ANNUAL REPORT 2007
Fight Against Fraud Department – Annual report 2007
Fight Against Fraud Department DLAF
Annual report 2007
Message of Mr. Tudor Chiuariu, State Counsellor for Justice, Home Affairs 6 and Antifraud...... Message of Mr. Ovidiu Dobleagă, Head of Fight Against Fraud Department – 7 DLAF......
EXECUTIVE SUMMARY...... 8
INTRODUCTION...... 10
CHAPTER I: THE CONTROL ACTIVITY...... 11
1.1 Operational competences...... 11 1.2 Optimization of the control activity in 2007...... 11 1.3 Results of the control actions...... 12 1.4 Follow up...... 14 1.4.1 Judicial follow up...... 14 1.4.2 Administrative follow up...... 16 1.5 Analysis of operational data...... 17 1.5.1 Distribution of controls according to the source of the notification...... 17 1.5.2 Main fraudulent and irregularity committing practices...... 18 1.5.3 Regional distribution of controls...... 18 1.5.4 The distribution of cases according to Implementing Agencies...... 20 1.5.5 Operational coordination...... 20 1.6 Case studies...... 21
CHAPTER 2: COORDINATION OF THE FIGHT AGAINST FRAUD...... 24
2.1 Romanian anti fraud system implemented by DLAF...... 24 2.2 The Antifraud Policy...... 26 2.2.1 National Antifraud Strategy – SNLAF...... 26 2.2.1.1 Implementing the Action Plan...... 26 2.2.1.2 Final Evaluation of SNLAF...... 26 2.2.2 Contribution to strengthening the PIF legal framework...... 27 2.2.2.1 Strengthening the institutional and legal framework...... 27 2.2.2.2 Finding irregularities and recovering the prejudice...... 27 2.2.2.3 Agreements/International Conventions...... 28 2.3 Coordinating the activity of data collection and analysis...... 30 2.3.1 Development of the activity of data collection and analysis...... 30 2.3.2 Irregularity Reporting Network...... 30 2.3.3 Irregularity reporting to the European Commission...... 30 2.4 Coordinating the activity of professional training...... 31 2.4.1 Training activities organized with the support of external partners...... 31 2.4.2 Financing Agreements signed with European Commission...... 34 2.4.3 The Training Coordinators’ Network...... 35 2 Fight Against Fraud Department – Annual report 2007
CHAPTER 3: COOPERATION WITH THE EUROPEAN ANTI FRAUD OFFICE...... 36
3.1 Operational cooperation...... 36 3.2 Participation to COCOLAF meetings and its sub groups...... 38 3.3 Annual Meeting of Heads of AFCOS...... 39 3.4 OLAF Antifraud Communicators’ Network – OAFCN...... 39
CHAPTER 4: COMMUNICATION AND PUBLIC RELATIONS ACTIVITIES...... 41
4.1 Study visit of a delegation from Croatia...... 41 4.2 DLAF activity in mass media...... 41 4.2.1 The national mass media...... 41 4.2.2 DLAF at the Open Doors Day for the European Institutions...... 42 4.3 International Conferences and Public Debates...... 42 4.4 DLAF activity reflected in the evaluations of the European institutions...... 43
ANNEXES...... 45
A. Cases investigated by DLAF and sent to trial...... 45 B. DLAF’s coordination system...... 48 C. Training activities – 2007...... 49 D. DLAF’s organisation chart...... 50
3 Fight Against Fraud Department – Annual report 2007
ABREVIATIONS
AA Audit Authority attached to the Romanian Court of Accounts ACIS Authority for Coordinating the Structural Instruments APDRP Paying Agency for Rural Development and Fisheries AFCOS Anti Fraud Coordination Service ANAF National Agency for Fiscal Administration ANPCDEFP National Agency for Community Programmes in the Field of Education and Professional Training ANV National Customs Authority APIA Paying and Intervention Agency for Agriculture COCOLAF Advisory Committee for the Coordination of Fraud Prevention CNADNR Romanian National Company of Motorways and National Roads CNCFR National Railway Company CFR SA CSM Superior Council of Magistracy DLAF Fight Against Fraud Department DNA National Anti Corruption Directorate EIB The European Investment Bank EU European Union/Treaty on the European Union GF Financial Guard HG Government Decision IGPR General Inspectorate of the Romanian Police INM National Institute of Magistracy ISC State Inspectorate for Constructions LdV Leonardo da Vinci Community Programme MADR Ministry of Agriculture and Rural Development MCP Multi Country PHARE Programme MEF Ministry of Economy and Finance MDLPL Ministry of Development, Public Works and Housing MJ Ministry of Justice MIRA Minister of Interior and Administrative Reform MMFES Minister of Labour, the Family and Equal Opportunities MMDD Minister of Environment and Sustainable Development MT Ministry of Transport OAFCN OLAF Anti Fraud Communicators’ Network OLAF European Anti Fraud Office OPCSB National Office for the Prevention and Fight against Money Laundering OPCP Central Finance and Contracting Unit PHARE PIF Protection of the financial interests of the European Union RRN Irregularity Reporting Network SC Commercial Society SNLAF National Anti Fraud Strategy for the Protection of the Financial Interests of the European Union in Romania
4 Fight Against Fraud Department – Annual report 2007
LIST OF DIAGRAMS
Diagram 1: Comparative situation of controls conducted/finalised between 2005 2007 Diagram 2: Increase in the value of the projects verified Diagram 3: Distribution of controls conducted between 2005 2007, according to the financing programme Diagram 4: Situation of cases finalized Diagram 5: Distribution of cases in which indications of fraud were ascertained Diagram 6: Evolution of the number of cases sent to DNA Diagram 7: Follow up of cases by National Anticorruption Directorate Diagram 8: Graphic representation of the solutions disposed by DNA Diagram 9: Distribution of controls according to the source of the notification Diagram 10: Increase of the number of controls conducted on the request of DNA Diagram 11: Regional distribution of controls Diagram 12: Distribution of cases according to Implementing Agencies Diagram 13: Results of operational coordination Diagram 14: „Phare RICOP” Case Diagram 15: „Sântana de Mure ” Case Diagram 16: Romanian anti fraud system coordinated by DLAF Diagram17: DLAF – connector between national and European anti fraud structures Diagram 18: Distribution of irregularity reports showing new indications of irregularities or frauds Diagram 19: Distribution of reports which contain updates regarding the stage of cases of irregularities and/or frauds previously signalled Diagram 20: Seminars organized between 2005 2007 Diagram 21: Total number of participants: 2005 2007 Diagram 22: The results of operational cooperation with OLAF: 2005 2007 Diagram 23: „Leonardo da Vinci” Case
5 Fight Against Fraud Department – Annual report 2007
Message of Mr. Tudor Chiuariu State Counsellor for Justice, Home Affairs and Antifraud
The year 2007 meant the consolidation of Romania’s position as model for other EU Member States or Candidate Countries with respect to the protection of EU’s financial interests. The activity of the Fight Against Fraud Department – DLAF throughout the past year was the natural continuation of previous efforts. It was an important test. The accomplishments of the past years have been confirmed. This is even more remarkable given the change in DLAF’s senior management. For any young organisation, the departure of the „founding leader” is a challenge. I am glad to see that, in the case of DLAF, there was a smooth transition, without any negative consequences. This demonstrates that DLAF was a solid construction, the result of hard work done in the previous years, and that its success did not owe to external circumstances. The management of Community funds rests one of the vulnerable aspects of the European construction. Generous principles, such as the solidarity of Member States and support for less developed areas, can be compromised by the deficient use of the financial instruments meant to put them into practice. Powerful institutions, such as DLAF, can reassure the European taxpayers that their money is not wasted. Signs of international recognition, whether reports of the European Commission or statements of European officials, confirm the conclusions of statistical data: DLAF continued to be a reliable partner, both to similar institutions in other EU Member States, as well as to the European Anti Fraud Office – OLAF, with whom it developed a special relationship. The example of DLAF contradicts the ill foretellers of Romania’s EU integration – the rhythm of reforms from the pre accession period did not slow down. I am glad to notice that the founding vocation of liberal governments is re confirmed at the beginning of XXI century, in a Romania Member State of the European Union. DLAF is a success story in institutional construction, whereby strong personalities create strong institutions. DLAF’s road ahead has not been an easy one and obstacles shall not fail to arise. A year of great challenges lies ahead. DLAF shall be the “guardian” of structural, cohesion and agricultural funds that Romania shall benefit from. I trust that DLAF’s young team will know how to approach these challenges and consolidate this project, year after year. Congratulations and good luck!
