milk levies evaded between 1998 and 2006.
OLAF made a significant contribution to the case in Pordenone by coordinating the proceedings and facilitating the exchange of information between the two courts. OLAF was aware that some of the suspects in Pordenone had already been involved in the case in Saluzzo. With this information, OLAF could provide important legal assistance to the prosecutors and to the Guardia di Finanza (the Italian financial police), who carried out the operational part of the investigation.
“This case shows what an important role OLAF plays in coordinating criminal investigations in Member States. As a result of the information provided by OLAF, the prosecutor was able to present the fraud, not as an isolated case only occurring in Pordenone, but as part of a wider scheme,” said OLAF's Acting Director-General Mr. Nicholas Ilett.
During the pre-trial investigation, assets valued at €16 million belonging to the two suspects and the legal persons involved were frozen. The seizure decision was later confirmed by the Italian Supreme Court. Following the decision at the court of Pordenone on 4 May 2010, which was made public on 23 July, the seizure decision was converted into a confiscation order. This marks the first step in the recovery of the EU money missing due to the evasion of the extra milk levy.
The milk quota regime introduced by the European Common Agricultural Policy aims to steer EU-wide milk production. Milk that is produced in excess of the quota is subject to an extra levy when being put on the market.
A common fraud scheme in this kind of case supposedly works as follows: milk producers create several cooperative companies and make them appear as “first purchaser” of the milk. In such capacity, these companies would be obliged to keep the levy on the “extra-quota” milk produced and to transfer the money to the Italian body responsible for collecting the levies. In practice, the cooperative companies do not do so; in fact, they do not carry out any real business activity at all. Subsequently, the milk is sold to the dairies. On paper, the sale seems to involve the cooperative companies and the dairies, but in practice it takes place directly between the producers and the dairies. This way, the producers are able to sell their extra-quota milk to the dairies without paying the levy.
The cooperative companies, which get involved in this irregular activity, usually justify their non-payment of extra levies by claiming the possibility of compensating such debts with credits in favour of the producers by means of an “under-quota” production at national level in the following years. Moreover, such cooperative companies accumulate high debts in terms of unpaid levies to Member States and the EU. These companies usually do not have any income or assets and that makes the recovery of the levies difficult.
Head of Unit Spokesman, Communication, Public Relations
European Anti-Fraud Office (OLAF)
Rue Joseph II, 30 B-1049 Brussels (Belgium)
Phone: +32 2 296 72 00
Fax: +32 2 2998101