Brussels widens fraud probe

A widespread inquiry i to secret bank accounts and fictitious contracts across the European Commission was launched yesterday amid growing anger at the scale of alleged fraud in the European Union's executive.

Neil Kinnock, EU administration commissioner, is ordering the commission's most senior officials to answer a "fraud questionnaire" to assess the extent of the problem.

The move reflects fears that the "vast enterprise of looting" that fraud investigators found at Eurostat, the commission's statistical arm, may also have occurred in other departments.

Members of the European Parliament yesterday expressed their concern about the issue and called Romano Prodi, commission president, to answer questions in September.

MEPs accused Mr Kinnock and Pedro Solbes, the commissioner in charge of Eurostat, of failing to heed several earlier warnings about alleged wrongdoing. Some MEPs called for Mr Solbes's resignation.

Problems were identified at Eurostat by trade unions in 1997, by internal commission audits in 1999 and 2000 and by Paul van Buitenen, a whistleblower in 2001. But Mr Solbes said he knew nothing about the scale of the problems until he read newspaper reports in May 2003. He said: "I can't be blamed or asked to take responsibility for something I didn't know about."

Last week Mr Kinnock revealed the "relatively extensive practice" at Eurostat until 1999 of setting up secret and illegal accounts, into which millions of euros are thought to have disappeared.

Some commission officials say the practice, ostensibly to give more "flexibility" in carrying out EU work, was widespread in the 1990s.

Mr Kinnock said there was evidence this "utterly reprehensible" practice was continuing at Eurostat, and lie has ordered an immediate inquiry into whether other commission departments were involved. He has asked the most senior civil servant in each department to give assurances that all contracts are awarded according to EU law.

If the inquiry reveals the practice still exists, it could mean European taxpayers have been defrauded on a large scale, and would place huge pressure on Mr Prodi's commission.

The last commission, led by Jacques Santer, was toppled by the parliament in 1999 amid allegations of financial misconduct.

Mr Prodi came in to office promising to clean up the institution with "zero tolerance" towards fraud.

The secret bank accounts at Eurostat were set up by commission officials to hold money paid through inflated contracts to subcontractors. Mr Kinnock told the parliament's budgetary control committee: "If they are discovered [elsewhere], for whatever reason and to whatever degree, we will take appropriate action."

Mr Kinnock says he has no idea how much money has gone into them, or what happens to it. He says he is unable to tell whether personal enrichment was the motive in the case of the Eurostat accounts.

The commission last week began disciplinary action against Yves Franchet, the director general of Eurostat, and Daniel Byk and Photius Nanopoulos, two directors. Six other directors were also moved temporarily to other posts.