Committee of Independent Experts
|
| · Introduction · Tourism
· MED Programmes · ECHO
· Leonardo da Vinci · Security
Office · · Nuclear Safety · Allegations of Favouritism · Concluding Remarks · Annexes · |
5.1. Introduction
5.2. The Programme, the Technical Assistance Office (TAO) and the contract
5.3. Audit findings of DG XXII's own audit unit concerning the Leonardo/Agenor TAO
5.4. Audit findings by DG XX, Directorate-General for Financial Control
5.5. Further proceedings in the Commission
5.6. Parliament in ignorance
5.7. Professor Reiffers' mission
5.8. Conclusions
5.1.1. The Committee chose this file for consideration because audits of the implementation of the Leonardo da Vinci programme and of its Technical Assistance Office (hereinafter referred to as TAO) have disclosed a wide range of alleged mismanagement, irregularities and possibly fraud and other breaches of criminal law.
5.1.2. Even though the various individual allegations against the Leonardo TAO would each have deserved thorough scrutiny, the Committee focused its attention on the treatment by the Commission and by the Commissioner responsible for the Leonardo da Vinci programme of the problems which arose . During the whole period under scrutiny, the Leonardo da Vinci file was under the responsibility of Commissioner Cresson and the Director-General of DG XXII.
5.2.1. In 1995, the European Commission launched the Leonardo da Vinci programme. This had been formulated by Directorate-General XXII (responsible for matters concerning education, training and youth). It was created by means of Council Decision 94/819/EC, and its purpose was to implement a vocational training policy in support of initiatives conducted by the individual Member States. It was scheduled to cover a maximum period of five years (1995 - 1999) with appropriations allocated of the order of ECU 620 million.
5.2.2. Normally, such a programme would have been implemented by the Commission's services themselves. However, because of a lack of staff within DG XXII, and since it appeared impossible to redeploy the necessary staff from other services in the Commission, it was decided to outsource the implementation of the project to a 'technical assistance office' following a public call for tender.
5.2.3. On the basis of an open tender issued at the end of 1994, Agenor SA was awarded a five-year service contract to provide technical assistance, renewable annually, from 1 June 1995 to 31 May 2000. The TAO provides the Commission with technical assistance in managing some of the operations carried out under the Leonardo da Vinci programme. Decentralised operations are managed by the Commission without the help of the TAO. The main operations which the TAO helps to manage comprise several thousands of project proposals per year and involve complex processing procedures through a chain of operations leading to the selection of some 750 projects per year by the Commission.
5.2.4. The main actors for the implementation of the European professional training programme Leonardo da Vinci were thus DG XXII, under Commissioner Cresson, and Agenor SA, which was selected as TAO for the programme and headed by the former representative of the non-profit-making association CESI in Brussels, the leading shareholder in Agenor SA. Audits were undertaken both by an audit unit of DG XXII itself and by DG XX, the Directorate-General for Financial Control, responsible to Commissioner Gradin. Mrs Gradin was also responsible for UCLAF which became involved as soon as allegations were raised regarding possible fraudulent actions and violations of criminal law.
5.2.5. As stated above, DG XXII entrusted the implementation of the programme to Agenor SA as Technical Assistance Office (TAO). Agenor SA is a French company composed of a number of shareholders from different Member States. However, its controlling shareholder is the French Group CESI (Centre d'Etudes Supérieures Industrielles).
5.2.6. CESI (Centre d'études supérieures industriels) is a non-profit-making association whose aims is to provide permanent training courses for senior management. Its Management Board consists, on the basis of equality, of Associations representing French management on the one hand, the two employers' organisations concerned and four major firms (Renault, Rhône-Poulenc, Banque Scalbert Dupont and IBM) on the other. CESI's Managing Director is Mr Jacques Bahry.
5.2.7. SISIE (Services Industrie Stratégie Internationale Environnement) is a limited company with a capital of FRF 3 000 000, whose aim is to provide consultancy services for businesses. Its major shareholders are the Schneider Group and EDF. Its Managing Director is Mr Nicolas Lebon.
5.2.8. It would appear that Mr Pineau-Valencienne is the Chairman of SISIE's Supervising Board (Mrs Cresson chaired the SISIE's Management Board before being appointed to the Commission), and that he was also an administrator of CESI where he represented the Metalworkers' Union.
5.2.9. As early as 1994, the Commission's DG XXII conducted an internal audit of the implementation of one of Leonardo's predecessor programmes, 'FORCE', also implemented by Agenor SA. The audit report contained a number of critical remarks about the networks and the products that had been established. It gave indications of double invoicing and unsatisfactory financial management. Another internal audit was done by DG XXII on a project managed by EWA, a Berlin-based subsidiary of CESI, which also revealed serious failings in financial management and control.
Obviously, the findings of these reports should have been taken into consideration by DG XXII when a decision on the award of the Leonardo TAO was taken.
5.2.10. The European Commission's DG XXII concluded a contract with Agenor SA on 13 June 1995 stipulating that the organisation would set up the administrative infrastructure required for the provision of assistance to DG XXII with respect to the start-up and follow-up of the Leonardo da Vinci programme. This contract stipulated inter alia the following requirements and obligations:
'The Organisation shall provide technical assistance to the Commission for the period referred to in Article 2 of the current contract with regard to the implementation of the Leonardo Programme.
.....
The Commission retains sole responsibility for the implementation of Council decisions and, in particular, for the liquidation of financial contributions committed to the execution of such decisions.
.....
The payment made by the Commission for the services rendered by the Organisation shall be based on the work programme and budget and personnel plan agreed by the Commission.
.....
The Organisation shall be responsible for the recruitment and general terms and conditions of employment of the employees required for the execution of the work programme. For this purpose, the Organisation shall inform the Commission of the general terms and conditions of employment and of the names and salary conditions of each of the employees employed by the Organisation for the execution of the work programme set out in this contract.
