Millions stolen from EU funds

Up-to-date investigations have shown numerous cases of fraud with EU funds in Eastern European countries.

Hungary is investing 26 million euros in a state-of-the-art waste treatment center that mysteriously burned down. The Hungarian Investigation Centre Átlátszó found that the state had signed a collusion with the contractors and had not conducted an investigation. Recently, the European Anti-Fraud Office (OLAF) opened a formal investigation to investigate possible financial crimes. In Slovakia, criminals stole millions from a €1.4 billion Covid assistance fund. EU funds were supposed to help local companies maintain their activities during the pandemic, but instead ended up in the bank accounts of secret offshore companies. And in Romania, an EU fund of 1 billion euros earmarked for the UNESCO-protected Danube Delta has been the target of fraud by local, politically connected businesses.

[This is part 1 of the series on fraud with EU funds]

Organised Crime and Corruption Watch is a series of publications produced by seven investigative publications that are members of The Organised Crime and Corruption Reporting Project. The team will investigate topics related to organized crime or corruption for each publication and will show the most relevant facts.

This is a joint investigation carried out by the reporters of: Investigace.cz (Czech Republic), Bird.bg (Bulgaria), Frontstory.pl (Poland), Rise Project (Romania), Jan Kuciak Research Center (Slovakia), Átlátszó (Hungary), Context Investigative Reporting Project (Romania)

Hungarian waste and fraud

In November 2022, the European Anti-Fraud Office (OLAF) announced that it had found irregularities in the management of funds in a Hungarian EU-funded waste management project. OLAF recommended that the EU withdraw €11 million from Hungary for the failed project.

This followed a 2019 investigation into the waste management project, where the root of the problem was discovered. The investigation began after locals near Lake Balaton, in Kiralicentistan, complained of pollution.

A landfill in Kiralisentistan was funded with European money as part of a €26 million project. Approved in 2003, the project was supposed to ensure the collection and proper handling of household waste from 158 towns and villages. The critical element was the construction of a regional waste handling station at Kiralicentistan.

The project was delayed due to a legal battle triggered by local environmental NGOs that were against the construction of a waste treatment plant. A major concern represented the planned location of the plant in a sensitive groundwater quality protection area. In 2008, they lost the legal battles and construction began.

In April 2011, after the construction of the plant, the three-month trial conducted by the public engineering consortium was completed. However, two days before the official cut of the tape in May, a mysterious fire burned the brand new biological-mechanical processing room.

The problem was settled between the participants – the construction consortium and the municipality, who concluded an out-of-court settlement. The consortium agreed to pay 60% of the estimated damage to finance the repairs. How the amount was determined, who was responsible for the fire and under what circumstances it started remains unclear. The renovation of the building took two years, further delaying the deadline of the project.

This stopped for a long time the necessary separation and treatment of organic waste, which had to be carried outin the biological-mechanical hall. So most organic waste made it to landfills, contrary to original project plans and EU waste policy.

A year after the launch of the site, locals began to complain about terrible odors. In 2017, experts proved that the source of the smell is the Kiralisentistavan factory and mainly the landfill (the location where the waste is dumped), the liquid tank and the biological hall (where biological waste is loaded and processed). The smell could sometimes be felt at a distance of 3-5 km.

The studies showed that the machines in the processing hall had been damaged for several years, which made it difficult to sort and mechanically process organic waste. Moreover, although renewable combustibles, such as wood, have been properly sorted and handled, they have not been transported for use. Instead, the owner left them in the dump. In 2019, fuel materials even caught fire.

As a result of public dissatisfaction with the smell, bio-waste was not processed in Kiralisentivatan between 2018 and 2021, but was transferred to another landfill. During these years, the local government has won three other major development grants from the EU, receiving around €20 million (calculated at the current exchange rate) additionally after the initial €26 million grant from 2003.All three projects aimed to develop the waste management system even further, but the Kiralisentistavan dump gave very poor productivity during these years, as described above.

In response to questions from Átlátszó, the organisation which manages the North Balaton’s landfill system confirmed that OLAF had investigated them. However, they denied the legality of OLAF’s accusations.

Orbán’s son-in-law is enriched with EU money

For many years, Hungary’s Atlatszo investigative centre exposed massive corruption in EU-funded projects. Atlatszo was the first to report on the case of Elios, in which Ishtvan Tiborcs, the Prime Minister’s son-in-law, was involved. In this scandal, Elios Zrt, a company co-owned by Tiborcs, received tens of millions of euros for upgrading street lights across Hungary.

Atlatszo concluded that most of the public contracts won by Elios Zrt could not pass the tests carried out by OLAF, the EU’s anti-fraud office. OLAF later confirmed these conclusions in a formal report. However, Hungarian investigative bodies and prosecutors sabotaged the Elios investigation, and Hungarian taxpayers eventually paid the bill instead of son-in-law Tiborcs.

