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DOC/01/5

Brussels, 21 March, 2001

[Graphic in PDF & Word format]

EUROPEAN COMMISSION

Questionnaire to the Commission on the "Fléchard case" (Follow-up to paragraphs 12-16 of Parliament's resolution of 6 July 2000)

submitted by

the European Parliament's Committee on Budgetary Control

COMMISSION'S ANSWERS

[Graphic in PDF & Word format]

EUROPEAN COMMISSION

Brussels, 19 March 2001

A. Introductory remarks

This document presents the Commission's answers to the questions of the European Parliament's Committee on Budgetary Control entitled "Questionnaire to the Commission on the "Fléchard case" (Follow-up to paragraphs 12-16 of Parliament's resolution of 6 July 2000)" - (document PE 294.418 (DV/430609/EN.doc) of 28 February 2001).

In order to preserve the overall consistency and legibility of the text, the questions are grouped by themes and subthemes; where appropriate, analogous or closely related questions are given a common answer. The Fléchard case (1991-1994) and the more recent "adulterated butter" case are treated separately.

The Commission points out that its answers rely in part on information provided by OLAF. OLAF's investigative independence is a requirement of the legislative acts governing it(1). The Commission makes all efforts to respect this requirement. There is currently no regular reporting to the Commission on the status of OLAF investigations.

B. Key elements and consequences of the Fléchard case

The Commission has formally expressed its position on the Fléchard case on several occasions, most notably within the framework of the 1998 discharge exercise and in its answer of 10 May 2000 to the Court of Auditors' presidential letter summarising the Court's findings.

The case concerns the handling by Commission departments of a butter export transaction in which the facts date from 1991-94.

Commission Regulation N° 863/91 of 8 April 1991 authorised a special sale of 124 000 tonnes of intervention butter for delivery to the Soviet Union. To ensure that the butter was not diverted from its destination successful tenderers were required to lodge a security with the relevant intervention agencies.

On the basis of the tendering procedure, 6 750 tonnes of Irish intervention butter were sold by the Irish Department of Agriculture and Food to the French company Fléchard. Fléchard met its obligation by deposing a tendering security of ECU 17,6 million.

The goods were to be delivered to the port of Riga to the order of two Polish operators for sale on the ex-Soviet market. But the goods were diverted from their destination and were sold in Poland. The case was investigated in 1992 by the Irish Customs investigation Branch and DG VI. No criminal charges were brought by the competent national authorities.

The injunction issued by the High Court in Dublin on 12 June 1992 blocked the forfeit of the security on the basis of a complaint lodged by Fléchard on grounds of force majeure and want of proportionality. On the basis of an opinion given by the Commission services, the Irish authorities settled the case in 1994 by accepting a payment from Fléchard of 3 million ECU, and this brought an end to the legal proceedings.

Against this factual background, the Commission recognizes with hindsight that the procedural framework, which covers such cases, should be improved.

The setting up of OLAF, with full independence in its investigations, marks already an essential step in this direction.

The financial and administrative reform of the Commission requires the services to set up appropriate internal control procedures including ex ante controls and an internal audit capability.

These new arrangements attribute sole responsibility to the authorising services and establish an independent audit service. Thus they can be expected to improve financial management and control and reduce the possibility of irregularity and of fraud. Moreover, all Directors General will provide an annual report where they will declare that the internal control procedures in place give adequate assurance as to the legality and regularity of the financial transactions.

The Commission is determined that the application of the principles of proportionality and equity should be based on guidelines and procedures in order to ensure transparency and legal certainty. Work on this is already in progress.

The Commission undertakes to conclude this work by the end of the year.

* * *

Investigations by OLAF and legal and other actions by certain Member States are continuing on the adulterated butter case. The Commission is following this with all due attention.

1. HORIZONTAL QUESTIONS

1.a The legal basis

Par 12, 13, 14

Par 15

(Retroactivity of EC Law)

Par 15

(Proportionality)

Questions by Mr Mulder

4. At what exact point in time was the Article 29 procedure invoked for this case? Why could Article 29 be used, since this article applies to direct expenditure and this case concerned indirect expenditure?

6. Commissioner Fischler states in his answer of 27 August 1999 to Working Document No 2 by Mr Mulder, MEP: 'As the final decision was based on equity, it could not have a legal basis, except for Article 29 of the Financial Regulation, as far as the procedure was concerned'.

Does the Commission agree that the decision to lower the penalty to ECU 44.5/100kg had no legal basis?

7. Commissioner Fischler states in his answer of 28 July 1999 to Working Document No 1 by Mr Mulder, MEP: 'The Legal Service opposed various texts of DG VI seeking an ad hoc solution for Fléchard. It only agreed with DG VI to a text of a general nature.'

Does the Commission agree that a special solution, through amending legislation, was being sought for the specific case of Fléchard? Does the Commission agree that it intended retroactive application to be part of this solution?

1. Which person or institution has the authority to apply Community law retroactively?

2. On what grounds does the Commission not agree with the arguments put forward by the Court of Auditors in paragraph 5 of its Presidential Letter and the arguments put forward by Parliament's Legal Service in its note of 27 August pointing out that retroactive application of Community law in this case could not be justified either in fact or in law?

1. Is proportionality applied to all cases? If not, what triggers the application of proportionality to a certain case?

2. What criteria determine whether a sanction is 'proportional'?

Where are they enshrined?

3. Which person or institution has the authority to apply proportionality?

4. Who in the course of procedure has the task of applying or deciding on proportionality and who is ultimately responsible?

5. On what grounds does the Commission not agree with the conclusion put forward by Parliament's Legal Service in its opinion of 27 August 1999 that neither the level of the sanction, nor the loss of the guarantee or the possible bankruptcy of Fléchard violated the principle of proportionality?

6. On what grounds does the Commission believe, as it has pointed out on numerous occasions, that the provisions of Council Regulation No 2988/95 of 18 December 1995, which entered into force on 26 December 1995, could apply to the Fléchard case, which was finally settled in November 1994?

1. The issues of proportionality and retroactivity

As stated in Article 5 of the EC Treaty « Any action by the Community shall not go beyond what is necessary to achieve the objectives of this Treaty ».

The principle of proportionality so enshrined in the Treaty has been repeatedly held by the Court of Justice of the European Communities to be a general principle of Community Law.

Any action of the Institutions and in particular of the Commission has to comply with this fundamental rule. This duty applies not only for the elaboration of legislative acts but also for their application.

Indeed Community legislation is of general application and therefore specific situations have to be taken into account in its case by case implementation. Thus, when the Commission is faced with legislation which in a specific case appears to have consequences contrary to the principle of proportionality, it has to remedy this situation in order to arrive at a proportional and thus equitable solution either by amending the relevant legislation or by finding a case-based solution.