Tudor Chiuariu
State Counsellor for Justice, Home Affairs and Antifraud
6 Fight Against Fraud Department – Annual report 2007
Message of Mr. Ovidiu Dobleagă, Head of Fight Against Fraud Department – DLAF
In the year 2007, Fight against Fraud Department – DLAF managed to become the main national actor in the field of the protecting the financial interests of the European Community. The improvement of the legislative and institutional framework allowed DLAF’s activity to be carried out in the best conditions, which is proved by the controls conducted during the year and by the appreciations coming from our collaborators on the European level. The efficiency of our activity is shown both by the significant increase of cases sent to trial, as well as by the increasing number of controls conducted at the request of the judicial authorities. As national coordinator of the fight against fraud, we have intensified the collaboration with the other national institutions with competences in the field, by concluding new protocols. In the legislative field, we have manifested actively by initiating a law project for Romania’s accession to the Cooperation Agreement between the European Community and its member states, on the one hand and the Swiss Confederation, on the other hand, with a view to combating fraud and any illegal activities in the detriment of their financial interests. Political backing for DLAF’s objectives, best administrative conditions to carry out its tasks, a team of enthusiastic young professionals, constant aim to improve performances – these are the ingredients of DLAF’s success. The strength of the Department derives from its ability to gather around it all national institutions involved in the management and control of EU funds. The protection of Community funds can only be achieved through the joint effort of these institutions. The culture of cooperation, promoted by DLAF ever since its establishment, has paid off. The year 2007 has been the year of the consolidation of DLAF’s position on a national level and not only, but also of the pro active manifestation of our institution in its field of competence. Without any doubt, we have managed to assure, under the best conditions, the continuity of DLAF’s project, started since 2005.
Ovidiu Dobleagă
Head of Fight Against Fraud Department – DLAF
7 Fight Against Fraud Department – Annual report 2007
EXECUTIVE SUMMARY
In 2007 DLAF carried out 103 controls regarding the obtainment, management and use of funds from the European Union’s non-reimbursable financial assistance programmes. Of these, 84 investigations were completed. In 56 cases DLAF ascertained potential fraud, while in 14 cases irregularities were found. The total value of the projects controlled was approximately 200 million euro, increasing by 38% as compared to the value of the projects controlled in 2006. As compared to the year 2006 there have been registered an increase of 20% with regard to the number of PHARE projects controlled (58 cases) as well as a doubling of the cases afferent to Sapard programme (30 cases).
Between 2005-2007 DLAF sent to National Anticorruption Directorate 121 cases regarding possible frauds in the obtainment and use of community funds. Among these, the prosecutor’s office solved 53 cases; 30 controls were confirmed by sending to trial the guilty persons, the prosecutors issuing 20 charges, while in other 4 cases the application of administrative sanctions was disposed. 2 cases were finalized by ending criminal proceedings against the defendants, while in 17 cases the prosecutors disposed the non-initiation of criminal proceedings. 68 cases remained unsolved, out of which 26 afferent to the period 2005-2006, while 42 afferent to 2007. Of the cases unsolved up to the date of this report’s drawing up, 58 are being investigated by DNA, while 10 were declined to other prosecutor’s office units. Among the cases under investigation at DNA, in 8 was disposed the initiation of criminal proceedings. Following DLAF controls, 39 persons have been sent to trial and risk possible imprisonment for up to 20 years. The percentage of DLAF notifications’ confirmation (64% of the cases solved) shows the high potential to render valuable the findings and, therefore, the quality and efficiency of the control activity. At the same time, there can be noticed a low celerity in solutioning the files by the judicial bodies, shown by the high number of cases unfinalized (approximately 56% of the total DLAF notifications), part of them exceeding 2 years from the date of the notification. As most of the old cases are still in the phase of preliminary investigations (11 of the 17 afferent to the years 2005- 2006), there is the risk of the criminal liability prescription, which makes impossible the recovery of the prejudice within the criminal trial and the punishment the guilty persons.
The control activity was based on a pro-active approach in initiating the verifications, in the context of a permanent improvement of the activity of data collection and analysis, aspect confirmed by the high number of notifications ex-officio (47% from the total of verifications carried out). Out of the 103 controls carried out, DLAF notified ex-officio in 49 cases, 34 controls being initiated following the requests of the judicial authorities (DNA – 31, IGPR – 2, other prosecutor’s offices - 1). As compared to 2006, there can be noticed a 7 times increase of the number of controls carried out at the request of National Anticorruption Directorate (31 cases in 2007 as compared to 4 cases in 2006). The control activity was also extended upon funds received from European Investment Bank, in 2007 DLAF carrying out 3 such verifications, from which one was carried out jointly with representatives of OLAF and EIB.
The controls conducted by DLAF in the year 2007 proportionally covered all 8 development regions. The highest amount of the projects controlled in the respective period is afferent to Region 2 South East (47.330.042 Euro), while the highest number of controls were carried out in Region 3 South Muntenia and in Region 7 Centre (17 controls each).
For the recovey of funds wrongly used, DLAF notified the Implementing Agencies in 65 cases. Following DLAF controls, debits were recovered by administrative action in the amount of approximately 2.600.000 Euro, out of which over 700.000 Euro in the year 2007. In the criminal causes established following DLAF controls, the judicial authorities disposed taking specific recovery measures in the amount of approximately 2.420.000 Euro, out of which in 2007 approximately 1.000.000 Euro.
8 Fight Against Fraud Department – Annual report 2007 In 2007, full recovery of the established debits was reported in 20 cases and partial recovery in 11 others. A special attention was paid to the infrastructure projects, aiming at verifying both the correctness of the financial operations and the observance of the quality standards in the execution of works contracts. In this context can be noticed the intensification of the collaboration with State Inspectorate in Constructions, which awarded operational support to the department in 23 cases (as compared to 9 last year). Considering the experience gathered in the financial control field, the collaboration with the Financial Guard was oriented towards complex cases, DLAF receiving operational support from this institution in 9 such situations. Moreover, the department’s activity specific (identifying frauds with community funds) determined, in 15 cases, a close cooperation with the specialized bodies within Romanian Police General Inspectorate.
The main fraudulent practices identified following the controls carried out were: falsified, incorrect or inexact supporting documents (34%), use of false or falsified certificates or statments (16%), performing ineligible expenditure (15%), infringements of public procurement regulations (4%).
The legal and institutional framework was improved by extending DLAF competences to post-accession funds, by establishing clear rules for rendering valuable DLAF’s control reports by the Implementing Agencies, as well as by regulating the prejudice recovery procedures. In its quality of institution responsible with assuring the protection of EU’s financial interests in Romania, DLAF initiated the law project for Romania’s accession to the Cooperation Agreement between the European Community and its member states, on the one hand and the Swiss Confederation, on the other hand, with a view to combating fraud and any illegal activities in the detriment of their financial interests, signed at Luxembourg on 26 October 2006. DLAF supported the signing of the Cooperation Agreement between the European Community, participant Member States and Japan Tobacco International SA and Japan Tobacco International Holding BV and its afferent documents, as well as the document referring to claims renunciation with regard to RJ Reynolds.