.....
The Organisation shall obtain the prior permission of the Commission for any change and/or any recruitment at managing level.
The Organisation may make amendments to the Personnel Plan with the prior agreement of the Commission .... .
The Organisation shall obtain the prior approval of the Commission for any item of equipment of furniture charged to heading II (running costs) of Annex III to the present contract, and shall make an appropriate record in its accounts and inventory.
The Organisation shall obtain prior permission of the Commission for the purchase of goods and services relating to the execution of the present contract, where such goods or services will entail costs in excess of ECU 10.000 during the contract period.
.....
This contract shall be governed by the general terms and conditions applicable to contracts awarded by the Commission of the European Communities, which are contained in Annex 1 to this contract and which the Organisation declares it has read and agrees to.
In addition to any auditing procedures required by the Organisation's own procedures, the Commission and the Court of Auditors of the European Communities shall be entitled, for the purpose of carrying out audits, to have access to all books, documents, papers and records kept by the Organisation.....'
5.3.1. A first internal audit of the Leonardo/Agenor TAO was carried out by DG XXII's audit unit from 1 June 1996 to 31 May 1997 into the first year of operation (1995/6) of the Leonardo/Agenor TAO and was published within DG XXII by October 1997. On the basis of this audit report, which disclosed a number of critical elements, UCLAF already established a list of items which might indicate serious irregularities and/or fraud. In a later note (n 2633) from UCLAF dated 17 April 1998, a copy of which was submitted to DG XX, it requested the inclusion of these items in the framework of DG XX's audit of the Leonardo/Agenor TAO which was conducted in 1998.
5.3.2. The main allegations in this first audit report by DG XXII were the following:
* Alteration of the initial tender specifications in order to give an advantage to the printing company 'Forma in Quarto'.
Under normal circumstances, price estimates are requested from various printers in order to secure the least expensive price. In this case, however, the initial tender specifications were altered at the last moment and revised price quotes were requested by fax. It emerges that 'Forma in Quarto' always replied last, its prices being in each case slightly lower than the best prices previously received.
* Deliberate non-compliance with the rule that the cheapest provider must be chosen for paper and printed products, again to the advantage of 'Forma in Quarto'.
Although the proposals for calls for tenders regarding paper and printed products in April/May 1998 clearly showed that 'Editions Européennes' had submitted the most favourable bid, and although DG XXII had asked the Leonardo TAO in a note dated 7 May 1998 not to accept the bid from 'Forma in Quarto', the Leonardo TAO still recommended this company. As DG XX's audit report later showed, 'Forma in Quarto' was in any case was not able to fulfil the required printing work.
* Irregular expenses in favour of a contract employee in the Leonardo TAO, charged by DML Consult, a company owned by the employee's wife. The employee worked for the TAO on the basis of a full-time secondment from the Belgian company VDAB, but at the same time charged for consultancy work through his wife's company DML Consult.
In the period from 1 June 1995 to 1 July 1997, the employee thus received, in agreement with the director of the Leonardo TAO, 'emoluments' for a total of BEF 4 million per year (BEF 2.85 million for his full-time secondment from VDAB and BEF 1.2 million via fictitious invoices from DML Consult).
As from 1 June 1997, he received an additional amount of approximately BEF 100 000 per month through a consultancy contract concluded between the TAO and DML Consult.
* An allegedly fraudulent invoice of ECU 8000. The invoice concerned study work supposedly performed by an organisation called Cendis-Ris. A detailed review of this study revealed that the document had been prepared by three other persons who had consultancy agreements with the Leonardo TAO through 'Etudes et Formation'. Moreover, no agreement from the Commission to carry out this study had been secured.
* Unacceptably high daily fee rates of ECU 2677 for a professor from Exeter University.
On 15 August 1995, the Leonardo TAO confirmed an agreement with Exeter University under which the latter would contribute expertise and networking know-how to the Leonardo da Vinci programme. The budgeted fees for this task amounted to GBP 40 000 per year based on a daily fee to the professor of ECU 2699. The contract was renewed for 1996/97 and 1997/1998.
No formal authorisation was ever given by the Commission for the services of Exeter University or the professor, who apparently did not produce any scientific services which could justify the considerable fee of over GBP 40 000 a year paid to the University by the TAO.
* An allegedly fraudulent invoice of ECU 24 000 for consultancy work by the company 'Etudes et Formation'.
Invoice No 30 dated 1 May 1997 for ECU 24 000, paid on 16 September 1997, referred to consultancy services carried out by employees of 'Etudes et Formation' for work on a 1996 compendium during the months March, April and May 1997. For this follow-up work to an already existing compendium, neither a contract, nor supporting documents nor a formal agreement from the Commission could be presented.
5.3.3. It should be noted that no action was taken by DG XXII to examine the alleged irregularities further and/or to review the patterns of control and of cooperation with the Leonardo/Agenor TAO
5.3.4. The internal audit unit of DG XXII undertook another brief audit visit to the Leonardo/Agenor TAO from 24 to 30 July 1997 covering the first two years of operation on a random basis. The audit report of this visit was submitted to and discussed with the Director-General of DG XXII in December 1997.
5.3.5. The report in many respects confirmed the earlier findings and revealed the following examples of alleged mismanagement and fraudulent practices:
* mission orders did not indicate the purpose of the missions;
* mission reports could not be presented;
* conflicts of interest: the 'group of experts' established by the Leonardo/Agenor TAO concluded contracts in 1995 and 1996 and participated in contracts during the same years;
* pre-invoicing from 'Forma in Quarto' for printing tasks to the order of ECU 93 676;
* an invoice for BEF 300 000, without a VAT number or an invoice number, for a study on a general evaluation of the Leonardo/Agenor TAO database by the systems manager of the TAO himself;
* double invoicing of a study produced by Cenid-Ris;
* pre-invoicing or fraudulent invoice of BEF 200 000;
* overstated fees and daily payments for consultancy services from Exeter University;
* pre-invoicing or fraudulent invoices of ECU 24 000 by 'Etudes et Formation'.