This is particularly the case when sanctions are provided for in Community legislation. A sanction must not exceed what is appropriate and necessary to attain the objective pursued by the rules which have been breached. More particularly, it is necessary to ascertain whether the penalty laid down by the provision in question corresponds to the importance of that objective and whether the disadvantages caused are not disproportionate to the aims pursued(2).

In this context, when a Regulation establishes sanctions which are less severe than the ones previously applicable, the milder sanctions apply immediately, in accordance with the principle of proportionality. This fundamental rule has been enshrined as well in the Regulation on the protection of the European Communities' financial interests(3).

When modifying the legislation in order to apply this principle to given specific situations, the Commission follows the procedure provided for by the legal basis of the act to be modified. If in contrast it is an isolated case, the appropriate level is the authorising officer, as described for direct expenditure by article 29 of the Financial Regulation. No particular procedure has formally been established in the case of indirect expenditure, so far. Nevertheless, in practice the article 29 procedure is applied mutatis mutandis in these cases as the corresponding part of the Financial Regulation applies to indirect expenditure according to its article 98.

2. Application to the specific case of butter exports to ex-USSR (Fléchard case)

In this particular case, the Commission has explained in detail the pertinent factual elements and legal considerations which guided its action.

Consulted by the Irish authorities the Commission departments faced a complex choice. What was the situation?

The goods did not reach their rightful destination. However there was no evidence to support the conclusion that Fléchard was behind the fraud. As the goods had been sold in Poland, they had not been re-imported into the Community market. On 12 June 1992, the High Court in Dublin had blocked the forfeit of the security on the basis of a complaint lodged by Fléchard on grounds of force majeure and want of proportionality. Furthermore, calling in the ECU 17.6 million security was likely to bankrupt Fléchard, jeopardising the jobs of its 1000 workers in a very difficult economic situation when unemployment was particularly high.

These facts show that there was no ideal solution. It became clear that the automatic seizure of the guarantee required by Regulation 863/91 would have disproportionate effects compared to the guarantee required when exporting butter from the free market. In so doing, the Commission would quite rightly have been accused of blindly following a mechanistic approach, with a serious risk of the regulation being invalidated by the Court of Justice for want of proportionality.

In this context, different solutions were examined and tested by the services. The ultimate conclusion was not to apply Regulation 863/91 but, given the specific features of the case outlined above, to go for an ad hoc solution based on the principles of proportionality and equity. Even if there was no specific regulatory basis, the application of these principles constitutes the valid legal basis. The injunction issued by the High Court in Dublin backed up this analysis. The adoption of Regulation 1938/93, relaxing the rules governing the release of securities, bears witness to the same attitude.

The conclusion turned on an aggregate penalty of ECU 3 million which was applied by the Irish authorities. This was a real and substantial penalty since it not only wiped out Fléchard's profit on the transaction but also cost it approximately a further ECU 1 million.

In this situation, the Commission departments acted out of concern to find a reasonable solution.

3. Assessment and lessons to be drawn

As the Commission recognized in its answer of 10 May 2000 to the Court of Auditors' presidential letter, even if the final outcome was legally well-founded and followed the administrative practice of the time, the Commission does not pretend that the case is free of imperfections and above criticism.

With the benefit of hindsight, one can consider that fraud checks and inspections should have been taken further or followed up more thoroughly at the time.

More generally, the conditions for applying the principles of proportionality and equity and the room for assessment they imply certainly suffered from the absence of clear criteria and specific procedures.

The Commission has realised the extent of the problems highlighted by this case and the concerns expressed by Parliament, and in particular the COCOBU. It is determined to draw the conclusions from past experience. It undertakes to issue guidelines to its departments concerning the application of the proportionality principle and the procedures to be followed.

Improvements regarding the procedure for the treatment of such cases will also be envisaged to ensure transparency and legal certainty. In particular, these procedures will:

- ensure a transparent internal procedure clarifying the different responsibilities for the treatment of the case, according in particular to the level of the sanction to be applied

- insert where appropriate procedural mechanisms in the legislation which will help it to deal with exceptional individual cases notified by the Member States.

Work on this is already in progress.

Finally, the Commission recalls that, according to its decision of 2 June 1999, it is required to pass the dossiers on suspected fraud to OLAF.

1.b Cancellation of debts under Article 29 of the Financial Regulation

Par 15

(Art 29 FR)

Questions by Mr Mulder

(1) In Mr Fischler's answer of 30 August 1999 to Question 6 of Working Document 2 by Mr Mulder, MEP, DG XIX states that 'The Commission cancels debts in about one thousand cases each year [under Article 29 of the Financial Regulation]'.

What was the total amount involved in these cancellations for the years 1997, 1998, 1999 and 2000?

Can the Commission give a breakdown by policy area and/or reason for waiver?

Which criteria were used?

Can the Commission elaborate on the reasons for, and categories of waiver specified in paragraph 15c of the follow-up report to the 1998 discharge?

Who took the decision?

In how many cases did the Financial Controller withhold approval of cancellation?

In how many of these cases was the withholding overruled?

Who is the 'superior authority' in the Commission responsible for overruling the withholding?

As indicated in the answer given by Mr Fischler (E-1751/99FR), about 1900 miscellaneous debts (disregarding own resources) were cancelled in the course of the procedure under Article 29 of the Financial Regulation for 1996, 1997 and 1998, giving an annual average of about 630 cancellations.

Amount of annual cancellations:

  • 1996: €13 million

  • 1997: €45 million

  • 1998: €77 million

  • 1999: €24 million

  • 2000: amount not yet available (accounts not closed)

The details are given in an annex.

Regarding the criteria used for these cancellations, pursuant to Article 29 of the Financial Regulation, the Commission waives its right to recover real debts where it believes that they cannot be recovered on grounds of: legitimate reasons (1. Justifications given by debtors, for example additional documentary evidence of completion of work, final reports, etc. proving the original claim unwarranted; 2. Judicial decisions in favour of the debtor; 3. Judicial decisions quashing fine orders), recovery impossible (debtors disappeared or bankrupt with no assets) or cost-effectiveness ratio (small claims).

The decision to cancel is taken by the authorising officer in accordance with Article 29(2) of the Financial Regulation, which provides: "If the authorising officer waives the right to recover an established debt, he shall send beforehand a proposal for cancellation to the financial controller for his approval and to the accounting officer for information".

Delegation of powers for an authorizing officer is given from the director general. In the context of the reform, internal rules governing this in each DG are established.

There have been cases where Financial Control took the view that a debt should not be cancelled and that efforts to recover it should be persisted with. The services having accepted in every case Financial Control's position, these cases have not in recent times involved the formal refusal of the Financial Controller's visa or, therefore, the possibility of formal overrule by the Commission.

The Commission is the only "superior authority" (third subparagraph of Article 29(2) of the Financial Regulation) with the power to override the refusal of the Financial Controller to withhold approval.