The cooperation with European Anti-Fraud Office – OLAF has been strenghtened by increasing the number of joint controls carried out. If in 2006, Romania was the first country to carry out joint on-the-spot controls with OLAF, in 2007 the total number reached 7. At the same time OLAF awarded technical assistance for the finalization by DLAF of 8 cases, which envisaged economic operators with the headquarters in other member states. Out of the 103 controls conducted by DLAF in 2007, 6 controls were initiated following notifications sent by OLAF. Moreover, DLAF forwarded to OLAF a number of 82 control reports which contain indications of fraud, a 3 times increase as compared to those forwarded in 2006. In its quality of anti-fraud coordinating service, in 2007, DLAF centralized, analyzed and forwarded to OLAF 169 reports which showed new indications of irregularities or frauds. Among these, 58 are afferent to SAPARD programme, 71 to ISPA programme and 40 to PHARE programme.
With the support of European Commission and Academy of European Law from Trier (ERA), DLAF organized, based on the Additional Training Programme, 13 training activities and 1internship, to which participated approximately 350 representatives of national institutions with competence in the field of PIF.
In 2007 the Department drew up the Final Evaluation Report of the National Anti-Fraud Strategy (SNLAF), outlining the fulfillment of the objectives assumed within the Strategy, the strong and the weak points, recommendations and course of action.
The seriosity and efficiency of DLAF’s activity were shown both in Commission’s Report towards the European Parliament and Council regarding the protection of the financial interests of the Communities – Fight Against Fraud, as well as in the Activity Report of European Antifraud Office – OLAF on 2006, published in July 2007. The extension of the department’s competences to the post-accession financial assistance as well as all the other measures to improve the legislative and institutional framework in the field entitle us to affirm that Romania has the capacity to assure a future correct management and a rigorous control of community funds.
9 Fight Against Fraud Department – Annual report 2007
INTRODUCTION
Along the years, protecting the EU financial interests meant a major area both at European and national level. This way, article 280 of EU Treaty stipulates the capacity of the Community and Member States to fight against fraud as well as against other activities that might harm the EU financial interests. Therefore, each Member State must ensure, at national level, the fulfillment of the obligations deriving from the Treaty.
Since January the 1st 2007, once Romania joined the European Union and became a Member State, our country may access the financing allocated by the European Commission from structural and cohesion funds. In order to respond to this new challenge, legal acts have been drawn up, at national level, strengthening the institutional and legal framework that could enable it to absorb and control the funds.
From DLAF’s point of view, 2007 meant the strengthening of its position in relation to other national and European relevant institutions. 2007 stands out, on the one hand, by the increase, both in the quantity but mostly in the quality of DLAF investigations and, on the other hand, by the intensified cooperation with the European Anti Fraud Office (OLAF). Besides these, the legislative changes made at the beginning of the year essentially strengthened DLAF investigation capacity, turning DLAF into the most important national institution in terms of controlling the EU funds.
In addition to these, the legislative measures passed in the course of 2007 envisaged to adjust the investigation and recover procedures of EU funds wrongly used to the new position of Romania as a Member State. They offer now an equivalent protection of EU financial interests with the national interests, based on article 280 of EU Treaty.
Therefore, we consider that year 2007 establishes the role and importance of DLAF, at national level, in fighting irregularity and fraud affecting EU financial interests. A natural consequence of the above mentioned is the concern which candidate countries show towards the institutional pattern put into practice by Romania.
As for the future DLAF activity, Romania’s position as Member State can only call for carrying on, in the same rate, the efforts regarding the protection of EU financial interests in Romania. This way, DLAF settled the following main objectives: more accurate and efficient investigations; strengthening the cooperation with OLAF; initiating legislative measures for the improvement of the national framework on the protection of the EU financial interests in Romania.
10 Fight Against Fraud Department – Annual report 2007
CHAPTER I: THE CONTROL ACTIVITY
The chapter presents the Department’s control activity, the way the investigations have been approached in 2007, as well as the concrete results achieved. The follow up of the controls is also described and relevant case studies are detailed in order to show the fraud and irregularities mechanisms.
1.1 Operational competences
In performing the exclusive attributions for the control of the means of obtainment, carrying out and usage of funds originating in the financial assistance awarded to Romania by the European Union, as well as in the afferent co financing funds, Fight Against Fraud Department DLAF benefits from functional and decisional autonomy. For fulfilling this principle, the Head of DLAF cannot request or receive instructions from any authority, institution or person with regard to initiating and conducting an investigation or drawing up the control reports. Following the improvement of the legal framework, the operational competences of DLAF investigators have increased, being also extended to post accession funds. They carry out on the spot controls, having the right to take statements and explanatory notes from the beneficiary and from any other person who may provide data and having unrestricted access to the headquarters of the entities, to land, means of transport or any other premises used for economic purposes. In order to assure finality to the control action, in case frauds are discovered, the law assimilates the reports concluded by DLAF with the preliminary reports of the judicial bodies, thus allowing their direct use in the criminal trial. For this purpose, in accordance with the provisions of article 214 from Penal Procedure Code, DLAF counsellors have the competence to take measures to conserve evidence by retaining documentation and corpus delicti and by concluding a procés verbal for ascertainment. For the efficient and complete carrying out of the control, on the basis of collaboration protocols concluded, DLAF benefits from operational support, in their specific field of expertise, from other public entities, such as: State Inspectorate in Constructions, Financial Guard, General Inspectorate of Romanian Police, Audit Authority.
By virtue of these competences and with the support of the specialists from the national partner institutions, DLAF investigators verify: eligibility of the applicants for community funds; technical financial capacity to carry out projects; observance of the procurement procedures; reality and legality of patrimonial operations; quality of the execution of the works executed; sustainability of the project after implementation.
1.2 Optimization of the control activity in 2007
The experience accumulated allowed a complex approach of the verifications upon the means of obtainment, carrying out and usage of funds originating in the financial assistance awarded to Romania by the European Union, as well as in the afferent co financing funds. This reflected in significant increases in the efficiency of the control teams and in the number of controls carried out.
11 Fight Against Fraud Department – Annual report 2007 The control activity was also extended upon the funds awarded by European Investment Bank, in 2007, DLAF carrying out 3 such verifications, out of which one was conducted with representatives of OLAF and EIB. The fact that the quality of DLAF reports improved is also proved by the significant increase of the control requests received from the judicial authorities. In 2007, National Anticorruption Directorate, national judicial structure with exclusive competences for criminal proceedings of the offences which affect the financial interests of European Union, requested DLAF the conducting of controls in 31 cases, 7 times more than in the previous year. A special attention was also awarded to the verification of projects as concerns the technical aspect, the quality of the works executed and their usefulness as against the objectives proposed by the financing requests. In these actions, DLAF activity was also supported by State Inspectorate in Constructions which, based on the collaboration protocol, conducted 23 such verifications.
1.3 Results of the control actions
The control activity has kept the rising tendency from the previous years, DLAF conducting 103 controls regarding the obtainment, carrying out and usage of funds originating in the financial assistance awarded to Romania by the European Union, out of which, until the date of the present report’s drafting, 84 have been finalized. As compared to 2006, the 103 opened controls carried out represent an increase by 18% as compared to the number of verifications carried out in the previous year (87 cases). 2005 2006 2007
103 100 Number of 90 87 controls 80 82 84 conducted 70 60 Number of 50 48 controls 43 40 finalized
Diagram 1: Comparative situation of controls conducted/finalized between 2005 2007
The total value of the projects controlled in 2007 is approximately 200 million Euro, increasing by 38% as compared to the projects controlled in 2006.
2005 2006 2007 Diagram 2: Increase 200 200 in the value of the projects verified Value of the 150 145 projects verified (mil. Euro) 100 72 50 12 Fight Against Fraud Department – Annual report 2007 The control activity envisaged the entire sphere of projects financed under pre accession programmes (PHARE, ISPA, SAPARD), other community programmes such as Leonardo da Vinci, but also reimbursable funds granted to Romania by European Investment Bank.
In Diagram 3 the distribution of DLAF cases in 2007 is presented, according to the financing programme. There can be ascertained a significant increase (20%) of the number of PHARE projects controlled in 2007, as well as a double number of controls afferent to SAPARD projects (30 cases) as compared to the year 2006 (16 projects). These increases are due to the orientation of the control activity towards the works contracts, especially towards the projects having as beneficiaries local public authorities (water supply systems, sewerage networks, transport infrastructure). At the same time, there can be noticed that the value of PHARE projects represents more than 56% from the total of the projects controlled in 2007.