5.3.6. In total, the audit recommended a reduction of the reported amount of ECU 456 486 and noted in its final remarks:'Taking into consideration the importance of the remarks, ..., the internal audit considers it as a standard procedure that this report is communicated to DG XX and UCLAF.'
5.3.7. Given the above findings and the recommendations, it is inconceivable that the Director-General of DG XXII did not inform the Commissioner responsible, Mrs Cresson. Since UCLAF could not be involved without giving notice to the Commissioner concerned, Mrs Gradin must also have been aware of the situation.
5.4.1. Only after lengthy debates between DG XXII, DG XX and UCLAF was a decision taken in February 1998 by DG XX and UCLAF to undertake an official audit of the Leonardo/Agenor TAO. The involvement of these two services, responsible respectively for financial control and the fight against fraud, not only indicates that the allegations were finally taken seriously by the services concerned but also, as indicated above, that the Commissioners responsible for the services must have been informed through their Directors-General. On the other hand, in spite of these findings, no initiative whatsoever was taken for immediate precautionary or preventive action, as should have been the case.
5.4.2. The internal draft audit report of DG XX was issued as early as 20 July 1998. It revealed inter alia the following allegations of possible fraud, management irregularities and/or breaches of disciplinary rules (the presentation of cases is not complete in order to avoid lengthy repetitions, but the selection presented sheds a significant light on the nature of the findings) :
* The minutes of Agenor's Administrative Board suggest that it had extensive foreknowledge in respect of the TAO call for tender, as a result of which Agenor was selected as the TAO.
* Agenor's Administrative Board never established procedures and rules delineating the decision-making powers of the Director. In important areas, such as recruitment, remuneration and promotion, the Director could take unilateral decisions.
* Certain projects were subject to a third evaluation carried out by representatives of the social partners, which is contrary to the relevant Council Regulation, and, furthermore, members of Agenor's Administrative Board were involved in projects. The draft report states in this respect:
"In our review of the selection process we came across a document in the TAO which was a list of projects having the direct support of the Cresson cabinet. We also saw documents advocating the use of Professor Reiffers, an advisor to the Cresson Cabinet, as an extra evaluator of projects related to a certain priority under the White paper. Organisations with links to Professor Reiffers are involved in Leonardo projects as either contractors or partners".
* Mission reports were missing or in certain cases not written. Several employees were apparently allowed trips home in lieu of salary, the legality of which is questionable as salary increases for Belgian companies at the time were restricted by law. An invoice, to the order of ECU 30 000, under the 1996-97 contract included several missions of the Director of the TAO that were not carried out.
* Invoices were submitted for payment without supporting documents, the only requirement being the approval of the Director. There was no centralised purchase order system.
* Nearly all printing assignments and the whole publication budget were awarded to one company, Forma in Quarto. The turnover of the 'Forma in Quarto' company equalled about 100% of the amount paid by Agenor to 'Format in Quarto' for the years 1996 and 1997, which suggests that Leonardo/Agenor TAO was the only client of the printing company. The fact that the total staff of 'Forma in Quarto' was only three and the investment in machinery was only ECU 50 000 is difficult to reconcile with the amount of work billed to the Leonardo/Agenor TAO, on average ECU 300 000 per year, and leads to the conclusion that the printing work was subcontracted out by 'Forma in Quarto'.
The obligation that at least three price estimates be obtained for expenditure above ECU 10 000 was circumvented by splitting the amount charged into invoices under ECU 10 000.
* For some contracts the Leonardo/Agenor TAO could give no proof that reports had actually been written; in one case, the same report was invoiced a second time under a different contractor's name.
* A possibly fraudulent payment of BEF 885 000 to the Deputy Director of the Leonardo/Agenor TAO. This Deputy Director was included in the proposal for the Leonardo/Agenor TAO as Head of Finance and Administration and was made redundant by the TAO Director within two weeks of his appointment. It was stated that he and the Director of Leonardo/Agenor TAO did not know each other at all. DG XX was not presented with any evidence of prior approval by DG XXII for this dismissal. A further amount of BEF 250 000 was ultimately also paid to a lawyer of the former Deputy Director for legal advice.
* Alleged 'ghost experts' charged to the Commission in respect of whom the Leonardo/Agenor TAO did not register attendance or the time of employment.
* Payment of allegedly illegal salary increases of BEF 50 000 per month to the Deputy Director of the Leonardo/Agenor TAO and an additional fee of BEF 25 000 for missions allegedly never carried out.
* Irregular advances and loans given to the Leonardo/Agenor TAO staff; to some staff, 'loans' of over BEF 1 million were given, which appeared extremely high in relation to the salaries and the low equity of Agenor.
* Alleged fraud by the Head of Administration. From October 1996, when she received the authority to sign payments of up to BEF 100 000, she started to write cheques to herself for amounts between BEF 50 000 and 100 000, totalling BEF 1 500 000 by March 1998. She was dismissed when this fraud was detected and after she had 'regularised' the situation. She is quoted as saying that she had received oral approval from the Director and that the transfers were to be considered as an advance payment to her.
* The Director's wife had been included in the initial proposal for the Leonardo/Agenor TAO as an assistant working in the Director's secretariat with a salary of BEF 89 000. After the dismissal of the Head of Administration in March 1998, she was appointed as the Head of Administration/Personnel with a salary of BEF 220 000. This salary has to be considered as grossly overstated for someone who not only has no appropriate degree but also no qualification relevant to the post occupied and who does not speak a second language.
