EIB denies claims of waste

Date: 13/05/1999

By Rory Watson

THE European Investment Bank, the EU's main financing institution, has categorically denied claims by a former employee that it "wasted" €241 million earlier this decade.

The allegations of possible fraud, mismanagement and cover-up against one of the Union's most respected institutions were made in a note sent to MEPs by Carlo De Nicola, who was part of the small team dealing with bond portfolio management and resigned from the bank in February.

The ex-employee that claimed the "Bank 'wasted' €24 million due to poor results achieved systematically for at least four years" between 1991 and 1994. "This loss is not just an accounting loss," he added, accusing the EIB of wrongly assessing market developments and of underperforming the market.

He also alleged that instead of maximising returns, the Bank "embarked on a window-dressing exercise including creative accounting, thereby wasting approximately €40 million."

Last year, De Nicola brought a case against the EIB before the Court of First Instance in Luxembourg complaining that he had been unfairly passed over for promotion.

His allegations of wrongdoing and incompetence have been firmly rebutted by the EIB. It acknowledges that the Bank's bond portfolio recorded an unrealised loss of €240 million in 1994, but insists this was due to exceptional market conditions. The EIB puts the poor performance down to a sharp rise in interest rates triggered by the US Federal Reserve. This was followed by similar action by European central banks and led to a hefty fall in the market value of all government bonds, especially in Europe.

" The unrealised loss has nothing to do with alleged speculation, irregularities or collusion of interests. Our position is transparent. We have nothing to hide," said an EIB spokesman.

He said the events concerned were discussed fully with the institution's auditors and board, and spelt out in its annual reports. In addition, the Bank commissioned accounting firm KPMG to audit all its activities in the early 1990s. "KPMG gave full confirmation that nothing questionable had happened," he added.