Corruption-busters face trials of their own in bid to clean up the institutions

Date: 10/01/02

Inside OLAF: David Cronin investigates the difficult task faced by Brussels' European Anti-Fraud Office

Among the drab monolithic glass and steel structures that dominate Brussels' European quarter is a building that boasts a little touch of Manhattan class.

Flame-like shards of metal jut from its roof, suggesting a hint of surrealism amid the sea of grey. It's as if the architects had taken the top of New York's art-deco Chrysler Building and peeled it off in pieces to expose what lies underneath.

Perhaps it's fitting, then, that this is none other than the Rue Joseph II headquarters of the European Anti-Fraud Office (OLAF), set up to expose the sort of shoddy shenanigans that give the whole EU a bad name - even when practised by a tiny few.

However, ever since its inception in 1999 OLAF has struggled to introduce a new culture of accountability into a conservative political environment. Even making simple decisions has been an ordeal.

Take its current unseemly row with Italy's government. Silvio Berlusconi and his justice minister, Roberto Castelli, have tried to block the appointment of magistrate Alberto Perduca as OLAF director of operations and investigations, even though it had been authorised by the previous centre-left administration.

Two other jurists face having their appointments vetoed, too, despite OLAF Director-General Franz-Herman Brüner doing everything by the book.

'I am personally very disappointed by the way that this matter has developed, all the more because OLAF enjoys excellent relations with our partner services in Italy,' says the German judge.

'These three persons were selected as a result of an objective and transparent recruitment procedure and I can see no reason why they shouldn't take up their duties in OLAF as soon as possible. No other member state has raised the kind of objections that Italy has.'

The situation is all the more frustrating, given the agency's track record during its short existence.

It has triggered unprecedented legal action against US tobacco giants over cigarette smuggling; probed falsification of documents designed to conceal the true level of banana imports from Ecuador; investigated abuse of flax and olive subsidies in Spain; exposed the Italian mafia in a butter-tampering case; tracked down missing EU funds in Slovakia and malpractice among Commission officials in Stockholm.

Nobody, then, could accuse its 250 staff (the number is due to rise to 330 later this year) of indolence. But one complaint that has dogged OLAF from its foundation is that it cannot be considered truly independent of the European Commission.

The main event that prompted the creation of OLAF was the resignation en masse of Jacques Santer's Commission in March 1999 over a series of damning allegations. At the time, the EU's executive faced a chorus of calls from politicians to ensure that a new anti-fraud service should be established and that it should not be under its control. The Commission didn't heed those warnings.

And so, OLAF now explains its status in baffling terms. A fact sheet it has prepared states that its investigative function is 'independent' but it is 'still part of the European Commission' and answerable to budget chief Michaele Schreyer.

British Conservative Chris Heaton-Harris, a member of the European Parliament's committee on budget control, has been one of OLAF's harshest critics. He has argued that it is not paying sufficient attention to mismanagement on its own doorstep. 'It has been spending a lot of time investigating fraud affecting cigarettes and bananas but the problems facing the last Commission were ones of internal affairs,' he said.

Brüner understands why some feel OLAF is not sufficiently detached from the Commission to properly investigate suspected mismanagement by its personnel. He nonetheless regards such criticism as unjustified.

'OLAF was created at a difficult time for the Commission,' he says. 'But when the Commission, Council and Parliament created OLAF, they sought to put safeguards in place to protect its independence in its investiga-tive function. This independence is particularly important, if not vital, for what we call internal cases.'

Among the safeguards he cites are the fact that he was not employed by the EU institutions before being appointed to his current role and that he has been given the power to start legal action in the European Court of Justice should the Commission try to compromise his autonomy. OLAF's work is also supervised by a committee of anti-fraud experts from beyond the EU institutions, who meet each month.

Furthermore, the office hasn't shirked its responsibility to scrutinise a case linked to one of the highest-profile commissioners, Vice-President Loyola de Palacio.

Although the transport and energy chief has been cleared of any personal wrongdoing, OLAF concluded last year that fraud involving subsidies to flax growers occurred when she was Spain's agriculture minister between 1997 and 1998. In response, the Commission has taken the unusual step of insisting that Madrid pays back more than €126 million paid to flax growers in the 1996-1999 period.

More recently, the office has been sent a dossier prepared by Paul van Buitenen, the man instrumental in the collapse of the Santer team.

The Dutch EU official has notified it of several cases of possible irregularities in the Commission and has warned that he could spark a 'showdown' with Romano Prodi's administration should OLAF not pursue the case with vigour. Known as 'the whistleblower', van Buitenen had previously highlighted a litany of cases suggesting that a blind eye was being turned to cronyism and mismanagement at the highest levels of the institution.

Neither OLAF nor van Buitenen has commented on the specifics of the new cases but the former insists that they are being treated seriously.

The slightly incestuous nature of the Brussels bureaucracy raises the tantalising prospect that OLAF officials may be appraised of allegations concerning fonctionnaires who are their personal friends. A spokesman for the office says that EU staff regulations make it clear that if such a conflict of interests should arise, the officials concerned must make it known to their superiors.

Inevitably, the office's workload will increase significantly once the EU accepts new members from central and eastern Europe, some of which are considered synonymous with corruption. OLAF has already opened a sub-office in the largest of the applicant countries, Poland.

'We are on the ground, working with our counterparts in the different candidate countries and we have received enthusiastic help from them,' Brüner says. 'What we are trying to do, through training and technical assistance, is to prepare them for the situation when they will be member states. But since large sums of EU funding are already being granted as aid to these countries, we are involved in fraud prevention and detection already.'

An illustration of this point is that OLAF has been studying claims that €40 million from the €140-million pre-accession aid package for Slovakia may have been pilfered. The affair led to the resignation of Bratislava funding director Roland Toth last year and a temporary freeze on major EU assistance for the country.

No firm decision has yet been taken on staff levels for OLAF post-enlargement but Brüner expects that it should be assigned a higher number of officials: 'More work will inevitably require more resources. We will need to work with the authorities in these countries to train them on what is needed in terms of methods and procedures and to prepare them for the work ahead.

'This will take time, effort and resources and we need to be thinking about this now,' the fraud chief adds.

One OLAF insider commented: 'They tend to have weaker systems of control in the applicant states and another culture to what we have in western Europe. Our plan is that our staff levels should go up to 330 during the course of 2002. But that's not enough to do all the investigations we could be doing.'

Fraud, of course, is a word that always looks good in a headline and there are few things that send a journalist's pulse racing quicker than a juicy tale about corruption and intrigue.

OLAF is adamant, though, that its raison d'être is to carry out meticulous enquiries rather than to help fill news pages. Frequently, its main function is to aid national authorities in getting to the bottom of a case. To the frustration of many, much of its work is therefore confidential. The report into the Spanish flax controversy is unlikely to be published, for example, as it was prepared for a judiciary.

Admittedly, it has been widely leaked to the Madrid media but OLAF's Brussels headquarters insists it was not responsible for any of the leaks.

'If people want instant gratification, then they're not going to get it here,' remarked one member of OLAF's staff. 'We're not here to do things quickly. We're here to do things correctly.'

Major feature on the European Anti-Fraud Office (OLAF).