* The future daughter-in-law of the Director replaced the Director's wife in her previous post in March 1998 as Head of the selection process. For this promotion, her gross monthly salary increased from BEF 107 000 to BEF 150 000.
* Another administrator, responsible for the development of administrative applications, started with a salary of BEF 125 000 (June 1995) which was later increased to BEF 200 000 (June 1996). She created her own company as of April 1997 and received several assignments from the Leonardo/Agenor TAO.
* Alleged false invoices issued by a company for analysis of the Leonardo/Agenor TAO database structure. The analysis report in question was in fact a simple description of the database structure of the Leonardo/Agenor TAO which should have been available after the acquisition of the database. It appears that the payment was more a present than payment for a service rendered with added value.
* An alleged false invoice of ECU 8800 from a subcontractor for 22 days of service in December 1977. The person in charge of staff in the Leonardo/Agenor TAO claimed never to have seen anybody doing the work. There were not 22 working days in December 1997 in the TAO.
5.4.3. The findings of DG XX's draft audit report, as well as other supporting documents, justify the conclusion that the implementation of the Leonardo I programme through the Leonardo/Agenor TAO can be characterised by
- a lack of internal control on financial transactions;
- a poor control environment concerning staff and activities which
allowed staff to commit serious irregularities;
- a perception of irregularities which in itself must be considered as an
incitement to corruption, as it meant offering indemnities to those who
were suspected of fraud rather than threatening prosecution.
5.4.4. The draft report thus shows important deficiencies in the Commission's monitoring of the Leonardo/Agenor TAO by the Commission. It states in this context:
'The Commission control could best be described as form over substance. It appears that the TAO has, under these circumstances, taken the opportunity to enforce its position to the extent that it is not always clear who is controlling whom, DG XXII the TAO or vice versa.'
5.4.5. On 6 November 1998, DG XX's internal draft audit report of 20 July 1998 became the provisional final audit report of DG XX and was submitted for observations to DG XXII.
5.4.6. It has to be noted that the time lapse of four months (July to November 1998) is to be regarded as excessively long, given the number and nature of the findings set out in the draft audit report of July 1998, which would have required immediate and decisive action by the services responsible.
5.4.7. Even though the provisional final audit report was shortened as regards to details and considerations on a number of aspects compared with the draft audit report of 20 July 1998, it still contained the major allegations, such as:
- detailed information about the requirements for the future Leonardo TAO was available to Agenor prior to publication of the tender;
- a considerable number of breaches of contract conditions, of varying degrees of seriousness,
- non-compliance with the contract clause relating to taxation;
- non-compliance with national tax laws and other local legislation, including social security payments;
- breaches in tendering procedures and staff policy;
- several areas of possible irregularities which UCLAF was advised to examine;
- in general, a poor system of internal control combined with a highly centralised management style operated by the TAO Director;
- serious weaknesses in the organisational and control structures as evidenced by irregularities that had already been identified;
- misappropriation of funds;
- senior management operating with a lack of integrity;
- absence of objective recruitment policies and procedures;
- favouritism with regard to the appointment of the Director's wife to a key management position;
- circumvention of DG XXII's approval in areas of project development;
- inadequate checks by DG XXII in areas such as personnel and management, informatics and operations (i.e. in none);
- lack of cooperation and, on occasions, reluctance of the Leonardo/Agenor TAO to provide timely and relevant information;
- general dissatisfaction of Member States (NCUs) and promoters with the time taken by the Leonardo/Agenor TAO and DG XXII to process applications and with the bureaucratic nature of the process.
- eligibility criteria appeared to have been applied in an arbitrary fashion;
- lack of transparency in the pre-selection process and interference by the Commissioner's private office.
5.4.8. DG XX concludes its above-mentioned audit report with the following remark:
'Given the overall results of this audit, the audit team proposes that DG XXII seriously reconsider the continuation of the TAO contract with Agenor. The fundamental problem is the management of the TAO; even where there are proper procedures these are often overridden by the Director.'
5.4.9. Looking from a more detached point of view at the above results, which had all previously appeared in their essentials in the internal draft audit report of 20 July 1998, the conclusion drawn by DG XX can only be regarded as an understatement. The question arises whether internal management, control and organisation functioned in an acceptable way in any area of the TAO's activities.
Above and beyond the established procedures of regular controls, standard audit procedures and spot checks, the question must further be asked whether it can be considered credible or probable that the overwhelming number of deficiencies that have become apparent, and which had been predicted (given the early 1994 internal audit report by DG XXII on 'Force' referred to above), could occur and continue over several years without - at least - having become known, through informal channels at the Commission and/or between the Leonardo/Agenor TAO and the Commission, at the highest levels of DG XXII.
5.4.10. On 10 November 1998 the then Director-General of DG XXII forwarded the provisional final audit report, together with his first observations, to the Commissioner responsible, Mrs Cresson. From various remarks made by the Director- General it must be concluded that DG XXII was not in a position to contest the factual findings. The remarks, moreover, contained references to further investigations that might be needed, to unspecified burdens of the past, to statements that some of the evaluations were 'questionable', to formal checks undertaken by DG XXII, which was officially not entitled to interfere, to the fact that the contract with the Leonardo/Agenor TAO did not allow further corrective measures, that - in his opinion - the overall functioning of the Leonardo programme was not to be questioned, that minor improvements had been introduced, that certain payments were not accepted by the Commission and that possibly illegal payments of the Leonardo/Agenor TAO did not concern 'Community funds'. It was further claimed that DG XXII relied on information provided by the Leonardo/Agenor TAO, that other internal DG XXII audits had not yet been finalised, that the Commission was not aware of the local social legislation, that further investigations would be needed and, finally, that a number of suggestions had to be taken on board, such as the information of UCLAF.