Under the proposal for recasting the Financial Regulation, the rationale of article 29 on full or partial waivers of debts is maintained. Under the new approach of greater responsibility for Director Generals, the Director General concerned is required to give his approval or to refer the case to the Commission in case of doubt. The principle of sound financial management is to be respected. This entails proportionality and equity(4).

1.c Clearance of accounts / rules as to decision-making

Par 12, 13, 14

Questions by Mr Mulder

5. In a letter from DG VI dated 30 June 1994 (DG VI 023639), the Commission guaranteed the Irish authority that this case would not be followed up through the clearance of accounts, something that was already contemplated by the Commission in January 1993. In its answer to paragraph 14 of the Court's Presidential Letter(5) on the case, the Commission states that 'such an assurance from the Commission is the normal safeguard ...'. What rules provide for this 'normal safeguard'? What criteria determine whether such an assurance should be given?

Under which provisions has DG VI the authority to give such an assurance?

Who has the authority?

Under which provisions?

Refunds on exports, but also intervention measures intended to stabilise agricultural markets, can only be financed by the EAGGF, Guarantee section, if they have been granted in accordance with the Community rules within the framework of the common organisation of agricultural markets.

In cases where the Member State erroneously interprets a Community provision, the expenditure effected on such a basis cannot be charged to the Guarantee section of the EAGGF.

Sometimes Member States address interpretation requests to the Commission services concerning the application of Community law in order to have their opinion on how to deal with a certain case. The Commission has no competence for providing legally binding interpretations of Community law and it is not in the position to give instructions to Member States on how to interpret Community law. What it can do is to inform the Member State on how it views the application of the Community provision for which a clarification is sought in a particular case.

If the Member State acts in accordance with the interpretation provided by the Commission, the latter is not in a position to refuse at a later stage in the framework of the clearance of account procedure the expenditure effected on the basis of its interpretation. The Member State, following the interpretation given by the Commission, acts in good faith and it can have confidence in the fact that the Commission will adhere to its interpretation given at an earlier stage. The above is in line with the Court's judgements in cases 11/76 and 18/76 (ECR 1979, p. 245 and ECR 1979, p. 343).

Par 15

(Art 29 FR)

Questions by Mr Mulder

(2) Is it correct that Member States can waive debt on their own authority when it concerns indirect expenditure and that the Commission can only give a non-binding opinion?

Is the Financial Controller involved in the formulating the content of such non-binding opinions?

Can he stop this non-binding opinion from being issued?

In how many cases in 1999 and 2000 did the Commission use its discretion to recover the additional amount through the clearance of accounts in cases where the Member State decided to recover less than the amount advised by the Commission in the non-binding opinion?

In how many cases did the Commission use its discretion to give Member States assurances it would not recover additional amounts through the clearance of accounts?

For a better understanding of the problem it appears necessary to outline the legal background of the question raised by the COCOBU: First of all a distinction must be made between:

1. Irregularities over €4000 reported to OLAF under Reg 595/1991

The Member State has the duty to pursue the debt of the beneficiary. If the full amount is not recovered then the amount lost is charged to EAGGF, unless there is any negligence on the part of the Member State, in which case it is charged to the Member State in the clearance of accounts process (Art 8(2) of Reg 1258/1999). This is a formal process requiring the preparation by OLAF, the visa of Financial Control and the approval of the Commission. OLAF is preparing some new decisions at the moment. No decisions have been taken yet for 1999 or 2000.

Member States may partially "waive" debt in some circumstances as they may accept a settlement lower than the initial debt during bankruptcy/liquidation proceedings. The Member State has to justify vis à vis OLAF that the best possible action was taken to recover a maximum amount.

2. For irregularities under €4000 or non-irregularities

The Member State uses national rules to determine when amounts are irrecoverable. These amounts are reported every six months to the Commission (since 1999). The amounts written off are subject to audit by the Commission and the Certifying Bodies.

Where a Member State has been negligent in recovery the Commission can make corrections in the clearance process. This was done in 2000 in three cases in Denmark and further corrections are envisaged for France and the UK this year. For other cases corrections were made, where a Member State had not properly applied sanctions or had deficiencies in the control regime (e.g. arable crops in Sweden, Portugal animal premiums, Germany animal premiums, non application of penalties under Art. 47 and 48 of Reg. 3665/87, France export refunds).

In future, the Internal Audit Service will audit all expenditure management systems, including the system of clearance of accounts.

1.d Other cases

Par 15

(Other cases)

Question by Mr Bösch

In its answer of 23 June 2000 to a question by Mrs Morgan, Mrs Schreyer says that a total of five cases were similar to the Fléchard case. Can the Commission forward the relevant files?In Commissioner Mrs. Schreyer's reply of 23 June 2000 to Mrs. Morgan five cases were cited in which the Commission had advised the national authorities that ad hoc solutions, based on proportionality, could be applied. The five cases concerned:

  • A German export of high value beef to Morocco where a small part of the goods (approximately 5%) did not reach the final destination.

  • A Swedish export of intervention barley where one lot had been replaced by goods from the market.

  • An Austrian export of cheese for which a wrong customs code had been indicated in the export refund application.

  • A German export of an alcoholic beverage, with sugar added, that was presented in a way which was not in accordance with the requirement of "sound, fair and marketable quality".

  • A French export of pork to Russia for which the proof of arrival at the final destination had not been supplied within the required deadline.

Information on these cases can be provided separately in accordance with the relevant provisions of the framework agreement (annex III).

1.e Bank guarantee mechanism

Par 12, 13, 14

Question by Mr Mulder

9. Do firms have the possibility to insure themselves against the loss of a bank guarantee? Is this usual practice and was it the case with Fléchard?Agricultural legislation does not forbid firms to insure themselves against the loss of a bank guarantee. The possibility of such insurance depends on contractual law in each Member State and on commercial relations between private parties, i.e. farmers and agro-industrial companies, and professional insurers.

As far as the Commission is informed, it is not normal practice to have such kind of insurance and it has no reason to believe that Fléchard had been covered by one.

1.f Organisation / Powers of DG AGRI

Par 12, 13, 14

Question by Mr Mulder

8. Some say that the case illustrates that DG VI combined too many responsibilities, being initiator of legislation, responsible for expenditure, responsible for application, control, recovery of funds and clearance of accounts. Does the Commission agree with this statement, and what measures will it take to improve the situation? In which way will the deconcentration of financial control as proposed in the recasting of the Financial Regulation prevent or facilitate cases like Fléchard from happening?The Commission agrees that there was a case for the responsibility for fraud fighting to be placed outside DG VI. That is why already in 1995 the former anti-fraud and recovery section of the unit G/4 located within the EAGGF Directorate was transferred to UCLAF to improve the situation.

In addition to that, even within DG VI the clearance of accounts responsibilities had also been taken out of the EAGGF Directorate and been integrated into a new directorate (AI) which had been put directly under the responsibility of the Director General.

