OLAF – will more control by Commission put fraud-busters under greater political pressure?

Date: 11/03/04

CHAMPAGNE wasn't exactly in abundance at the European Commission's anti-fraud office, OLAF, on 1 March.

On that day, Franz-Hermann Brüner was four years into his job as the office's director.

Those four years have been pockmarked with controversies. Barely a year after its inception, OLAF was involved in a bruising squabble with Italy's premier Silvio Berlusconi, who sought in 2001-02 to prevent the appointment of magistrate Alberto Perduca as OLAF's director of operations and investigations, even though this had been approved by the previous centre-left government in Rome (Berlusconi eventually relented). Then, last year, it was widely perceived as a scapegoat in the Eurostat affair, with Commissioners Michaele Schreyer and Pedro Solbes indicating they were unaware of fraud allegations concerning the EU's data agency because OLAF had not informed them directly. (Under rules then applying, it only had to let David O'Sullivan, the Commission's secretary-general, know if probes against EU officials were under way.)

And, last month, Brüner's ire was aroused by an inference made by EU Ombudsman Nikiforos Diamondouros that his signature on a letter to French hydraulics firm Blue Dragon might have been forged.

Despite the tense atmosphere in which it is working, OLAF has managed to conduct some major probes. This week, for example, it finalized the first phase of its work on allegations that EU aid to the Palestinian Authority was being siphoned off to support terrorists. The office has so far found no evidence to substantiate those claims.

OLAF's supporters in the EU institutions fear that, as a result of those controversies, the Commission now wishes to exert greater political control over the office.

On 9 February, the Commission published a proposal aimed at improving the flow of information between its top table and OLAF, with a view to avoiding a repetition of the Eurostat affair.

A discussion paper prepared by EU officials, seen by European Voice, suggests the reform proposal poses several risks. The paper draws a parallel between the way OLAF was formed - amid the panic following the fraud revelations that triggered the collapse of Jacques Santer's Commission in 1999 - and the current state of affairs. Just like the situation in 1999, it says, this proposal has been formulated "in haste by an absent-minded Commission at the end of its mandate".

In particular, the paper raises concerns over the suggestion that the supervisory committee, which oversees OLAF's activities, will have to be kept "regularly informed" of investigations under way and the action taken on them.

According to the paper, an "excessive reinforcing" of the committee's powers is recommended. It states there is a possibility the committee could have quasi-judicial powers to scrutinize the conduct of investigations and argues the European Court of Justice should instead have responsibility in this matter.

The supervisory committee, chaired by Raymond Kendall (the secretary-general of international police agency interpol), is currently comprised of five members.

Kendall explained that both OLAF and EU police agency Europol have supervisory committees. "Here you have two law-enforcement agencies within the EU that don't have judicial oversight. And that creates problems, when people under investigation don't have right to reply and the presence of lawyers."

The work of the committee, he said, has already led to improvements within OLAF's management. "Although things were difficult in the first couple of years, I now have a feeling that Eurostat and the Blue Dragon thing probably couldn't occur today. Something could always slip through the cracks, however."

Under the Commission's reform proposal, the number on the committee would grow to seven. These would be chosen "by joint agreement" by EU governments, the Commission and the European Parliament.

But some Commission sources say the requirement to keep them abreast of OLAF's activities would heighten the possibility that the office would come under greater political pressure. One of the more sensitive dossiers handled by OLAF thus far related to Commission Vice-President Loyola de Palacio's previous tenure as Spain's agriculture minister. This found that subsidies paid to Spanish flax growers were subject to fraud in 1996-99. One well-placed source said it is conceivable OLAF would be asked to drop investigations against commissioners in the future if it had to keep the administration appraised of how they are progressing.

The supervisory committee has something of a strained relationship with OLAF's highest echelons.

For a start, the latter are at a loss to explain why the committee's administration is located in Luxembourg, when OLAF itself is based in Brussels. In a fascinating aside, the committee's administrative director, Frenchman Jean Darras, works in the same building as some of the senior Eurostat officials OLAF has been investigating.

They are also bemused why the committee has filled just three of the eight staff posts allocated to it. And they allege that one of the officials tasked with giving a legal analysis of OLAF's work is not properly qualified, as he is a customs officer by training, rather than a lawyer.

Raymond Kendall admitted that not all of the posts allocated to the committee's administration have been filled but said OLAF has agreed that new staff should be recruited. He said one difficulty encountered in recruitment has been convincing people who already have posts in the Parliament or elsewhere in the Commission to work for it.

He defended how the man undertaking legal analyses in the administration is a customs official, rather than a trained lawyer. "What he does is clears the ground for us by undertaking a preliminary examination of complicated dossiers," Kendall explained. "His ability to analyze is pretty good. Sometimes people in OLAF resent what he does with us and see it as interference. But that's nothing significant."

He also defended how the supervisory committee has its headquarters in Luxembourg. Right at the beginning, it was already decided it would be better if the secretariat was not too close to where OLAF was situated.

Speaking to this paper, Franz-Hermann Brüner said that he had no worries about possible interference in his office's work. However, he voiced worries about the move to ensure a greater flow of information between OLAF and other EU bodies, saying this could endanger the rights of individuals who are under investigation.

"The biggest risk is that too many people will be dealing with data not only in regard to criminal investigations that have to be kept quiet. But say there is a serious suspicion about bribery and I am going to Mr X to say there is a suspicion about Mr Y. Is this protection of personal integrity?

"I'm quite sure we can limit the misuse of data. If I can pay a compliment to the Commission, I think it understands how information should be treated. But when I talk about data, it is sometimes more a question about the protection of individuals."

But Elisabeth Werner, the Commission's budget spokeswoman, says the recommendations are vital: "Since political responsibility for management of funds by Commission services remains with commissioners, it is essential that the relevant institution is informed about internal investigations conducted by OLAF."

On various occasions, OLAF has faced allegations from the European Parliament's budget control committee that it is taking an excessive amount of time to conduct investigations. The proposal addresses those criticisms, stating that in any case where OLAF wishes to continue a probe launched more than 18 months previously, it will need permission from the supervisory committee. But Brüner argues that attempts to make OLAF work to deadline betray a lack of understanding for the kind of inquiries that it is involved in.

"In a murder case, you have someone lying on the floor, killed by a bullet. You have a clear victim. From there on, you can start to ask "who is it and who did it?". Now, if you take a fraud or a corruption case, it is sometimes even difficult to define the victim, or the victim doesn't want to say anything. You have to establish everything. This is not the kind of one-day event situation, where you make one phone call and you're finished. Our cases are getting more and more complex. Sometimes you have to concentrate on cross-border things, for example."

Even though OLAF sent a file almost a year ago to a Paris prosecutor, implicating Eurostat and French firm Planistat in the "vast looting" of EU funds, it continues to probe suspected irregularities at the data agency.

"Some people have the feeling Eurostat is one case but it's a family of cases. Because they are different in nature they will take a different time. It's not for me to say when we will finish them but we are trying to get them out of the way as soon as possible."