60
50 58
48 40 30 30 20 27
10 16 10 2 5 7 8 1 3 0 4 4 PHARE ISPA SAPARD LdV BEI
2005 2006 2007
Diagram 3: Distribution of controls conducted between 2005 2007, according to the financing programme
Following the control activity carried out in the year 2007, there were ascertained indications of fraud in 56 cases, while irregularities were identified in 14 cases. At the same time, in 14 out of the 84 cases finalized, the aspects initially notified were not confirmed, the projects being implemented appropriately.
56 60
50 Not confirmed 40 Irregularities 30
20 14 14 Indications of fraud 10
0
Diagram 4: Situation of cases finalized
13 Fight Against Fraud Department – Annual report 2007
The majority of the cases of fraud were identified within PHARE projects (27), these also representing the highest value from the total of controls carried out in 2007. Diagram 5 presents the distribution of cases in which indications of fraud were ascertained, according to the financing programmes.
8 PHARE 27 20 ISPA SAPARD 1 LdV
Diagram 5: Distribution of cases in which indications of fraud were ascertained
1.4 Follow up
1.4.1 Judicial follow up
The control action is finalized under the form of a control report, approved by the head of the department. If, following the verifications carried out, aspects of criminal nature are ascertained, DLAF notifies the judicial authorities for the purpose of holding responsible for criminal liability the guilty persons, as well as for taking the legal measures to make the funds unavailable and to recover the prejudice. According to the law, National Anticorruption Directorate is the judicial structure with exclusive competences to investigate the offences which affect the financial interests of EU in Romania, thus being the main beneficiary of DLAF’s control activity.
2005 2006 2007 60
50 51 48 40 DLAF cases 30 sent to DNA
20 22
10
0
Diagram 6: Evolution of the number of cases sent to DNA
14 Fight Against Fraud Department – Annual report 2007 Following the controls conducted in the year 2007, DLAF forwarded to DNA a number of 51 cases, while other 14 were forwarded to other units of prosecutor’s offices as they were the competent bodies with regard to the aspects identified. Out of the total of files sent to DNA between 2005 2007, the prosecutor’s office solved 53 cases; 30 controls were confirmed by pressing charges against the guilty persons, the prosecutors issuing 20 indictments, while in 4 other cases it was disposed the application of administrative sanctions. Except for these, 2 cases were finalized by ending criminal proceedings against the defendants, while in 17 cases the prosecutors disposed the non initiation of criminal proceedings. 68 cases remained unsolved, out of which 26 are afferent to the period 2005 2006, while 42 afferent to the year 2007. Of the cases unsolved until the date of this report’s drafting, 58 are being investigated by DNA and other 10 have been declined to other prosecutor’s office units. Up to the present, in 8 of the cases in progress at DNA, it was disposed the initiation of criminal proceedings penale against the persons prosecuted.
SOLVED UNSOLVED CASES PERCENTAGE YEAR SENT CONFIRMATIONS TO CONFIRMED NOT CONFIRMED Declined (from cases DNA to other In solved) Sending Administrative Non- Ending prosecutor’s progress to trial fine initiation of criminal offices criminal proceedings proceedings 2005 22 8 2 3 0 5 4 77% 2006 48 17 1 11 2 4 13 58% 2007 * 51 5 1 3 0 1 41 67% 30 4 17 2 10 58
TOTAL 34 19 2005 2007 53 68 64% 121
* - cases sent up to the date of drawing up the present report (January, 31th 2008)
Diagram 7: Follow up of cases by National Anticorruption Directorate
The percentage of confirmation of DLAF’s notifications (64% of the cases were solved) shows the high potential to use the findings and therefore the quality and efficiency of the control activity.
Despite these, there can be noticed a low celerity in solutioning the files by the judicial bodies, shown by the high number of cases unfinalized (approximately 56% of the total DLAF notifications), part of them exceeding 2 years from the date of the notification.
As most of the old cases are still in the phase of preliminary investigations, (11 of the 17 afferent to the years 2005 2006), there is the risk of the criminal liability prescription, which makes impossible the recovery of the prejudice within the criminal trial and the punishment the guilty persons.
15 Fight Against Fraud Department – Annual report 2007
Confirmed: 34 sent to trial: 30 36% administrative 64% sanctions: 4
Not confirmed: 19 ending criminal proceedings: 2 non initiation of criminal proceedings: Diagram 8: Graphic representation of the solutions disposed by DNA
Following DLAF controls, 39 persons were sent to trial for offences against the financial interests of the European Communities (Annex A). Up to the present, in 5 cases investigated by DLAF, the court laws have pronounced indictments for punishments of up to 10 years of prison.
1.4.2 Administrative follow up
In accordance with the legal provisions, in case it identifies irregularities, DLAF forwards the control report to the Implementing Agencies, in order to take the measures imposed to remedy the deficiencies signalled and, as the case may be, to recover the ineligible expenses. Based on the factual findings ascertained by DLAF and on the legal provisions indicated in the contents of the control report, the Implementing Agencies proceed to establishing and individualizing the payment obligations and to issuing the proof of debt. In this context, in the year 2007, a number of 65 cases in which irregularities were found were sent to the Implementing Agencies, as follows: • Ministry of Development, Public Works and Dwellings: 16 cases • Central Finance and Contracts PHARE: 20 cases • Payment Agency for Rural Development and Fisheries: 21 cases • National Agency for Community Programmes in the field of Education and Professional Training: 8 cases
From the data notified by the Implementing Agencies it results that, following DLAF controls, debts were recovered by administrative action in the amount of approximately 2.600.000 Euro, out of which over 700.000 Euro in the year 2007. In the year 2007 the debits established in 20 cases have been recovered entirely, while in other 11 cases the calculated debits have been recovered partially.
The main methods by which funds were recovered were: • voluntary payment – the beneficiary returned the debt either in lump sum or in instalments based on a payment convention (6 cases); • court order in the trials in which the agencies established themselves as civil parts for the recovery of the prejudice (6 cases); • foreclosure procedure by ANAF (4 cases); • deduction from later payments (3 cases).
16 Fight Against Fraud Department – Annual report 2007 Currently, in a number of 6 files, the debits established are being recovered by court actions, while in other 4 files by the foreclosure procedure. Moreover, in a number of 13 cases, the recovery procedures were initiated by notifying the beneficiary and cancelling the financing contract. At the same time, in the criminal causes, the judicial authorities disposed taking specific measures (seizure of defendants’ assets, blocking the amounts held by these in bank accounts) in the amount of approximately 2.420.000 Euro, out of which in 2007 approximately 1.000.000 Euro.
1.5 Analysis of operational data
Within the preliminary investigations carried out, data have been analyzed, processed and corroborated with regard to over 3.500 economic operators involved or related to the obtainment, carrying out and usage of European funds. The activities mentioned have been supported by DLAF access to the relevant national and European data, on the basis of collaboration protocols concluded with the national partners and OLAF.
1.5.1 Distribution of controls according to the source of the notification
The control activity was based on a pro active approach in initiating the investigations, in the context of a permanent improvement of the activity of data collection and analysis, aspect confirmed by the high number of notifications (47% from the total of verifications carried out). Out of the 103 controls carried out, DLAF notified ex officio in 49 cases, 34 controls being initiated following the requests of the judicial authorities (DNA – 31, IGPR – 2, other prosecutor’s office 1). Moreover, DLAF conducted 6 controls on requests received from OLAF, other 6 controls representing notifications from the implementing agencies, while other 8 controls were initiated following the notifications received from natural and legal entities.