The proposal for a recast of the Financial Regulation involves the discontinuance of centralised ex ante control by the Financial Controller of financial transactions proposed by the authorising services. This forms part of a wider set of financial reforms designed to place on the authorising services full responsibility for the usefulness and regularity of their own financial operations. These services are being required to set up appropriate internal control procedures - including ex ante controls - and an internal audit capability. The new central Internal Audit Service will examine the quality of their internal control arrangements.

These new arrangements, and in particular the discontinuance of the current system under which responsibility is divided between the authorising services and the Financial Control DG, can be expected to improve financial management and control and reduce the possibility of irregularity.

Finally, as already mentioned, suspected fraud cases have to be transmitted to OLAF.

2. TREATMENT OF THE CASE

2.a Conduct of investigations

Par 12, 13, 14 (treatment of Fléchard)

Questions by Mrs Stauner

2. Can the Commission state why it did not insist in 1992-1994 that the Irish and French authorities clarify the suspicions of fraud?

Were its departments not aware from the investigation reports that the firm had knowingly submitted false documents to the Irish authorities?

It is correct that on 21 January 1992, Fléchard supplied the Irish authorities with certification of delivery of the butter to Riga, supplied by its Polish operators. On the basis of this Fléchard applied for the release of the guarantee. The Irish authorities declined to release the guarantee until further evidence of the delivery was supplied. It was then later established that the certificates provided by the Polish clients and passed on to Fléchard were false and that the goods had actually ended up in Poland. The Irish Customs Investigation Branch, assisted by DG VI, investigated the case. But to the best of the Commission's knowledge proof was not established that Fléchard knowingly submitted false documentation to the Irish authorities. The Irish authorities did not find sufficient grounds to investigate this case further. In this context it should be also kept in mind that the butter in question left EC territory.

The Commission can in response to this question only repeat what it already stated in the reply to the Court of Auditors' presidential letter that: "It is possible, with the benefit of hindsight, to conclude that fraud checks and inspections should have been at the time further undertaken or followed up more thoroughly".

Par 12, 13, 14 (treatment of Fléchard)

Questions by Mrs Stauner

3. Why was the firm never added to the black list?

4. Why was the firm subsequently not even placed under closer scrutiny?

The so-called black list did not exist at the time of the events. As far as the present situation of the black list is concerned, see section 3.c.

Moreover, no charges were brought against the firm and the case was handled on the basis that the other parties involved in the operation instigated the fraud.

2.b Implication in other frauds

Par 12, 13, 14 (Fléchard activities)

Questions by Mr Bösch

For more than two years, high-ranking Commission officials went to considerable and extraordinary lengths to ensure that a 'solution' was found, in November 1994, in favour of the firm.

(1) Can the Commission confirm that there are serious signs that the firm could have been involved in another case of fraud from November 1992 to February 1994, in which Hungarian butter was illegally imported and then re-exported?

(2) Does the Commission know anything of the fact that the French judicial authorities investigated the firm in 1995 in connection with butter of Spanish origin?

Without prejudice to specific information held by OLAF, the Commission is not aware of the mentioned irregularities.

2.c Payments received / Subsequent transactions

Par 12, 13, 14

Question by Mr Mulder

* * *

Par 12, 13, 14 (treatment of Fléchard)

Question by Mrs Stauner

1. Until when did the Commission have transactions with Fléchard?

* * *

1. Can the Commission specify how much in total Fléchard SA has received to date in payments from the Community budget, after being suspected of involvement in fraudulent activity in early 1992?

As stated in the reply given to Mrs. Morgan of 23 June 2000 the Fléchard company has been on a regular basis involved in the export of agricultural products and thereby benefited from export refunds paid through the French authorities. According to the data available to the Commission services the enterprise Fléchard has received payments, at least for export refunds, in the financial years 1999 and 2000. However, due to the legislation in force on the confidentiality of such data (Council regulations 1469/95 and 1073/99), as explained in the reply to the written questions n° 3240/00 and 3478/00, the Commission is not in a position to be more specific.

2.d Other cases in Russia

Par 15

(Other cases)

Question by Mr Mulder

(1)  The Court of Auditors, in paragraph 19 of its Presidential Letter on the case, states that it cannot be ruled out that other shipments of butter under Regulation 863/91 arrived at destinations other than the intended ones.

Does the Commission agree?

Has the Commission any indication of the sort?

As mentioned by the Court of Auditors in par 19 of its presidential letter on the case, the possibility that other shipments of butter under Regulation 863/91 arrived at destinations other than the intended ones cannot be ruled out completely.

However, the Commission maintains, as explained in its reply to the Court of Auditors, that it cannot share the Court's view that the Commission services should have had genuine doubts on the other consignments of butter exported to Russia under this regulation. In the opinion of the Commission, there were reasonable and sufficient assurances that other exports had not been diverted from their envisaged destination. The Commission has no indication to the contrary.

Par 15

(Other cases)

Questions by Mr Mulder

(2)  The Commission's answer to paragraph 15 of the Court's Presidential Letter seems to suggest that the Commission would not have been able to act upon suspicions of similar cases if the Member State concerned had not flagged it as a suspicious case. Is this true, and is the Commission completely dependent on the Member State? Can it not take any initiative of its own?The Commission's clearance of accounts services establish a work plan on the basis of an objective risk assessment. In addition to that the services act if they are requested to do so by OLAF or the Court of Auditors (mainly in the context of DAS).

Moreover, any indication from whatever source of an increased risk in a sector or in a Member State is followed up and can lead to additional audits.

Notwithstanding the above, it is the Member States which are primarily responsible for carrying out checks of expenditure under EAGGF guarantee.

2.e Meeting of 7.1.94 / Role of Delors cabinet

Par 12, 13, 14

Question by Mr Mulder

* * *

Par 12, 13, 14 (Delors cabinet)

Questions by Mrs Stauner

3. Why were neither the Director-General of DG VI, nor the cabinets of Commissioners Steichen and Schmidhuber invited for the meeting of 7 January 1994?

* * *

Heard by the European Parliament in summer 1999, Pascal Lamy stated that, as Commission President Delors' chef de cabinet at the time, he did not learn of the Fléchard case until late 1993/early 1994. In connection with the decisive meeting of the Delors cabinet of 7 January 1994, he stated: 'Il n'y avait dans le comportement du cabinet du président de la Comission de l'époque, rien que de très normal. Lorsque, sur un cas un peu difficile, quatre ou trois directeurs généraux ne sont pas d'accord, ce qui arrive, il n'est pas anormal que le cabinet du président soit sollicité pour essayer de les mettre d'accord.' (The conduct of the cabinet of the President of the Commission of the time was perfectly normal. When, in a rather difficult case, three or four Directors-General do not agree, which does happen, it is not unusual for the President's cabinet to be asked to try and get them to agree).(6)

In February 2000, a letter which showed the role of the Delors cabinet in a different light was discovered in a safe in the Directorate-General for Agriculture.