5.4.11. Even if it has to be conceded that the TAO contract itself provided a high level of freedom of action for the Leonardo/Agenor TAO, DG XXII certainly allowed an extension of the scale of independence through tacit acceptance and/or indifference. In this Committee's opinion, the remarks of the Director-General of DG XXII, although concealing the real problems, did nevertheless disclose findings that should have alerted the Commissioner who, in turn, should have informed the Commission.
5.4.12. Responsibility for the facts assessed above, lies certainly with the Commissioner concerned, either because of non-intervention in a situation known to be highly unsatisfactory, or because of a failure to make inquiries about the true situation in a file which, from the outset, (see above para. 3) should have been followed up with special care. But, of course, such responsibility also has to be borne by the heads of DG XXII and the officials responsible for contacts with the Leonardo/Agenor TAO and the supervision and implementation of the programme. All of them hid behind formal arrangements, understating established findings and/or showing an extraordinary degree of indifference.
5.5.1. In an internal note from UCLAF dated 18 September 1998, a summary is given of sixteen cases of possible breaches of criminal law, of four cases of possible contractual and administrative breaches and two cases of possible internal disciplinary violations. Against the background of this record, which is based on DG XX's internal draft audit report on the Leonardo/Agenor TAO dated 20 July 1998, it was suggested that:
'a letter should be prepared to the Public Prosecutor in Brussels requesting a criminal investigation with reference to Article 209A of the EU Treaty. This letter should contain a copy of DG XX's final audit report as well as a non-exhaustive listing of points, which according to the Commission would be actions of fraud and violations of the Belgian criminal legislation. However, the non-exhaustive list should only contain examples of fraud, which can immediately be proved by evidential documentation. The purpose of the list is to convince the Belgian judicial authorities of the necessity to start the police investigation. It should therefore .... only contain the most obvious cases of fraud. Administrative actions should also be conducted vis à vis the company Agenor as indicated in the draft audit report. Finally, with regard to the internal personal aspect in the Commission it should be considered to involve the DG IX to complete an administrative investigation which will determine any possible disciplinary sanctions and/or penal actions against responsible employees in the DG XXII.
5.5.2. In a note dated 23 September 1998 from the Head of unit DG XX.2's Internal Audit Unit to the Director-General of DG XX, reference is made to a meeting arranged with representatives of DG XXII to discuss the comments of DG XXII on the internal draft audit report on the Leonardo/Agenor TAO which had been forwarded to them on 18 September 1998.
The Head of DG XX.2's unit concluded his note with the following remarks:
'I must emphasise, at this stage, that DG XXII did not contest the findings on the TAO Leonardo da Vinci, which means that DG XXII should consider without further delay their approach to the TAO Leonardo and the actions to be taken in respect of the contract with the TAO that expires on September 30. It appears that DG XXII have not developed any contingency plans in respect of the future management of the Leonardo programme in the light of our audit findings (received 24 July 1998).'
5.5.3. It should be emphasised that this note was drafted well in advance of 10 November 1998 when the provisional final audit report was forwarded to DG XXII (as referred to above in para 5.4.9.).
5.5.4. According to a note for DG XX's files, a meeting took place on 30 September 1998 between the Director-General of DG XX and the then Director-General of DG XXII concerning the renewal of the contract of the Leonardo/Agenor TAO. In the light of the findings of the audit report, the option of terminating the contract with Agenor with six months' notice and the engagement of a new TAO was discussed. DG XXII considered that such a termination would create problems for the continuity of the programme. It was finally agreed that the contract would be extended for an initial period of four months - from September 1998 to January 1999 - with special conditions for improvement being closely monitored by DG XXII. With regard to the performance of the Director of the TAO, DG XX requested that DG XXII approach Agenor with a view to negotiating the replacement of the current Director.
5.5.5. No reference was made at that stage either to an intention of informing the Commissioners responsible and, through them, the Commission, or to possible reactions or measures to be taken in the light of the findings of the audit report, such as possible disciplinary action or judicial proceedings.
5.5.6. In two confidential UCLAF working documents dated 16 October 1998 (n 6903) and 3 November 1998 (n 7358) on meetings held between representatives of UCLAF and DG XX on 1 October 1998 and 13 October 1998, the issue of possible breaches of criminal law and further investigations in the framework of the Leonardo/Agenor TAO was discussed. There is, however, no evidence that the meetings resulted in any kind of immediate action by the Directors-general or the Commissioners concerned.
5.5.7. On 4 November 1998, a meeting took place between the Director of UCLAF, the Director-General of DG XXII and the Deputy Director-General of DG XX. At that meeting, the final audit report to be issued on 10 November 1998 (see above para. 5.5.2) was available in manuscript version, and it was agreed that it would be submitted to the Secretary-General, Mr Trojan, and to Commissioner Gradin with names and to the European Parliament without names. It was further decided to establish a file with documentation to back up the most obvious cases of fraud and to give priority to five matters which appeared to contain 'the most obvious and easily proved cases of irregularities.
5.5.8. It should therefore be noted that the Heads of both DG XX and UCLAF were well aware not only of the numerous incidences of mismanagement but also of fraudulent practices which justified the involvement of judicial authorities.
5.5.9. At this stage, DG XXII was still involved in what is known internally as a contradictory procedure. But it is also evident that the audit report as produced by DG XX was available to the services concerned, including the Director-General of DG XXII, and therefore also to the Commissioner responsible.
5.5.10. By letter of 10 November 1998, the then Director-General of DG XXII submitted to Mrs Cresson's Chef de cabinet a revised version of DG XX's supposedly final audit report together with the remarks of DG XXII (referred to above in para. 5.4.4.). It followed from the text of the audit report, and even more from the 'remarks' added by DG XXII, that the findings of the report had to be deemed to be serious, especially since these remarks did not contest the factual basis of the serious allegations made in the report. At one stage, DG XXII conceded for the first time that the matter in question should be investigated by UCLAF.