8% 6% 47% notifications 6% ex officio judicial bodies
OLAF
implementing agencies petitioners 33%
Diagram 9: Distribution of controls according to the source of the notification
There can be noticed an increase by 7 times of the number of controls conducted on the request of National Anticorruption Directorate. Out of the 31 controls conducted for the benefit of the criminal investigations conducted in certain cases, 25 were finalized, in 17 from these frauds were ascertained and irregularities in 6. In 2 of the 25 cases finalized,
17 Fight Against Fraud Department – Annual report 2007 the signalled aspects were not confirmed, the projects controlled being implemented appropriately.
35 30 31 25 20 DLAF controls conducted on 15 the request of DNA 10 5 4 0 0 2005 2006 2007
Diagram 10: Increase of the number of controls conducted on the request of DNA
1.5.2 Main fraudulent and irregularity committing practices (Modus operandi)
In the year 2007, the main types of frauds/irregularities identified on the occasion of DLAF investigations were: • use of false/falsified, incorrect or incomplete supporting documents (34%); • use of false or falsified certificates or statements (16%); • carrying out ineligible expenses (15%); • infringement of public procurement regulations (4%).
A method of fraud operation frequently used in 2007 was the simulation of tender procedures by the beneficiaries for the purpose of procuring their own tools / equipments. Moreover, there were also found cases of complicity between the applicants for European funds and the representatives of local/fiscal administration, materialized by issuing false fiscal certificates used to prove the eligibility.
1.5.3 Regional distribution of controls
The controls conducted by DLAF in the year 2007 covered all 8 development regions, proportionally to the financial allocations for each region. The highest amount of the projects controlled in the respective period is afferent to Region 2 South East (47.330.042 Euro), while the highest number of controls were carried out in Region 3 South Muntenia and in Region 7 Centre (17 controls each).
18 Fight Against Fraud Department – Annual report 2007
6 NORTH WEST DEVELOPMENT REGION 1 NORTH EAST DEVELOPMENT TOTAL NO OF CONTROLS: 5 REGION FINALISED CONTROLS: 5 VALUE OF PROJECTS: 16.346.720 € TOTAL NO OF CONTROLS; 16 FINALISED CONTROLS: 15 VALUE OF PROJECTS:45.265.061 €
7 CENTRE DEVELOPMENT REGION 5 WEST DEVELOPMENT TOTAL NO OF CONTROLS: 17 REGION FINALISED CONTROLS: 13 VALUE OF PROJECTS; 7.278.427 €
TOTAL NO OF CONTROLS: 10 FINALISED CONTROLS: 10 VALUE OF PROJECTS; 2.836.813 € 2 SOUTH EAST DEVELOPMENT REGION
3 SOUTH MUNTENIA TOTAL NO OF CONTROLS; 15 DEVELOPMENT FINALISED CONTROLS: 13 VALUE OF PROJECTS: 47.330.040 € REGION 4 SOUTH WEST OLTENIA TOTAL NO OF CONTROLS: 17 FINALISED CONTROLS; 10 DEVELOPMENT VALUE OF PROJECTS; 41.671.371 € REGION TOTAL NO OF CONTROLS: 8 FINALISED CONTROLS: 8 VALUE OF PROJECTS: 15.264.214 €
8 BUCHAREST ILFOV TOTAL NO OF CONTROLS: 15 DEVELOPMENT FINALISED CONTROLS; 10 REGION TOTAL VALUE OF PROJECTS: 23.700.096 €
Diagram 11: Regional distribution of controls
19 Fight Against Fraud Department – Annual report 2007
1.5.4 The distribution of cases according to Implementing Agencies
According to the Implementing Agency which manages the projects, the 103 projects controlled by DLAF in the year 2007, are shown in Diagram 11: • MDLPL – Ministry of Development, Public Works and Dwellings 38 projects • APDRP Payment Agency for Rural Development and Fisheries 30 projects • OPCP Central Finance and Contracts PHARE 24 projects • ANPCDEFP National Agency for Community Programmes in the field of Education and Professional Training 8 projects • Other agencies 3 projects
3% 8% 37% MDLPL APDRP 23% OPCP ANPCDEFP Other agencies
29%
Diagram 12: Distribution of cases according to Implementing Agencies
1.5.5 Operational coordination
The legal provisions which establish the obligation of any institution/public authority to grant DLAF support in carrying out its control attributions, are consolidated and rendered valuable by the collaboration protocols concluded by the department with the main institutions with competences in this field. In 2007 DLAF paid special attention to the infrastructure projects, verifying both the correctness of the financial operations as well as the observance of the quality standards in the execution of the works contracts. In this context, one can notice the intensification of the collaboration with State Inspectorate in Constructions, which awarded operational support to DLAF in 23 cases (as compared to 9 in 2006). Taking into consideration the experience gathered in the financial control field, the collaboration with the Financial Guard was oriented towards the complex cases, DLAF receiving operational support from this institution in 9 such cases. At the same time, the specific of the department’s activity (identification of frauds with community funds) determined in 15 cases a close collaboration with the specialty bodies within General Inspectorate of Romanian Police.
20 Fight Against Fraud Department – Annual report 2007
25
23 20 22
15 2005 15 2006 10 2007 10 9 5 9
2 2 0 ISC IGPR Financial Guard Audit Authority
Diagram 13: Results of operational coordination
1.6 Case studies
„Phare RICOP” Case
The present case constitutes an example of fraud committed within programme PHARE – RICOP – Component for SMEs, by the method of procurement of own equipments and transfer of economic activity between two companies belonging to the same person. The Project The control envisaged a project in total amount of 166.667 Euro (out of which 100.000 Euro represented financial assistance of European Union), which proposed the endowment of a factory with high standard equipments and the execution of a high production capacity technological line in the field of wood processing (Company „B”, hereinafter SC „B” SRL). The control activity From the analysis of the documents and the information obtained, DLAF ascertained that, in reality, the legal representative of the beneficiary, Mr. D.B. used the funds awarded by the Project for the procurement of own equipments (owned by a different company where he acted as shareholder – SC „A” SRL). To accomplish this, in order to create the appearance of tenders organized according to legal provisions and to mislead the Contracting Authority (Ministry of European Integration) with regard to the real origin of the equipments, Mr. D.B. used an interposed commercial company (SC „C” SRL) acting as ‘successful tenderer’. The fictitious character of the procurement procedures is also shown by the reduced time interval between the moment of equipments procurement by the ‘intermediary – tenderer’ and the moment of reselling them within the Project. In fact, when the financing contract was concluded by SC „B”, the equipments were in the patrimony of SC „A”, also managed by Mr. D.B., which renders obvious the premeditated character of his actions, with a view to obtaining community funds without any supplementary financial effort. The result of these operations was the transfer, made only in documents, of the equipments and consequently of the production activity from SC „A” SRL to SC „ B” SRL, without a subsequent real technological contribution, which might improve and diversify the wood processing production.
21 Fight Against Fraud Department – Annual report 2007
Therefore, the Project’s aim was not fulfilled, the group of companies managed by Mr. D.B. having in its patrimony, at the end of the Project implementation period, the same equipments as before concluding the financing contract. The only new element was the collection of community funds on the basis of transfers, operated only in writing, of the equipments from one company to another. Follow up The control report drawn up, together with the afferent documentation and the statements taken, have been forwarded to National Anticorruption Directorate for solution finding.
(1) transfer of equipments made only on paper
D.B. (administrator) (2) equipments procurement SC „A” SRL SC „B” SRL owner of beneficiary of equipments EU funds SC „C” SRL 34.000 € (intermediary)
(3) payment of equipments from EU funds
34.000 €
(4) reimbursement of the equipments’ countervalue
Diagram14: Case „Phare RICOP”
„Sântana de Mure ” Case
The case „Sântana de Mure ” refers to the defficient implementation of a SAPARD project by a local public authority by: - modifying the technical data during the execution of works; - using inexact documents regarding the property of the land; - infringement of the ethics clauses. The Project The object of the project in the amount of 4.974.327 lei was the collection of wasteawaters by a separate centralized sewerage system and the connection of the four component localities of Sântana de Mure commune to the system. The person responsible for project implmentation was the mayor of the commune, Mr. V.B.