The letter (marked 'personal and confidential' and dated 10 March 1993) was from the then adviser on agricultural matters in the Delors cabinet to the Director-General for Agriculture, who was responsible for the case. It was openly biased towards the solution proposed by the French Ministry of Agriculture in favour of Fléchard and offered help in pushing through this solution by intervening with the Commission's Legal Service.

(1) How can such unconcealed bias in favour of Fléchard be reconciled with Mr Lamy's assertion that his cabinet played no more that a mediating role?

(2) Why was the note marked 'personal and confidential' by its author? Was it to prevent his intervention becoming known?

(3) Does Commissioner Lamy stand by his assertion (letter of 14 July 2000 to Mrs Stauner) that he knew nothing of his colleague's intervention? Does he take the view that his colleague acted correctly?

(4) If so, was it customary for members of the Delors cabinet to have such great power of discretion and not to be obliged to report on their activities in connection with matters which they themselves regard as politically very important?

(5) Is one not forced to conclude from these events that the Delors cabinet in no way played a mediating role but, on the contrary, prevented application of the legal provisions in force through its prompt intervention?

(6) On 21 December 1993, Mr Schmidhuber, Commissioner responsible for the budget informed his colleague responsible for agricultural matters, Mr Steichen, in a note that the precondition for finding a solution to the case was that 'it first had to be clarified how far Fléchard itself was involved in the 'diversion' of exports'. Why was this matter not resolved before the solution in favour of Fléchard was adopted at the meeting of 7 January 1994?

(7) Why were no representatives of the Steichen and Schmidhuber cabinets invited to the meeting on 7 January 1994? Was the Delors cabinet afraid that otherwise the question of Fléchard's involvement in the fraudulent 'diversion' of the butter would be raised?

(8) When and how were the Steichen and Schmidhuber cabinets informed of the outcome of the meeting of 7 January 1994?

Were they sent copies of the minutes?

If not, why not?

(9) Is it certain without any doubt who took part in the meeting of 7 January 1994? Is it true that Commissioner Lamy was present at the meeting for at least part of the time?

(10) Commissioner Lamy has stated that the Delors cabinet's handling of the Fléchard case was not unusual. Can the Commission name other cases that it handled in a similar way?

Statement by Mr Lamy

The Delors Cabinet that I headed had three types of activity: advisory (preparing and commenting on files for the President); management (relations with departments attached to the President, in particular the Secretariat-General and the Legal Service, scheduling, horizontal logistics for the Commission - mail, missions, protocol, etc.); and supervisory (monitoring by the Commission and its departments of the priorities set by the President and the Commission).

This mass of responsibilities fell to be borne by the small team that I organised, replaced, motivated and managed for ten years, with an overriding concern to economise on the resource that we lacked most cruelly time.

Hence the absolute need to concentrate my own activities on the points that the President or I myself felt deserved priority, including the function he gave me personally of representing him in preparations for the G7/G8 summits. Consequently it was rare for me to get involved in the management of individual cases their handling was naturally delegated to the individual members of the team depending on their areas of responsibility, subject of course to my supervision and my responsibility as is only proper in a delegation situation.

I therefore accept full responsibility for my staff's action in this case as in any other, whether or not they acted as I would have done myself.

Having reviewed all the available material in the file, however, I do not see how they can be criticised, by me or anybody else, regarding the way they exercised their responsibilities.

- The adviser for agricultural matters transmitted messages and his views as he should. The quality of the people dealing with the case and of their arguments warranted his attention, and had he taken no initiatives I would certainly have reprimanded him;

- The adviser for budget and financial control, quite properly organised a discussion between the main protagonists, whose views of the decision to be taken differed.

Nor do I see how they can be criticised or how I would have criticised them for their conduct: ultimately the main point was to try and bring the views of three DGs into line. That is why the meeting chaired by my Deputy on 7 January was not attended by the cabinets. And as we all know, the Financial Controller is functionally independent under the Financial Regulation.

At the time, of course, our procedures and legal rules allowed what experience shows us was a large room for assessment and decision-making. As I explained to your Committee on Industry, External Trade, Research and Energy at my hearing as Commissioner designate in September 1999(7), this involved a degree of subjective judgment which is open to criticism, and, as the Commission pointed out in its reply to the Court of Auditors on 10 May 2000, the conditions for applying the principles of proportionality and equity and the room for assessment they imply certainly suffered from the absence of clear criteria and specific procedures. Changes have already been made to remedy matters and this effort will, of course, have to continue in future.

2.f OLAF investigation into the missing record

Par 12, 13, 14 (missing minutes)

Questions by Mrs Stauner

* * *

Par 12, 13, 14 (missing minutes)

Questions by Mr Bösch

In its report on follow-up measures in connection with the discharge for 1998, the Commission writes that the missing minutes of the crucial meeting of 7 January 1994 had not been found.

(1) Why does the Commission not state that OLAF takes the view that the minutes in all probability never existed?

(2) What conclusions does the Commission draw from this finding of OLAF's investigations ?

Do they not cast doubt upon the credibility of three Commission Directors-General who, as late as May 2000, issued a written statement that they had received copies of these minutes which then disappeared under very odd circumstances?

* * *

In paragraph 1 (d) of its resolution of 13 April 2000 on the postponement of the 1998 discharge, Parliament demanded that the Commission call upon OLAF to 'launch an investigation into the Fléchard affair in order to identify those responsible for arranging the disappearance of documents'. The background to this was the statement by three Directors-General that each of them had received a copy of the minutes of the crucial meeting of 7 January 1994 in the Delors cabinet, but that all copies had been taken under extremely odd circumstances from their archives.

1. When did the Commission, in accordance with Article 5 of the OLAF Regulation, ask OLAF to launch an investigation?

Can the Commission produce a copy of its request?

2. When did the Director of OLAF decide to open an investigation?

3. If the investigation has already been completed, can the Commission tell us when it was completed and forward a copy of the relevant OLAF report?

4. If the investigation has not been completed, can the director of OLAF answer the following questions now:

(a) Is it now clear who had been invited to the meeting of 7 January 1994 and who attended it, even if not for the whole of the time? Can he give the names of the relevant people?

(b) Is it now clear who took the minutes and who subsequently received a copy of them?

(c) Can the director say whether all the officials who took part in the meeting have already been questioned as part of the OLAF investigation?

(d) Have Mr Delors' then chef de cabinet and his deputy already been questioned?

By letter dated 15 May 2000, the Commission was informed of the decision by the director of OLAF to open an investigation in the "Fléchard" case so as to retrace the written conclusions of the interdepartmental meeting held in the President's cabinet on 7 January 1994.

A copy of the report on the results of OLAF's investigations was transmitted to the Commission by letter from the director of OLAF dated 8 March 2001. The director of OLAF sent a copy of the report to the Chair of COCOBU the same day.