This is just one of many cases that were first uncovered by media and investigative journalists before turning into OLAF investigations and national criminal cases. Sometimes sentences are handed down in secret: as Atlatszo discovered in 2022, a Hungarian billionaire was quietly convicted by a Hungarian court of a case of EU public procurement fraud without publishing any news about the case or conviction.

The Hungarian government has decided not to participate in the establishment of the European Public Prosecutor’s Office (EPPO) in 2021. funds to Hungary due to its failure to tackle corruption. The Commission has announced that Hungary must achieve milestones to gain access to recovery and resilience funds and implement anti-corruption measures, including the establishment of an Integrity Agency and an Anti-Corruption Working Group. Meanwhile, the official website of the Hungarian Ministry of the Interior states that “Hungary, according to national, European and international polls, is moderately affected by corruption.”

“We have hundreds of registered files in EPPO Romania.”

Romania has a long history of fraud with EU funds, proven through criminal and journalistic investigations. A 2021 report by the European Public Prosecutor’s Office notes that Romania is second only to Italy in terms of the amounts suspected of having been misappropriated. “We have hundreds of registered EPPO cases in Romania,” Laura Kovesi, head of EPPO, said in an interview with Context.ro. According to Kövesi, one of the most significant criminal cases investigated by her team is related to the EU funds allocated to the Danube Delta. The investigation began after Romanian investigative portal InfoSudEst.ro and Süddeutsche Zeitung revealed that a group of politically connected businessmen had stolen at least 100 million euros out of a total of 1 billion euros. The fund was supposed to be invested in the local economy, but never reached the banks of the Danube Delta.

Last year, the EOP reported 44 active investigations, which together caused damage of EUR 1.3 billion. Some of the cases investigated have a cross-border dimension, and Kövesi believes organised crime groups are very active in the EU. “I noticed the great flexibility of these organized groups, the ways of communication between them are very simple and clear,” she said. Kövesi notes that the biggest problem in law enforcement is to detect the involvement of these criminal groups.

One recent example is an investigation by the Organisation for the Investigation of Organised Crime and Corruption (OCCRP), published last year, into 20 million euros of EU funding stolen to feed the most vulnerable Romanian citizens. According to the investigation by Rise Project and Bivol, the money was stolen by members of two organized crime groups: one based in Bulgaria and one in Romania. The stolen funds were used to purchase luxury goods and properties in Bulgaria.

Romania: Bribery reaches 50% of contracts

Fraud in Romania is the focus of the European Commission, and a 2021 report puts Romania at the top of the list of countries where fraud with EU funds is committed. The 2020 report noted 237 irregularities, covering more than EUR 166 million. of EU grants. A recent OLAF report also identified Romania as one of the countries more prone to fraud, showing that two of the most significant frauds it investigated were related to Romania.

OLAF reports are sometimes mentioned in the National Anti-Corruption Department (DNA) in Romania. According to a 2022 DNA report, the number of fraud-related crimes is high, with the department registering 590 new cases involving EU funds worth around 25m euros. euro. Taking bribes is a common component of these cases, sometimes “the bribe negotiated as a percentage was up to 50% of the amount received.”

Slovakia: The country where livestock farmers hold the golden key to EU funding

In October 2021, the Jan Kuciak Investigative Center (ICJK) reported on how 24 million euros ended up in the accounts of phantom firms. History reveals that Slovak shell companies were used to steal EU funds. The scheme began during the COVID-19 pandemic. The Slovak government decided to create an emergency fund of 1.3 billion euros, called “First Aid”, supported with money from the European Regional Development Fund. As the government advertises, the First Aid program was created to quickly provide financial assistance to businesses in distress due to state-imposed restrictions due to the pandemic. Businesses can get money to help pay rents or their employees. This allows them to receive hundreds of thousands or even millions of euros to prevent dismissals of their employees during the pandemic.

ICJK identifies multiple companies that have received millions in aid despite having no employees, do not file financial statements, and their owners are foreign nationals. Later investigations by ICJK revealed that these “owners” were fictitious with names that were probably fictitious.

The State of Irregularities

Slovakia has been a beneficiary of the EU budget since 2004. In the multiannual financial framework for the period 2021-2027, EUR 12.8 billion has been allocated to the Cohesion Fund. Euro for Slovakia. At the same time, it is one of the countries that spend EU funds the worst. It failed to spend around $6 billion on the construction of a new gas pipeline. from the previous financial framework.

And from what it spends, the money often goes to projects that show the highest number of “irregularities”. Over many years, OLAF’s annual reports have shown the highest levels of detection of irregularities and their financial impact in the European Structural and Investment Funds and agriculture. In 2020, 15.41% of payments on Slovak projects showed “irregularities”. This is the highest number in the EU; in second place is Romania with 8.03% and third – Greece with 1.97%. However, there has been progress – Slovak irregularities were 21.03% in 2019.