22 Fight Against Fraud Department – Annual report 2007
The control activity The control was intiated at the request of National Anticorruption Directorate Territorial Service Târgu Mure . From the verifications made, the following resulted: the project’s legal representative ordered the execution of sewerage works on other routes than those approved by the initial project, without obtaining the legal approvals; the project’s legal representative ordered the excution of works on lands which were under the private property of natural entities, thus infringing the provisons of the financing contract; the legal representative submitted for deduction, at the implementing agency, false documents regarding the carrying out and correctness of the works executed; part of the works were executed by subcontracting to two commercial companies, whose administrator/shareholder was the project’s legal responsible and his wife, thus infringing the ethichs clauses foreseen in the annex to the Financing Contract. Follow up The control report drawn up by DLAF regarding the carrying out of the above mentioned project was forwarded to National Anticorruption Directorate. On 18.07.2007 DNA – Territorial Service Mure disposed sending to trial the project’s legal responsible, the mayor of Sântana de Mure commune, Mr. V.B. for committing offences against the EU financial interests, but also for connected offences, being ascertained a prejudice in the amount of 46.590 lei. The implementing agency issued a debit note for the recovery of amounts wrongly used.
(1) construction works contract award
335.000 RON SAPARD Funds
City Hall Sântana de Mure (SAPARD beneficiary) CONSTRUCTOR
Mayor
NGO SC
(2) works 91.300 RON
subcontracting
(3) equipments 20.000 RON
Diagram 15: Case „Sântana de Mure ”
23 Fight Against Fraud Department – Annual report 2007
CHAPTER 2: COORDINATION OF THE FIGHT AGAINST FRAUD
The chapter describes the antifraud coordination system implemented by DLAF, being underlined the achievements in the legislative area, as well as in the intelligence and training of antifraud experts areas.
2.1 Romanian anti fraud system implemented by DLAF
The protection of the Communities' financial interests (PIF) at national level involves the activity of numerous institutions, both authorities of public administration and judicial bodies. A coordinated effort is necessary to effectively prevent and combat illicit practices, to sanction perpetrators of illegal acts and recover damages. That is why DLAF has developed an antifraud system structured on three levels (Diagram 16):
Irregularity Reporting European Anti-Fraud Office Network D OLAF Irregularity INTELLIGENCE Allegations Reports
Operational Joint Investigation
L Support Teams Law Enforcement CONTROL European Anti-Fraud Office Authorities OLAF A Control Control Reports FOLLOW-UP Reports
Administrative European Anti-Fraud Office and Judicial National OLAF Authorities F
Diagram 16: Romanian anti fraud system coordinated by DLAF
24 Fight Against Fraud Department – Annual report 2007
I Intelligence The first level consists of gathering and analysing information received by means of the Irregularity Reporting Network, made up of representatives of managing authorities and implementing agencies, from judicial authorities, as well as self generated information within the Department. At the same level, DLAF receives allegations from the European Anti Fraud Office OLAF.
II Control At the second level DLAF carries out control activities and receives operational support from the national authorities, on the basis of coordination protocols concluded with them. DLAF also carries out joint on the spot investigations with OLAF, upon request of each party.
III Follow up The third level concerns the administrative and judicial monitoring of DLAF cases, by a strengthened cooperation with the National Anticorruption Directorate and with administrative institutions which manage European funds. Moreover, at this stage control reports are sent to OLAF.
The above described system integrates at all three levels both national and European partners. Considering DLAF’s main responsibility of protecting EU’s financial interests in Romania, the Department acts as connector between national and European anti fraud structures involved in protecting the EU budget (Diagram 17).
NATIONAL EUROPEAN PARTNERS PARTNERS
Diagram17: DLAF – connector between national and European anti fraud structures
For 2007, one of DLAF’s main objectives was the adjustment of the system to the new challenges raised by the Romania quality of new Member State: more funds to be controlled, new institutions included in the system coordinated by DLAF. All these meant new legislation adopted, cooperation strengthened with national institutions as well as ongoing professional training of the personnel with competencies in protecting EU’s financial interests in Romania.
25 Fight Against Fraud Department – Annual report 2007
2.2 The Antifraud Policy
2.2.1 National Antifraud Strategy – SNLAF
National Antifraud Strategy aimed at lining up the legal and institutional framework according to EU requests, in key fields regarding the protection of financial interests: financial control, fiscal control, investigation and criminal pursuit of fraud, financial recovery, coordinating fight against fraud. During the year 2006, DLAF updated SNLAF as a result of cooperation with responsible institutions for implementing measures caught in the Action Plan due to SNLAF, with the Public Policy Unit from within Government’s General Secretariat and talks with OLAF and EU Delegation in Romania. Thus, the implementation period of SNLAF has been prolonged until July of 2007.
2.2.1.1 Implementing the Action Plan
The implementation period was October 2006 – July 2007 and all 21 measures established in the updated Action Plan have been accomplished.
We mention among the objectives: developing the professional capacity of personnel involved in protection of EU financial interests by attending sessions of professional training; increasing the informing rate of public opinion with regard to prevention of fraud by drawing up and spreading promotional materials linking with the financial support given to Romania by EU; improving the legal framework in the field of recovery and also a better judicial follow up. Following the implementation of measures from the Action Plan, the Emergency Ordinance no 12/2007, modifying and completing Government Ordinance no 79/2003 regarding investigation and recovery of EU funds and of co financing funds wrongly used and Government Decision no. 1306/2007 for approval methodological standards for carrying out Government Ordinance no. 79/2003 regarding investigation and recovery of EU funds and of co financing funds wrongly used has been adopted.
2.2.1.2 Final Evaluation of SNLAF
DLAF is the responsible body for coordinating the implementation of the Strategy and performing its final evaluation with the purpose of outlining the rate of the objectives accomplished and the directions for future actions in this field. In the last part of 2007, DLAF carried out the final evaluation of SNLAF implementation. Unit of Public Policy of Government General Secretariat has been asked to cooperate to fulfill that purpose. The final evaluation process of SNLAF implementation materialized in a Report outlining the rate objectives which have been accomplished, the strong points and the weak points, recommendations and directions of action. The Report can be consulted on DLAF’s site www.antifrauda.gov.ro.
26 Fight Against Fraud Department – Annual report 2007
2.2.2 Contribution to strengthening the PIF legal framework
In 2007 DLAF initiated and took part in drawing up legal acts with regard to strengthening the position of the department and also to improving national procedures on the findings and on recovering the prejudice brought to the EU funds.
2.2.2.1 Strengthening the institutional and legal framework
Government Emergency Ordinance no 25/2007 Government Emergency Ordinance no 25/2007 establishing measures for reorganization of Government’s Working Body, published in Official Gazette no 270 of 23 April 2007, has introduced provisions for improving the activity of administrative and financial follow up of the investigations conducted by DLAF. Therefore, authorities with competence in managing EU funds must communicate to DLAF, within 30 days from receiving DLAF’s investigation report, all measures taken for rectifying the aspects pointed out and also the actions taken for recovering the possible prejudice. At the same time, DLAF investigation report has now a greater judicial value, DLAF findings are compulsory to the authorities with competence in managing EU funds. Based on de facto reasons ascertained by DLAF and also on legal background pointed by DLAF, authorities with competence in managing EU funds will proceed to establishing and individualizing the payment duties and will express the budgetary debts where EU funds have been prejudiced.
Prime Minister’s Decision no 205/2007 The new Prime Minister’s Decision no 205/2007 regarding organization and functioning of Fight against Fraud Department – DLAF, published in Official Gazette no 511 dated 31 of July 2007, inserts provisions referring to DLAF’s quality of Antifraud Coordinating Service (AFCOS) in Romania. Also, DLAF has the responsibility to centralize, analyze and deliver to European Commission (European Antifraud Office) all irregularity reports.