The conclusions of OLAF's report record that it did not find the missing minutes and that the investigation concerning the Fléchard case is to be regarded as closed. The Commission deplores this failure but nevertheless has no reason to doubt the existence of written conclusions.

Par 12, 13, 14 (missing minutes)

Questions by Mr Bösch

5. Does the Commission agree that the arranged disappearance or theft of documents are serious matters which call for disciplinary action and, if necessary, criminal prosecution?

6. Will the Commission also take disciplinary action if it should turn out that the minutes of the meeting of 7 January 1994 never existed and the claim that they did was nothing more than a cover-up to protect those responsible for this matter?

Independently of the concrete case, the Commission regrets any disappearance of official documents. Should an official document disappear through theft or other deliberate action the Commission agrees that this would call for all appropriate actions in the light of the circumstances.

2.g Letter from the President of the Court of Auditors

Par 12, 13, 14 (Information from Mrs Schreyer)

Question by Mrs Stauner

(5) Was the Commission's answer of 10 May 2000 approved by the whole Commission?The letter sent by President Prodi to President Karlsson on 10 May 2000 was part of an exchange of correspondence between the Presidents of the two institutions.

By letter of 19 April 2000, Mr Karlsson transmitted to President Prodi the Court's observations regarding exports of butter to the former USSR under Regulation No 863/91. On 10 May 2000, President Prodi sent President Karlsson a document setting out the Commission's positions regarding these observations. The Court's final observations regarding this case were contained in a letter from the President of the Court of Auditors.

The reply for President Karlsson was prepared under the authority of President Prodi and the Commissioners responsible for the areas concerned. The Commission was kept informed.

Par 12, 13, 14 (Information from Mrs Schreyer)

Question by Mrs Stauner

(6) Were those who approved these answers on 10 May 2000 familiar with all of the documents and facts relating to the case, including Commissioner Schmidhuber's letter of 21 December 1993 and the confidential note from the adviser on agricultural matters in the Delors cabinet?President Prodi's reply of 10 May 2000 is based on a thorough analysis and assessment of the details of the case. Account was taken of the documents referred to in the OLAF report of 4 March 1999 and in President Karlsson's letter. This was the case of Commissioner Schmidhuber's letter of 21 December 1993 and the note from the adviser on agricultural matters in the Delors cabinet.
Par 12, 13, 14 (Information from Mrs Schreyer)

Question by Mrs Stauner

(7) Does the Commission stand by the account of events in the Fléchard case it gave on 10 May 2000, or has it now revised its account in the light of new facts?The Commission has no new evidence calling into question its presentation of the facts as set out in its reply of 10 May to the President of the Court of Auditors.

2.h Letter from Ms Theato (February 2001)

Par. 16

(Answer to Mrs Theato's letter)

Question by Mrs Stauner

(1) Why is the Commission refusing to comply with the request made by the Committee on Budgetary Control and release its officials and former officials from their obligation to maintain professional secrecy in the Fléchard case?The Commission attaches the greatest importance to the powers of budgetary control assigned to the European Parliament by the Treaty. The exercise of this power is part of the normal relations between the Commission and Parliament. It requires loyal cooperation on the part of the Commission and of its staff, as the body controlled. However, this in no way impinges on the obligation of officials to maintain professional secrecy when performing their duties.

As explained in Ms Schreyer's letter of 21 February 2001 to Ms Theato, the Commission assures Parliament of its full cooperation in all matters related to budgetary discharge. It therefore sees no objection to the Committee on Budgetary Control interviewing Commission officials and former officials on any aspect it may consider useful in connection with the 1999 discharge.

Par. 16

(Answer to Mrs Theato's letter)

Question by Mrs Stauner

(2)  Would the Commission be prepared to release its officials from the obligation to maintain professional secrecy if Parliament were to set up a committee of inquiry?The exercise of the European Parliament's right of inquiry is governed by Parliament, Council and Commission Decision 95/167/EC, Euratom, ECSC of 19 April 1995. Under Article 3(3) of the Decision, officials or servants authorised to appear before the committee of inquiry are required to speak on behalf of and as instructed by their Governments or institutions. They continue to be bound by the obligations arising from the rules to which they are subject.

This also applies to the obligation to maintain professional secrecy under Article 17 of the Staff Regulations, which is binding on all officials and servants of Community institutions and bodies.

The obligation to maintain professional secrecy safeguards the relationship of trust between the institution and its employees and contributes to the proper functioning of the institution. The lifting of this obligation can be considered only in exceptional circumstances on the basis of a case-by-case study.

Par. 16

(Answer to Mrs Theato's letter)

Questions by Mrs Stauner

(3)  Why is the Commission refusing to obtain a statement from the Irish authorities indicating why they halted the control procedures and took no legal action against Fléchard, even though the firm had knowingly submitted false documents to them?

(4) Why is the Commission refusing to obtain a statement from the Irish authorities indicating why they never added this case to the list of irregularities in accordance with Article 3 of Regulation (EEC) No 595/91?

(5) Why is the Commission refusing to obtain a statement from the Irish authorities indicating whether an agreement was reached between them and the Commission (DG VI) to link the FLECHARD and GOODMAN cases and set them off against each other?

(6) Why is the Commission refusing to request a statement from the competent authorities indicating why the French agriculture and finance ministries intervened to protect the interests of a firm that had clearly been involved in fraudulent activities?

(7) Did the Commission request such a statement when it was formulating its position in connection with the 1998 discharge procedure?

All the facts relating to the Fléchard case, including the action taken by the Irish and French authorities, have been analysed and examined in detail.

As indicated in the letter of 21 February 2001 from Mrs Schreyer to Mrs Theato, detailed information on these aspects of the case was supplied during the 1998 discharge procedure and in the reply to the letter from the President of the Court of Auditors. The Commission sees no reason for any additional demarche on its part towards the national authorities and confirms this position.

Furthermore, the Commission considers it important to point out that fraudulent intent on the part of the Fléchard company has not been proven. It would therefore be incorrect to suggest that either the Commission or national authorities acted to protect the interests of a company guilty of fraud.

Par. 16

(Answer to Mrs Theato's letter)

Question by Mrs Stauner

(8) Why is the Commission refusing to say whether, in accordance with the call made by Parliament, it has forwarded all available documents on the case? Is it to be concluded from this that further documents have been discovered or have turned up?The Commission has no evidence in its possession to suggest that not all the documents relevant to the case have been made available.

3. ADULTERATED BUTTER CASE

3.a Commission Information

Par 12, 13, 14 (Information from Mrs Schreyer)

Question by Mrs Stauner

In a letter of 5 July 2000 to Mrs Theato, Mrs Schreyer said she had 'just' learnt from her press officer that OLAF and the competent national authorities wished to inform the public about the case of fraud involving adulterated butter and that 'contrary to information I previously received, the Community's financial interests are also affected'.

