Tourism fraud report brings call for changes

Date: 19/06/1997

By Rory Watson

AN INTERNAL European Commission investigation will reveal later this month how much EU finance intended to promote the tourist industry was siphoned off through fraud earlier this decade.

After months of combing through six years of accounts dealing with 38 million ecu of EU funds, the Commission is on course to hand its findings over to the Union's financial watchdog, the Court of Auditors, at the end of the month.

The report is expected to divide the 700 individual projects which have been investigated into three separate categories. The first will contain those judged to have been correctly implemented, the second those where mismanagement has been uncovered and the third instances of fraud.

Once the cases of fraud have been identified, the Commission is expected to demand that the money be returned - a process which could involve it in lengthy legal battles in national courts.

The Commission has made the inquiry a priority after it was severely criticised by both the European Parliament and the Court of Auditors for the lax management of the funds and after allegations that two of its officials, who have since been dismissed, demanded kickbacks.

The Belgian judiciary is still continuing its own inquiry into claims that the former Greek head of the Commission's tourism unit George Tzoanos, his wife, and French official Pascal Chatillon misappropriated EU money.

The Commission's investigation is being carried out amid unprecedented security and is expected to act as a model for any future inquiry into allegations of illegal use of Union funds. Its findings will also be fed into the internal programme which the Budget Commissioner Erkki Liikanen is implementing to improve the institution's administrative and financial efficiency.

“The inquiry is necessary to remove any shadow which might have continued to hang over the Commission's tourism department,” said one observer.

All the papers relating to the period under investigation (1989-1995) have been removed from the tourism department. They are being held in secure premises and access is carefully restricted.

The work is being supervised through monthly meetings of a monitoring group of top officials from the Commission departments most closely involved: budget, financial control, tourism, anti-fraud, the legal service and the inspectorate-general.

Officials are also working with other European institutions, particularly the Parliament and the Court of Auditors, and with national authorities in France, Belgium and Greece, where the main frauds are thought to have taken place.

The 15-strong team of internal Commission investigators is being reinforced by external auditors who have been given the task of combing through almost 40 of the projects.

British Tory MEP Edward McMillan-Scott, who first rang alarm bells about the misuse of EU tourism funds, believes wider lessons should be learnt from the affair. He argues that it shows the Parliament must have a greater role in the fight against fraud, with the power to mount quick inquiries on its own initiative.

McMillan-Scott says that if such a system had been in place in 1990, “members would have been aware of the situation and a lot of wasted time and money would have been avoided”.

German Socialist Rosemarie Wemheuer, who is preparing a report on the outcome of the investigation, agrees.

“I feel it is not just a problem with the tourism department. It raises broader questions about the Commission's policy on calling for tenders. The whole procedure might need to be overhauled as the system is not transparent enough,” she said.