5.5.11. On 23 November 1998, the Deputy Financial Controller submitted to the Director- General of DG XX copies of the final audit report, subsequent to the contradictory procedure with DG XXII, which were to be forwarded to Commissioners Gradin, Cresson, Liikanen as well as to Mr Trojan and President Santer's Chef de cabinet. It may be assumed that, from then on the whole Commission was in a position to know what had been revealed in the reports and what was going on in the Leonardo/Agenor TAO.
5.5.12. In a letter, with annex, from the then Director-General of DG XXII to the Director- General of DG XX dated 26 November 1998, further observations were set out regarding DG XX's audit report. It is stated that this reply from DG XXII had been 'examined' together with Commissioner Cresson's Chef de cabinet, and that it had also been forwarded to the Secretary-General, Mr Trojan.
5.5.13. On 10 December 1998, the contradictory procedure concerning DG XX's audit report concerning the Leonardo/Agenor TAO was 'officially' finalised, and the Director-General of DG XX sent a copy of the report to the Chair of Parliament's Committee on Budgetary Control. DG XX's final remarks were forwarded later on 7 January 1999.
5.5.14. By mid-December 1998, an official of the Commission, Mr Van Buitenen, had sent a comprehensive letter to the Chair of the Green group in the European Parliament revealing, among other things, most of the findings of the Leonardo/Agenor TAO audit report. From then on, both information and action on the part of the Commission developed rapidly:
- on 19 January 1999, the Financial Controller of the Commission and the Director-General of DG XX sent a note to Mrs Cresson with the conclusions of the audit report;
- on 8 February 1999, UCLAF sent a note to Mrs Cresson's Chef de cabinet informing him that four cases involving the Leonardo/Agenor TAO would be brought before the Public Prosecutor in Brussels, as subsequently occurred on 11 February 1999.
5.5.15. On 29 January 1999, the Commission decided to give Agenor an extension of the Leonardo TAO contract for another two weeks from 31 January 1999 until 15 February 1999 in order to gain time for further negotiations on the improvement of the internal management of the TAO and for the removal of the Director who was held responsible for a large number of alleged breaches of the rules. Since Agenor did not respond to this extension, the Commission terminated the contract with Agenor with effect as from 31 January 1999 by letter of 11 February 1999.
5.6.1. Throughout the summer of 1998, the European Parliament worked on its report on the proposal from the Commission concerning the Leonardo II programme, the successor to Leonardo I currently under consideration. According to Parliament's schedule, the report of the Committee on Social Affairs and Employment on Leonardo II drawn up by its rapporteur, Mrs Sue Waddington, was to be discussed and adopted at Parliament's part-session of 4-5 November 1998. The European Parliament's Committee on Social Affairs adopted its draft report for the plenary on 27 October 1998.
5.6.2. There can be no doubt that all matters regarding the financial, managerial and substantive implementation of Leonardo I would have been of imminent importance for Parliament's attitude and for the decision-making process relating to Leonardo II. It is elementary 'common sense' that the Commission should have supported the Parliament's decision-making process in providing it with all kinds of information on substantial and even seemingly less important matters concerning Leonardo I. Any information on past experience could have served as a background on how to structure the successor programme.
5.6.3. On 26 October 1998, a few days before the debate and adoption at first reading of Parliament's resolution on the Leonardo II programme on 5 November 1998, MEPs received an anonymous 'Open letter to Members of the European Parliament' dated 26 October 1998 which closed with the demand: 'Do not vote for the proposed Leonardo Da Vinci II programme at your November part-session'. Subsequently, a number of allegations were made regarding the democratic control of the programme, distorted procedures for project selection, poor information and dissemination practices, as well as very bad management. Even though it had to be classified as one of the many papers trying to influence political decision-making, a fact of life in the European Parliament, the paper was such as to suggest at least some familiarity with the programme's implementation.
5.6.4. Until 26 October 1998, the day when the anonymous letter arrived, the rapporteur for Parliament's Committee on Social Affairs and Employment, Mrs Sue Waddington, had no information whatsoever about the numerous irregularities that had occurred in the implementation of the Leonardo I programme. In order to secure complete assurance that the insinuations of the anonymous letter were false, she wrote to the President of the Commission on 5 November 1998:
'Of course, I am not inclined to give any credibility to
anonymously sent material, and I intend to take my report through the
Parliament as planned.
I would however like your assurance that the allegations are unfounded
and that the audit of Leonardo I has been satisfactory and that the
Commission have taken account of the Parliament's decisions on the White
Paper.
5.6.5. Four days later, on 9 November 1998, President Santer answered Mrs Waddington inter alia with the following words:
'I share your view as to the attitude to be taken towards anonymous material.
I can confirm that the Commission's Financial Controller is currently finalising an internal audit report which raises questions about certain aspects of the management of the current Leonardo programme by the technical assistance office concerned. During the period of the audit the contract with the technical assistance office has been renewed on a temporary basis to ensure that, if necessary, corrective action is taken.
The Commission will monitor closely the performance of the technical assistance office and the position will be critically reviewed before the end of the year.
5.6.6. The above-mentioned response from President Santer may be interpreted on two levels; a formal one, and one which takes into account the substance of the question raised by Mrs Waddington as to the nature of the accusations made in the anonymous letter.
5.6.7. On the formal level President Santer answered correctly in stating that the Financial Controller was currently finalising an internal audit report and that certain aspects of the management of the Leonardo programme by the Technical Assistance Office were being questioned. He was also right in noting that the position of the Technical Assistance Office would be critically reviewed before the end of the year.
