Brussels The European Union is doing too little to tackle the urgent problem of corruption. The EU Commission has a black list in which companies and individuals are entered if they either go bankrupt or attract attention. The list includes companies that have bribed high-ranking officials, obtained confidential tender information, and over-reimbursed costs.
But the file is poorly maintained. Just 18 cases are listed there that do not go back to insolvency. The comparable US database has 140,000 entries. This emerges from a new report by the European Court of Auditors.
The Court of Auditors is therefore calling for urgent reforms. “With a well-functioning database, we could tackle corruption problems across Europe in a uniform manner,” says Helga Berger, member of the European Court of Auditors, the Handelsblatt.
In her new report she shows exactly what is missing. Even considering that the EU’s blacklist covers only a small part of EU spending, the entries appear to be very sparse. “Adjusting for the amount of funds involved, we estimate that the US federal government excludes more than 50 times as many business partners as the EU,” the report says. Insolvencies are also recorded in the European database, but are hardly relevant because the companies affected are very unlikely to receive any more EU money anyway.
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“Something urgently needs to be done to protect EU funds from misuse,” says Berger. “We have to exclude unreliable contractors from EU orders.”
Despite “systematic irregularities” there is a lack of counter-reactions
A big problem is that three-quarters of EU money is managed by the Member States, especially the money in the agricultural and structural funds. In the case of Hungary and the Czech Republic, it is well documented that a few companies continue to benefit from this money, although fraud and embezzlement have long been proven.
But such irregularities do not lead to an entry in the EU black list. And when companies receive money from these funds, they are not necessarily checked for blacklisting either. The Member States have not yet been obliged to do this. Even if the Commission is informed of abuses, it cannot exclude these funds.
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That would be up to the Member States, some of which have their own blacklists, others not. In the case of Hungary, the anti-corruption measures are so miserable that the EU Commission has initiated legal proceedings. The reason: There is no guarantee that the EU money will reach the right recipients. The Commission speaks of “systematic irregularities, inadequacies and weaknesses in public procurement procedures”.
“In the current system, it is possible for a company to be excluded from public contracts in one EU country but continue to implement European projects in another EU country,” says Berger.
With its own black list, the EU could at least cut off some of the profiteers from the flow of money and would not have to rely on the Hungarian authorities, whom it certifies that they do not consistently follow up on indications of criminal activity.
Extending the list to include agricultural and structural funds would be possible if the majority of member states and the EU Parliament agree to a corresponding proposal from the Commission. The Court of Auditors hopes so.
Entry chaos in the databases paralyzes the pursuit
Further improvements are needed to ensure effective protection against repeat offenders. In particular, much existing data is not used to maintain the blacklist. If the European anti-fraud authority Olaf initiates proceedings against a company, this does not automatically lead to an entry in the black list. Even a judgment is not enough.
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The Commission has also been using a data mining tool called Arachne for a number of years, which is intended to provide indications of risks with business partners. Olaf maintains another system of tips from Member States. But relevant entries in these databases need not result in blacklisted entries.
The reason: There is no body in the EU Commission that would systematically evaluate information. Only when one of the Commission’s many directorates-general has direct knowledge of a case does it pass it on to an inspection body, which then decides whether to place it on the blacklist. “No one is really responsible for maintaining the database,” says Berger. “There is no overview because the Commission does not pay enough attention to the topic.”
Instead, the Commission too often relies on declarations on honor provided by companies. They state that they were not convicted of professional misconduct. This is usually not checked.
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