(1) Who had provided the Commissioner with incorrect information and told her that the Community's financial interests were not affected?

OLAF has independent powers of investigation. It does not provide the Commission with any more information on on-going investigations than it provides Parliament or Council. OLAF decides when it is to publish its press releases. In this case it was to publish on the same day as the Italian authorities. The initial rapid analysis by OLAF at the beginning of July indicated that the butter was produced for internal EU consumption and no export refunds from the EU budget would have been paid. As the situation was clarified, it emerged that the adulterated butter was sold as butter, concentrated butter or used in the production of processed foods. Refunds on the use of butter in processed food could have been paid from the EU budget. This information was conveyed to the Parliament, as soon as it was confirmed, in Commissioner Schreyer's letter to Mrs Theato of 5th July 2000.
Par 12, 13, 14 (Information from Mrs Schreyer)

Question by Mrs Stauner

(2) Were the other Members of the Commission informed of this matter as late in the day as the Commissioner responsible for the fight against fraud?Commissioners became aware at the same time, in particular through the OLAF press release of 5th July 2000 which contained details of this case, and the press release of the Italian Procura della Repubblica Presso il Tribunale di Napoli Guarda Finanza of that same day.
Par 12, 13, 14 (Information from Mrs Schreyer)

Question by Mrs Stauner

(3) Why was the information provided so late and why had it been misleading despite the fact that the Italian authorities had asked OLAF for assistance as early as October 1999 in solving this case of fraud and it had been clear at least since then that the fraud affected the Community budget?OLAF was called in to aid contacts with other anti-fraud services in other Member States. Furthermore, OLAF is independent in its investigations, and did not inform the services concerned until sufficient proof existed of the fraud, and its character.

Par 12, 13, 14 (Information from Mrs Schreyer)

Question by Mrs Stauner

(4) Were the Members of the Commission deliberately misled about this fact or left with an unclear picture in order to ensure that the Commission gave an answer to the Presidential letter of the Court of Auditors on 5 May 2000 which played down the events in the Fléchard I case?Members of the Commission were not misled. The Commission's reply on the Fléchard case was sent to the Court of Auditors, two months before OLAF's information on the butter case.

3.b State of case

Par 12, 13, 14 (adulterated butter)

Questions by Mrs Stauner

In the period from 1995 to mid-2000, an internationally operating criminal syndicate conducted large-scale transactions with adulterated butter. The butter was adulterated in Italy and then delivered to well-known firms in Belgium, Germany and France.

(1) Can the Commission give the names of the firms that were supplied with the adulterated butter?

(2) Can the Commission confirm that current findings of the investigations put the amount of adulterated butter supplied at about 100 000 tonnes?

(3) Can the Commission state how much of it has been impounded?

(4) Can the Commission confirm that the butter was adulterated by mixing in animal fats (especially beef tallow) from rendering plants and that this was covered up by adding chemical substances?

(5) Can the Commission confirm that the percentage of added animal fat was apparently about 30% normally but was substantially higher in some consignments? Is it able to state how such butter was further processed?

(6) Can the Commission confirm press reports that equipment for the production of adulterated butter and the necessary chemical substances were supplied by firms in Germany?

(7) On 7 December 2000, the magazine 'L'Expansion' published passages from police witness statements from which it has to be concluded that the perpetrators were aware that the adulterated butter they were producing and/or marketing also posed a risk to health.

In its answer to Written Question E-3241/00, the Commission confirmed that the public prosecutor in Naples had suggested in his press release of 5 July 2000 that there could be a risk to health.

Why was there no mention of this health risk in the OLAF press release distributed by the Commission?

(8) Why was the public not warned and instead a decision taken to have chemical analyses carried out when it was known they would take months to complete?

How many samples have been/are being analysed, and in which Member States?

When did analyses of these samples begin and when were they/will they be completed?

What are the findings to date?

(9) What steps have been taken to take products made with the adulterated butter out of circulation?

What recommendations has the Commission made to the Member States concerned in this connection?

(10) Why did the Commission refuse to reveal immediately the names of the firms supplied by those who adulterated the butter?

Did data protection really have priority over health protection in this case?

(11) Why, when he appeared before the Committee on Budgetary Control on 7 February 2001, did Commissioner Fischler state that the adulterated butter did not pose a direct risk to health? What does this mean?

Does it mean there was an indirect risk?

If so, what was it?

(12) Can the Commission confirm that the process used by those who adulterated the butter was in principle the same as that used in the production of 'milk replacers' for rearing calves?

(13) Can the Commission confirm that such cow's milk substitutes are regarded as being a possible channel for the transmission of BSE?

(14) Is it true that butter adulterated as described above went undetected by the customary inspections?

If so, what conclusions should be drawn?

Legal background

For animals and animal products such as butter, Article 9 of Directive 89/662/EEC requires from the Commission, in case of serious hazard, to take appropriate measures to protect public health. To trigger this procedure, the Commission must have confirmation of the hazard from a competent authority in a Member State. Any proposal initiated by the Commission is then submitted for a vote to the Standing Veterinary Committee (SVC) composed of the Chief Veterinary Officers from Member States before adoption. In case of emergency, the Commission may, in agreement with the Member State concerned and following objective confirmation of the hazard, adopt specific safeguard clauses. The SVC must nevertheless confirm such a measure. No Member State provided information on which the Commission could prepare a proposal.

The Rapid Alert System for Food (RASFF)

In the case of adulterated butter, as soon as the Commission services were informed of the fraud, the channel of the Rapid Alert System for Food (RASFF) was used on 6 July 2000 to inform competent authorities in the Member States and to request further information in particular from Italy where the fraud originated. On 7 July 2000, DG SANCO contacted OLAF to request more information. OLAF replied the same day that they had received no information on this issue from Italy.

RASFF contacts points in Italy and France were again requested for more information on 7 July 2000. The Commission only became aware later that a firm in Belgium was involved. The contact point in Italy replied the same day that they had no information. This information was forwarded to all Member States through RASFF. Moreover, written requests for information were sent to the concerned Member States (Italy, France, Belgium) on 11 July 2000. The Commission indicated in this request that the matter would be discussed at the next SVC and that it expected the Member States concerned to provide information. On 14 July 2000, Italy replied officially that they had no information beyond what was in the press release. On 17 July 2000, France replied officially that they were surprised that the Commission asked for results of analysis when OLAF was involved. No further information was supplied by the French authorities.

At the SVC on 18 July 2000 the Commission stressed again the need for the concerned Member States to perform analysis to confirm that this product did not pose a health risk. No Member State was in a position to provide more information. Commissioner Byrne wrote on 28 July 2000 to Belgium and France and urged these Member States for information on sampling and analysis.