It is important to note that this does not mean that a fifth of all projects in Slovakia are corrupt. In the past, this high percentage was explained by the controlling authorities in Slovakia as a sign that they have the strongest system for reporting irregularities. But the idea that EU funds are a nest of corruption is widespread in society in Slovakia. The idea that everyone has to pay a standard fee of 20% for the approval of applications for European funds is an urban legend. However, perception is growing with every revelation of corruption in EU funds – cases that continue to increase and sometimes reach the highest echelons of Slovak society.

The list of corruption scandals related to EU funds over the years is long and exhausting. Over the past few years, the European Public Prosecutor’s Office has taken over more and more of these cases. For 2021, it reported 42 active investigations, mainly related to VAT fraud, but some of them “… relate to corruption in the allocation of European funds or the actual use of EU funds,” according to European prosecutor Juraj Novocki.

In May 2022, the European Public Prosecutor’s Office filed the first indictment in Slovakia. Three people were charged with setting up an organised group that cheated the European Regional Fund of 375,000 euros.

In November 2020, another regional case emerged. A businessman who has a project to hire workers says he was contacted by a member of the regional council of the Kosice region, who is also a member of the commission that decides on EU-funded projects and is asked for a bribe. Another businessman explained that of the approved amount, he received only 80 percent. This again confirms widespread suspicions of a fixed 20% “fee” for bribes.

EUR 10 million in bribes in the livestock programme

Since 2018, when the murder of Slovak investigative journalist Ján Kuciak and his fiancée Martina Kušnírová shook the state and the political landscape, not only these small and regional cases have caused public discontent and interest from the judiciary.

In March 2020, the National Crime Agency (NAKA) launched an investigation codenamed “Breeder” (Kravar). It is one of the largest corruption cases in Slovakia. NAKA says some applicants for funding from the EU’s Common Agricultural Policy were forced to pay bribes to receive payments. These, it is contended, were not merely a few individual cases; It was systematic corruption. And according to investigators , at least 10 million euros went for bribes.

In the “Breeder” case, 19 persons were charged. Among them were high-ranking officials, such as the former heads of the Agency for Payments for Agriculture (APZ or equivalent to the Bulgarian SFA editor’s note) Juraj Kozhuh and Lyubomir Partika, as well as the famous oligarchs Martin Kwietik and Norbert Bödör. The latter is known for its links to Robert Fico’s political party, the SMER-SD, which was in power from 2006-2010 and 2012-2020.

The Prime Minister’s Friend from the Golden Key

In 2014 and 2015, Robert Fico gave speeches in the regional city of Nitra during a party hosted by Bonul, a private security company owned by Norbert Bödör. It is remarkable that during these years Bonul won many public contracts. After his speech, the then prime minister did not return to Bratislava, but stayed at the Golden Key Hotel, which for years was known as one of the favorite places of SMER-SD politicians.

Jan Kuciak, who was later murdered in 2017, proved that the Golden Key was owned by Norbert Bödör, although it was allegedly owned by two unknown companies. It was discovered that these two companies received tens of millions of euros from APA, including 2.4 million euros in 2016, to buy and renovate the Golden Key Hotel. The grant, as Kuciak wrote, was illegal, not meeting the requirements of the EU fund, but it was still approved by APA chief Partica.

Does the opportunity make him a thief?

Norbert Bödeur was charged in the Livestock Breeder case. The court began in February 202 and continues to this day. However, Bödör is not the only oligarch who is now facing problems. József Brchel is also considered one of the “sponsors” of the SMER-SD party.

As ICJK revealed in 2021, several of Brchel’s companies received lucrative licenses to build solar power plants in 2009, and at least three of them were built with 11.4 million euros from EU structural funds grants. Brchel is currently also prosecuted in another case, Customs, of corruption and money laundering related to other projects in the Financial Administration.

We are still waiting for the trial to begin in the First Aid case. And just a few months after ICJK revealed this story, it revealed another one, in which a different set of companies received “First Aid” grants worth 700,000 euros to cover their rental costs. This money was supposed to help businesses that had to pay rent, even though it was closed due to the pandemic. The companies ICJK wrote about received subsidies, even though the premises were closed before the pandemic. Unlike the employment program described earlier, the authorities do not investigate this case.

This shows that in Slovakia there is still a desire to get an irregular part of the cake, especially from the one funded by the EU. With the EU’s Multiannual Financial Framework 2021-2027 totalling €12.8 billion for Slovakia and an additional €6.3 billion allocated to the Slovak Recovery and Resilience Plan, opportunities and incentives for fraud continue to increase. The national police and independent media must continue to expose these fraudulent schemes to ensure the proper use of these funds.

Tomáš Madleňák/ Investigative Center of Ján Kuciak – Slovakia

Tamás Bodoky / Atlatszo Investigative Center – Hungary

Orsolya Fülöp / Atlatszo Investigative Center – Hungary

Bianca Albu/ Rise Project – Romania

Attila Biro/ Context Investigative Reporting Project – Romania

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