2.2.2.2 Finding irregularities and recovering the prejudice
Practical difficulties facing when applying the provisions of Government Ordinance no 79/2003 regarding investigation and recovery of EU funds, and of due co financing funds wrongly used, and Government Ordinance no 1510/2003 for approving Methodological standards of applying Emergency Ordinance no 79/2003, as well as Romania’s position as EU Member State determined the adoption of legal measures which could lead to an improvement of investigation mechanisms and EU funds recovery and also to the expansion of the application sphere of legislation to post accession funds. In meeting this objective, Fight against Fraud Department and Ministry of Public Finance have initiated a working group made up of representatives of both institutions, and those of Audit Authority from Romanian Court of Accounts and other authorities with competences in managing EU funds. Following the meetings and discussions within the working group, projects of Government Ordinance and Government Decision have been drawn
27 Fight Against Fraud Department – Annual report 2007 up for amending and completing Government Ordinance no 79/2003 and for approving the Methodological standards for applying Government Ordinance no 79/2003 and repealing Government Decision no 1510/2003.
Government Ordinance no 12/2007 The following improvements have been brought, by passing Government Ordinance no 12/2007 for modifying and completing Government Ordinance no 79/2003 regarding the control and recovery of EU funds and of co financing funds wrongly used, published in Official Gazette no 84/2 Feb. 2007: • Enlarging the application field on post accession funds • Devising the investigation activity on obtainment, carrying out and usage of EU funds (exclusive responsibility of DLAF) from the activity of effective ascertaining in view of recovering the amounts paid from the non reimbursable EU financial assistance, by creating an efficient mechanism for establishing the findings and recovering the EU funds • Assimilating the EU debts to national fiscal debts for an efficient recovery of prejudice to the EU funds • Exclusive competence to ANAF in the field of the foreclosure procedure for recovering the prejudice to EU funds. The document has been approved by Law no 205/2 July 2007 which approves Government Ordinance no 12/2007 for modifying and completing Government Ordinance no 79/2003 (regarding investigation and recovery of EU funds and co financing funds wrongly used, published in Official Gazette no 467/11 July 2007).
Government Decision no 1306/2007 Methodological standards for applying the Government Ordinance no 79/2003 regarding investigation and recovery of EU funds, co financing funds wrongly used, have been approved by Government Decision no 1306/2007 published in Official Gazette no 753/6 November 2007, document initiated by DLAF and Ministry of Economy and Finance. According to this decision, the control report issued by DLAF is distinguished by the authorities managing EU funds, which will proceed to establishing and individualizing the payment debts and which will issue the proof of debt. The columns of the minutes for findings are to be filled in accordance with DLAF report.
2.2.2.3 Agreements/International Conventions
The Cooperation Agreement between European Community, Member States and Switzerland with regard to the fight against fraud As institution responsible with ensuring the protection of the EU financial interests in Romania, DLAF initiated the law project concerning Romania’s accession to the Cooperation Agreement between European Community and Member States on one side, and Switzerland on the other side, with regard to fight against fraud and other illegal activities affecting EU financial interests, signed in Luxembourg, on the 26th of October 2004. In December 2007, the project of the law has been adopted by the Chamber of Deputies – the first chamber to be informed, and then forwarded to the Senate, the decisional chamber.
28 Fight Against Fraud Department – Annual report 2007
The Cooperation Agreement represents an important instrument in fight against fraud at European level, by strengthening the relations between European Community and Member States on one side, and Switzerland on the other side, for an efficient fight of illegal activities affecting EU financial interests and reinforces the administrative assistance in the field. Taking into consideration the application field of the Agreement and the obligations deriving from joining this Agreement together with all competences of DLAF in the field of PIF, the Government of Romania designated the department as central unit in Romania, responsible to process the administrative assistance requests, formulated on the basis of the agreement.
Convention regarding the protection of EU financial interests By signing the Treaty for joining the EU, Romania engaged itself to join a series of conventions and protocols, their provisions becoming therefore compulsory to our country. Council Decision no 2008/40/JAI has been adopted on 6th of December 2007, with regard to Bulgaria and Romania joining the Convention drawn up on basis of article K.3 of EU Treaty, referring to the protection of EU financial interests. With the same Council Decision, Romania also joined the Protocol of 27 September 1996 and Protocol of 29 November 1996 and also the second Protocol, dated 19 June 1997. Thus, starting with 1st of January 2008, the provisions of PIF Convention and those of its protocols also apply directly to our country, which had adopted and transposed until now all the measures in the field of PIF.
The Cooperation Agreement between European Community, participant Member States and Japan Tobacco
DLAF supported the signing of the Cooperation Agreement between the European Community, participant Member States and Japan Tobacco International SA and Japan Tobacco International Holding BV and its afferent documents, as well as the document referring to claims renunciation with regard to RJ Reynolds. According to the Cooperation Agreement, in cases of confiscations of authentic cigarettes on Romanian territory, Japan Tobacco shall pay to Romania 100% from the taxes which would have applied upon the confiscated products and a 500% payment if the total volume of Japan Tobacco cigarettes confiscated in any calendar year exceeds 90 milion cigarettes. Japan Tobacco shall make a payment of 400 million dollars in the bank account appointed by the Commission. Romania could benefit from part of this payment in exchange of signing The Mutual Quash Litigations Agreement, which foresees the renunciation to all civil claims for deeds of smuggling previous to signing the Agreement, Japan Tabacco not being absolved of penal accusations, fiscal claims, claims of medical nature or administrative procedures. Moreover, Romania shall have access right to the data bases of Japan Tobacco. The same rights and obligations become applicable mutatis mutandis also with regard to the companies Gallaher and the entities RJ Reynolds, members of Japan Tobacco.
29 Fight Against Fraud Department – Annual report 2007
2.3 Coordinating the activity of data collection and analysis
2.3.1 Development of the activity of data collection and analysis
Taking into consideration Romania’s quality of EU member state and consequently of beneficiary of structural and cohesion instruments, as well as of funds afferent to Common Agricultural Policy and Fishing, in 2007 DLAF acted on the line of rendering the operational activity efficient, objective assumed by SNLAF, in order to obtain the access to new national data bases, relevant for the protection of the financial interests of European Communities. Thus, at DLAF’s request, Prime Minister’s Chancellery and OLAF, through the Programme of European Commission Hercule II, supplied the funds necessary for the procurement of an advance software for the investigative management of data analysis, the procedure being currently carried out. DLAF is in an advance stage of negotiation with the Authority for Coordinating Structural Instruments (ACIS) within Ministry of Economy and Finance, with a view to concluding a collaboration protocol. Moreover, a similar protocol has already been concluded with Directorate for Coordinating the Payment Agencies from within Ministry of Agriculture and Rural Development, in the field of irregularity reporting.
2.3.2 Irregularity Reporting Network
On the 22nd of November 2007 DLAF, acting as national coordinator of the fight against fraud, organized the fourth reunion of Irregularity reporting network regarding the pre accession/post accession funds (RRN). The Irregularity reporting network (RRN) was established in 2005, by DLAF, for the purpose of improving the process of irregularity reporting to the European Commission OLAF. Among the objectives of the reunion were the extension of Irregularity reporting network by including the national institutions with attributions in the management of the post accession assistance awarded to Romania, aspects regarding deficiencies within the reporting process, perspectives upon the Irregularity Management Electronic System (IMS), which is currently being developed at European Antifraud Office, as well as the possibility of implementing a new system for irregularity transmission.
2.3.3 Irregularity reporting to the European Commission
In its quality of fight against fraud coordinating service, in 2007, DLAF centralized, analyzed and forwarded to OLAF, in accordance with the provisions of the memorandums and financing agreements afferent to PHARE, ISPA and SAPARD programmes and of the Collaboration Protocol concluded with the Certifying and Payment Authority from within Ministry of Public Finance, 169 reports which showed new indications of irregularities or frauds. Among these, 58 are afferent to SAPARD programme, 71 to ISPA programme and 40 to PHARE programme.
30 Fight Against Fraud Department – Annual report 2007
58 40 PHARE
71 ISPA
SAPARD
Diagram 18: Distribution of irregularity reports showing new indications of irregularities or frauds
Moreover, in the same period DLAF forwarded to OLAF a number of 417 reports containing updates regarding the stage of cases of irregularities and/or frauds previously signalled. 216 out of the 417 cases are afferent to programme SAPARD, 32 to programme ISPA and 169 to programme PHARE.