Belgium sent on 14 September 2000 results of analysis performed on the adulterated butter and reported negative results for chemical contaminants such as PCBs, organochlorine pesticides or heavy metals. This information was placed on the RASFF news site.Informally, one Member State also explained that the analysis they had carried out did not show any public health concerns and that this was the reason why they had not sent information to the Commission.

The matter was discussed again on a meeting of the SVC on 22 November 2000 where OLAF was invited. The Member States concerned (France, Belgium and Italy) were asked to provide any information they had on this matter, since their authorities were involved in the investigation and thus fully aware of the fraud. No response was received from the Member States.

Following a renewed written request by the Commission on 19 December 2000, Italy confirmed on 9 March 2001 that they are not in a position to provide any information because of judicial secrecy(8).

Names of the firms

The Commission can only confirm its answer to written question 3241/00 to the effect that the names of the firms supplied with adulterated butter are kept secret due to the confidentiality of investigations, in accordance with national criminal law and the data-protection rules. In any event the Commission does not know these firms' names; only OLAF has them.

Risks for health

Commissioner Fischler was explicitly referring to expert opinions quoted in the press release from OLAF (Press Release OLAF/10/2000, 19 December 2000) which states: (…..)"Expert analyses so far carried out on the products which have been seized exclude any possible direct health risk to consumers." (…).

As explained above, the Commission relies on information provided by Member States. According to one Member State, the analysis it had carried out did not show any public health risk.

Although the Commission does not have the details of the production method used, it seems that transesterified animal fats and short chain fatty acids may have been used in order to simulate the composition characteristics of real butter.

If animal fat was used and if this came from bovine animals (other sources such as porcine are feasible also) then tallow would be the most obvious source. In accordance with Council Decision 1999/534/EC tallow that is produced in accordance with the criteria levels laid down (Filtration and 133°C, 3 bars, 20 minutes) would be rendered safe and not give rise to the risk of transmission of BSE.

For further information on these questions the Commission refers to the answers to be given by OLAF in the exercise of its independent powers of investigation.

3.c Black list

Par 12, 13, 14

Question by Mr Mulder

* * *

Par 12, 13, 14

(treatment of Fléchard)

Question by Mrs Stauner

* * *

Par 15

(Blacklisting)

Questions by Mr Bösch

2. Although the Commission states in its answer to written questions by Mrs Stauner, MEP, that the Commission can only add companies to a 'black list' on instigation of Member States and that the Commission has no own discretion in adding companies to the 'black list', does the Commission not even have such discretion as far as direct expenditure is concerned, for which the Commission is directly responsible?

* * *

3. Why was the firm never added to the black list?

* * *

Can the Commission outline the problems associated with applying the black list and make proposals as to how the relevant regulation might be improved?

Can the Commission state how many firms in the various Member States are currently blacklisted?

Can the Commission state, how many firms involved in the recent adulterated butter affair have been blacklisted, and in which Member States?

Council Regulation (EC) 1469/95 sets up the so-called "black list", in measures concerning beneficiaries of operations financed by the EAGGF (Guarantee Section). It puts in place a Community system concerned with tendering procedures, grant of export refunds or sales at reduced prices of intervention products. It allows the national authorities to identify operators who have deliberately or as a result of serious negligence committed an irregularity prejudicial to Community funds, or who are suspected on solid grounds of having done so. Measures include reinforced checking of all the operator's operations, suspension of payments on current operations, or even exclusion from operations for some time. Notification of the economic operator is at the initiative of the Member State. The economic operator has a right of appeal, and measures taken should be proportionate. OLAF maintains a data-base, with data supplied by a designated authority in each Member State. It assures transmittal of such information to the designated authorities in the other Member States, according to the conditions set out in the legal base.

Concerning the principles governing the « black list », it should be recalled that it contains only cases where fraud has been proven - which can need years due to the length of the legal procedures.

In order to have a larger scope for prevention, the Commission has created the Early Warning System (EWS), which provides a warning when commitments are registered or before payments are being authorised for companies or individuals figuring on this list.

For further information on the black list, the Commission refers to the answers to be given by OLAF in the exercise of its independent powers of investigation.

4. ROLE OF OLAF

Par 12, 13, 14 (UCLAF-OLAF)

Questions by Mr Bösch

The impression gained so far is that the former anti-fraud unit UCLAF only came to know about the Fléchard case in early 1999 through a letter from Mrs Theato, i.e. way past the time limit for criminal prosecution. In a letter to Mrs Theato of 9 March 1999, the then director of UCLAF wrote concerning the Fléchard case: 'As far as inquiries are concerned, this case was dealt with exclusively by DG VI/G/4 (...) UCLAF was at no time involved in the inquiries or kept informed thereof'.

(1) Can the Commission conform that UCLAF was in fact informed of the case earlier and that UCLAF had long had a secret file on the case?

(2) If so,

(a) can the Commission state who set up the secret file?

(b) can the Commission say whether, and if so how, pressure was brought to bear on UCLAF officials not to proceed with the Fléchard case?

On these questions the Commission refers to the answers to be given by OLAF in the exercise of its independent powers of investigation.

(1) Commission Decision of 28 April 99/352/EC, ECSC, Euratom establishing the European Anti-fraud Office (OLAF); Regulation (EC) No 1073/1999 of the European Parliament and of the Council of 25 May 1999 concerning investigations conducted by the European Anti-Fraud Office (OLAF); Council Regulation (Euratom) No 1074/1999 of 25 May 1999 concerning investigations conducted by the European Anti-Fraud Office (OLAF)

(2)Case C-356/97 Molkereigenossenschaft Wiedergeltingen eG, paragraphs 35 and 36.

(3) Council Regulation (EC Euratom) No 2988/95, article 2 (2) ; see Case C-354/95, National Farmers Union and Others, in particular paragraphs 39 to 41 . See also article 49 of the Charter of fundamental rights of the EU.

(4) Article 68 par 2 of the proposal states that where the authorising officer waives recovery of an established entitlement, he shall ensure that the waiver is in order and complies with the principle of sound financial management. He shall inform the accounting officer of the waiver so that it can be registered. The waiver decision must be substantiated and adopted by the authorising officer by delegation [in the case of the Commission, by the Director General himself]. The authorising officer by delegation shall refer any cases about which he has doubts to the higher authority for a decision [for the Commission to the College].

(5) This letter, together with the Commission's answer, can be found on the Court of Auditors Internet page (http://eca.europa.eu) under the heading Special Reports 2000.

(6) The verbatim record of the hearing can be found on the European Parliament Internet page http://europarl.europa.eu/hearings/com.

(7) The verbatim record of the hearing can be found on the European Parliament Internet page http://europarl.europa.eu/hearings/com.

(8) According to article 329.1 of the Codice di procedura penale italiano all documents drawn up in the course of an investigation by the Public Prosecutor and by the police (polizia giudiziara) are covered by secrecy until they have been made avalaible to the accused and, in any event, not later than the closure of the preliminary investigation.


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