5.6.8. As for the substance of Mrs Waddington's letter, however, the answer was evasive to an extent which can only be qualified as misleading, in that it failed to mention all those allegations and factual management irregularities that were known to the Directors- General of DG XXII, DG XX and UCLAF by that date.
No mention was made of the initial internal audit from June 1996 to May 1997 (see para. 5.3.4. above) and of its very critical findings, no mention was made of the report on the audit visit to the Leonardo/Agenor TAO (see para. 5.4.1.), which had already disclosed internally many serious allegations of mismanagement and fraudulent practices and, finally, no mention was made of the internal draft audit report by DG XX, nor of the subsequent consultation between DG XX, DG XXII and UCLAF (see paras. 5.5.1.-13. above) which gave a global picture of disastrous management of the Leonardo/Agenor TAO, and which was available on 20 July 1998.
5.6.9. Even if the President of the Commission, had no idea of what was going on in the Leonardo/Agenor TAO when he signed the letter on 9 November 1998, it should have been imperative to write a rectifying letter to Mrs Waddington on 23 November 1998 when the seriousness of the situation was 'formally' disclosed to Mr Trojan and President Santer's Chef de cabinet, Mr Cloos (see para. 5.5.11. above).
5.6.10. With a view to securing more complete information about the 'internal audit report which raises questions about certain aspects of the management of the current Leonardo programme' referred to in President Santer's first reply to Mrs Waddington, she wrote another letter to the President pm 30 November 1998 'concerning allegations of fraud and failures in the administration of the Leonardo programme.' She closed her letter by saying:
'I would therefore be grateful if you could provide me, as the Parliament's rapporteur on the programme, with a copy of the internal audit report and also keep me fully informed of any action which may be taken vis à vis the technical assistance office.
I look forward to receiving your reply.'
No formal reply to this letter was ever given, although the fact that Mrs Cresson appeared before the European Parliament's Committee on Social Affairs on 5 January 1999 to some extent obviated the need for such a reply.
5.7.1. Professor Reiffers' mission
- The White Paper on Education and Training, approved by the Commission in November 1995 on a proposal from DG XXII and Commissioner Cresson, sought to promote new approaches in the field of education (Towards the Learning Society) by boosting the LEONARDO and SOCRATES programmes. Professor Reiffers, from the University of Aix-Marseilles, made significant contributions to the drawing up of this document (cf. note from Mrs Cresson to the Committee of Independent Experts dated 17 February 1999).
- The White Paper proposed five objectives, the first of which concerned the promotion of 'the acquisition of new knowledge'. In July 1995, with a view to the attainment of these objectives, on a proposal from Commissioner Cresson and in agreement with Commissioners Bangemann and Flynn, the Commission appointed a reflection group consisting of 25 members, chaired by Mr Reiffers (amount paid to Mr Reiffers: ECU 10 000, the other members of the Bureau also being remunerated).
Mr Reiffers' curriculum vitae, which the Committee has noted, shows that he is an eminent person with a well established reputation. After holding several university posts, in 1991/1992 he was appointed education and training adviser to the Prime Minister, Mrs Cresson.
- On 29 December 1995, Mr Reiffers secured a contract to provide assistance (ECU 30 000) for an individual mission connected with the implementation of the White Paper. That contract was awarded without any pre-selection procedure. The possibility cannot be excluded that it was awarded in implementation of Article 59(d) of the Financial Regulation which authorises private-treaty contracts under certain circumstances.
- By letter of 27 March 1996, in agreement with the Director-General of DG XXII, Mrs Cresson appointed the heads of project responsible for the attainment of the five objectives set out in the White Paper. Mr Reiffers was appointed head of project for Objective No 1, the other heads of project being heads of unit at the Commission. In her letter, Mrs Cresson said that these heads of project were working under the responsibility of the Director-General responsible for ensuring a balance between the estimated costs and resources. Finally, it was indicated that such cooperation should result in compliance with decision-making procedures and institutional rules vis-à-vis the public authorities of the Member States. Those appointments were also made without any pre-selection procedure.
The post of head of project was not remunerated.
- A call for tenders was issued on 31 May 1996 for the provision of consultancy services to assist in the implementation and monitoring of the experimental European project for the accreditation of knowledge. Consultancy contracts were also concluded for the attainment of Objectives No 3 and 4 in the White Paper.
In response to this call for tenders concerning Objective No 1, 66 requests for documentation were registered, and four bids were deemed to comply with the tender specifications. The bid submitted by Reiffers Conseil was selected because it was the economically most advantageous bid. When this proposal was submitted to the ACPC, that committee asked for further information so that the authorising officer might consider the possibility of the appointment of Mr Reiffers as an expert under other current procedures and might explain and attest to the fact that the person to whom it was proposed that the contract be awarded had had no influence on the drawing up of the notice of tender and the tender specifications (cf. the aforementioned meeting of the ACPC).
In his additional report, the Director-General of Directorate-General XX II noted that it was neither for the Commission as a body nor for the Commissioner responsible to make such an appointment. He wrote that the nature of the consultancy services to be provided by the contractor did not seem to require appointment by the Commission as a body. It was a matter of meeting the requirements of the services which currently did not have available the expertise required to bring the project to a successful conclusion. Appointment by senior politicians in the Commission would divert the mission from its purpose, which was to assist the services and not to play a role involving advice or political direction.
Having said that, the Director-General approved Mr Reiffers' contract, taking the view that there was no conflict of interests in Mr Reiffers' being appointed coordinator for Objective No 1 since he had not been involved in the drawing up of the call for tenders or the tender specifications.
The Commissioner responsible gave no information to the ACPC in his letter dated 27 March 1996 that he had appointed Mr Reiffers head of project.
The amount of the contract was estimated at EUR 80 000 per year (one-year contract renewable twice) (meeting No 370 of the ACPC of 16 October 1996).
- Having been consulted by DG XXII, the Commission's Legal Service indicated on 3 December 1997 that there was a conflict of interest between the two posts held by Mr Reiffers. He subsequently resigned from his post of consultant.
- A letter sent to the Commissioner's Chef de cabinet by the Director-General of DG XXII on 24 September 1996 reflects a desire not to reveal certain facts to the bodies asked for their opinion on certain aspects of the programme. In that letter it is stated that some of the objectives set out in the White Paper continued to result in reservations if not outright opposition from certain Member States and that they must not be given any opportunity to increase the pressure on and cause difficulties for Mrs Cresson, particularly when the Council of Education Ministers met on 21 November.
This matter gives rise to the following assessment:
5.7.2. From the time when Mr Reiffers was appointed as initial project deviser and as architect, it was not irregular for him also to become the person responsible for implementing one of the objectives. Nothing prohibits in principle the person selected as project deviser from acting as project manager and, possibly, from assisting in its implementation. It is on a case-by-case basis, depending on the circumstances of each contract, that the authorising officer may select the appropriate solution.
5.7.3. In the light of the documents available to it, the Committee of Experts has not been able to establish whether Mr Reiffers had been awarded a consultancy contract for the attainment of Objective No 1 in respect of which he was also head of project or whether that call for tenders concerned his appointment as head of project.
It may well be that this involved a procedure used inappropriately with a view to actually remunerating a head of project which would explain why no reference was made before the ACPC to the earlier appointment of Mr Reiffers on 27 March 1996 or of an aggregation of appointments and/or contracts resulting in a conflict of interests by making one and the same person of head of project and consultant.
5.7.4. The Committee would like to recall in this connection an opinion which it expressed on another occasion, namely that the fact of complying with legal and statutory provisions does not mean that such conduct was justified. Furthermore, with the tacit approval or not of the Commissioner responsible, Mr Reiffers put her in an embarrassing situation.
5.8.1. The Leonardo Da Vinci file raises significant questions with respect to the functioning of the services of the Commission, up to the highest levels of command, the Directors-general, as well as of the individual Commissioners and the Commission as a whole. The allegations raised against the Leonardo/Agenor TAO at an early stage of operation, and even before (see para. 5.2.8. above), were so serious and illustrative of a dysfunctional organisational climate and structure that they should have been seen by those who were in charge. They are a demonstration of the weaknesses of the information channels and control mechanisms within the Commission, up to the highest level. Individual Directors-general and Commissioners were indeed aware at the latest by July 1998 of the serious problems facing Leonardo/Agenor TAO, and critical reports were known to the Directors-general concerned long before that date but, pending lengthy discussions between the Commission services involved, no action was taken. The main failings are identified in the following paragraphs.
5.8.2. As may be seen from several of the files discussed in this report, the concept of having European public programmes implemented by private contractors needs to be carefully considered and managed. The European Parliament and the Council have imposed on the Commission more and more tasks, while at the same time applying rigorous budgetary restrictions. However, the multiplication of the operational funds in many of the Commission's areas of activity or the introduction of new multimillion ecu programmes, without providing the necessary staff and/or adapting the relevant regulations, will obviously cause problems.
5.8.3. The implementation of Community programmes by private contractors can only be accepted on the basis of a guarantee that the essence of the public function is not abandoned and transferred into the hands of private contractors. Moreover, those private contractors must be subject to contractual provisions imposing strict obligations in the general interest, and the public authorities must effectively supervise this action. It is clear that such supervision has not been exercised with sufficient care in the present case vis-à-vis the Leonardo/Agenor TAO. It would seem that excessive confidence has been placed in the TAO, and thus excess reliance on outside consultants (see above para. 5.4.2.).
5.8.4. DG XXII, which is responsible for the programme, had already found indications of irregularities as early as 1994 when it conducted an internal audit of the implementation by Agenor of a predecessor programme (see above, para. 5.2.9.). It should have acted accordingly, if not in the selection of Agenor as TAO for Leonardo, then at least in the supervision of its activities, once selected.
5.8.5. As DG XXII's own audit reports show, many irregularities and fraudulent practices were detected in 1997. Given the findings and recommendations, it is not conceivable that the Director-General of DG XXII did not inform the Commissioner responsible, Mrs Cresson, or that the latter was not informed through other sources.
5.8.6. After unnecessarily lengthy discussion between DG XXII, DG XX and UCLAF, it was finally decided in February 1998 that DG XX and UCLAF would undertake further investigations, a fact which must have been communicated to the Commissioner responsible for those services, Mrs Gradin. In DG XX's internal draft audit report of 20 July 1998, allegations of numerous frauds and irregularities were confirmed. It revealed important deficiencies in the control of the Leonardo/Agenor TAO by DG XXII and came to the conclusion that it was not always clear who controlled whom, DG XXII or the TAO (para. 5.4.3.). It was not until the beginning of November 1998 that action was taken on the final audit report, that it was officially submitted to DG XXII and thereafter to the other Commissioners (paras 5.5.7. et seq.). On 10 December 1998, the final audit report was sent to Parliament (para 5.5.13.). It would seem to the Committee that, during these lengthy proceedings which took place from February until December 1998, DG XX, its Director-General and the Commissioner responsible should have acted more swiftly and taken control of the situation, given the seriousness of the allegations involved.
5.8.7. When Parliament was finally informed about this matter in December 1998, when the audit report was submitted to its Committee on Budgetary Control, it had already adopted its position on the successor programme, Leonardo II. Taking into account the importance of the decision to be taken and the role of Parliament in the decision-making process, it is unacceptable that the Commissioner responsible failed to inform the President and through him Parliament, of the allegations which surrounded the Leonardo/Agenor TAO.