216 PHARE 169 32 ISPA SAPARD
Diagram 19: Distribution of reports which contain updates regarding the stage of cases of irregularities and/or frauds previously signalled
2.4 Coordinating the activity of professional training
2007 represented a première for DLAF and the professional training activity. Comparing to the years before, when the department benefited from financial support due to the 2 PHARE financing contracts (Multi Country PHARE 2002, implemented during year 2005 and PHARE Multi Country Networking Programme, in 2006), in 2007 the training sessions have been entirely financed from the national budget or co financed together with other external partners (see Annex C).
2.4.1 Training activities organized with the support of external partners
Based on Additional Training Programme drawn up by DLAF for the year 2007, specific professional training activities have been organized, in cooperation with external partners. Therefore:
31 Fight Against Fraud Department – Annual report 2007
With the support of the European Commission
At DLAF’s initiative, on basis of Pericles Programme, European Commission organized in Iasi, during 29 31 January 2007, the seminar entitled Protection of the Euro against Counterfeiting, chaired by the Head of DLAF. The seminar gathered representatives of institutions with duties in fighting financial crime, from the Netherlands, Italy, Germany, Spain, Bulgaria, Latvia, and also representatives from OLAF, Europol, Interpol, European Central Bank. On behalf of Romania attended representatives of DLAF, National Bank of Romania, National Bureau for Preventing and Fighting Money Laundering, ANAF, Financial Guard, IGPR, Ministry of Justice, National Institute of Magistrates and Prosecutor’s Office.
With the support of the Trier Academy of European Law – ERA
• During 23rd 24th of April 2007 took place in Iasi the professional training course entitled ‘Cross border cooperation in fighting transnational crime’. To this course attended 27 representatives of national institutions with duties in preventing and fighting cross border crime (General Inspectorate of Romanian Police, Border Police, Organized Crime and Terrorism Investigation Unit, National Bureau for Preventing and Fighting Money Laundering, Ministry of Home Affairs and Administrative Reform, Financial Guard, National Customs Authority, DLAF). th th • During 4 5 of June 2007 From left to right: Aled Williams (Eurojust), Cornelia took place in Cluj Napoca the seminar Riehle (ERA), Ovidiu Dobleaga (DLAF), Ingrid entitled ‘Judicial Cooperation in Maschl (Justice and Home Affairs expert, Austria) Seminar ‘Judicial Cooperation in Criminal Matters: Criminal Matters: Introduction to EU Introduction to EU Law and Practice’, Cluj, 4 -5 Law and Practice’. The event was June 2007 dedicated especially to the magistrates with duties in the field of judicial cooperation in criminal matters, and also to other representatives of national competent institutions, such as: Ministry of Justice, Centre for International Police Cooperation from within Ministry of Home Affairs and Administrative Reform, DLAF, etc..
With the support of European Commission – DG Enlargement (Technical Assistance Information Exchange Instrument of the European Commission – TAIEX) and The European Anti Fraud Office – OLAF The training activity coordinated by DLAF permanently benefited from the support of OLAF. Presentations held within seminars by the OLAF experts and by those of institutions from within EU Member States have been much appreciated by the participants to the professional trainings. The external training manager on behalf of OLAF attended as chairman the events organized on the basis of DLAF Training Programme. • During 5th 9th of February 2007, one DLAF representative performed a working visit in Southend, United Kingdom. The purpose of the visit was to get acquainted with the activity carried out by the training unit of HM Revenue & Customs – HMRC from United Kingdom. • During 5th 9th of March 2007 and 19 23rd of March 2007, 2 modules of professional training entitled ‘Financial Crime Investigation’, took
32 Fight Against Fraud Department – Annual report 2007 place in Sibiu. Seminars have been organized for 40 participants, representatives of institutions with tasks in the field of fighting financial crime (IGPR, Financial Guard, ANAF, National Bureau for Preventing and Fighting Money Laundering, National Customs Authority, Romanian Court of Accounts, Paying Agency for Rural Development and Fisheries, National Anticorruption Directorate, DLAF). • During 16th 18th of April and 18 20th of April 2007, 2 modules of professional training entitled ‘Exploitation of the VAT system: Frauds and weaknesses’ have been organized in Iasi. The event gathered 60 representatives of national institutions involved in preventing and fighting fiscal fraud (ANAF, General Inspectorate of Romanian Police, Financial Guard, Audit Authority of Romanian Court of Accounts, Ministry of Economy and Finance, National Bureau for Preventing and Fighting Money Laundering, Romanian Court of Accounts, National Customs Authority, National Anticorruption Directorate, Prosecutor’s Office, Paying Agency for Rural Development and Fisheries, DLAF, judicial technical experts and magistrates). • During 25th 26th of June 2007 and 8 9 of October 2007, took place in Bucharest 2 sessions of the seminar on ‘Irregularity Reporting’. The events have been mainly dedicated to irregularity officers from within Implementing Agencies and Management Authorities. To the seminars also attended representatives of Certifying and Paying Authority of Ministry of Economy and Finance, Audit Authority of Romanian Court of Accounts and DLAF. • During 1st 5th of October 2007, the first module of professional training has been organized in Timisoara, entitled ‘Fraud in the field of Common Agricultural policy’. The second module has been organized in Bucharest, between 19 23rd of November 2007. To this second event took part representatives of Ministry of Agriculture and Rural Development, paying Agency for Rural Development and Fisheries, Paying and Intervention Agency for Agriculture, Audit Authority of Romanian Court of Accounts, National Customs Authority and DLAF. • During 15th 17th of October 2007 and 17th 19th of October 2007, in Iasi, there have been organized 2 modules of professional training entitled ‘Risk Analysis in Own Resources’. The seminars gathered representatives of ANV, Financial Guard, ANAF, Ministry of Economy and Finance, Ministry of Agriculture and Rural Development, Paying Agency for Rural Development Seminar ‘Risk analysis in Own Resources’, Iasi, 17- th and Fisheries, Paying and 19 October 2007 Intervention Agency for Agriculture and DLAF.
At the same time, a DLAF representative was part of two activities due to the twinning project RO 05/IB/FI/01 ‘Strengthening administrative capacity for ensuring transparency and efficiency of financial flow towards and from EU budget’, carried out between 23rd 27th of July 2007.The twinning project is proceeded by the Ministry of Economy and Finance through its Coordinating Unit of Budgetary relations with EU.
Thus, in 2007, on the basis of Additional Training Programme, DLAF organised 13 seminars and one training internship, to which took part almost
33 Fight Against Fraud Department – Annual report 2007
350 representatives of national institutions with competences in the field of PIF. Seminars took place in Bucharest and important regional centres (Iasi, Timisoara, Cluj, Sibiu). The target group was focused on the representatives at the regional level (Diagram 20).
2005 2006 2007 Phare Multi Multi Country DLAF Additional Training activities Country Phare Training Networking Programme Programme Programme Seminars organized 3 10 3 in Bucharest Seminars organized 0 5 10 in regional centres Seminars organized in Member States 8 0 0 Total number of seminars held 11 15 13
Diagram 20: Seminars organized between 2005 2007
One of the objectives of the Department for year 2007 was to include a greater number of participants, rising continuously comparing to the years before (Diagram 20). Moreover, DLAF adopted a transparency policy by publishing on its website all programmed seminars, therefore all interested institutions could take part to the events.
Multi Country Phare Programme (2005)
173 347 Phare Multi Country Networking 305 Programme (2006)
DLAF Additional Training Programme (2007)
Diagram 21: Total number of participants: 2005 2007
2.4.2 Financing Agreements signed with European Commission
A steady concern of DLAF was to find new partners for organizing future training activities in order to maintain the high quality level of these events.
Therefore, in September 2007, the Framework Partnership Agreement came into force, signed between the European Commission and DLAF, on basis of ‘Prevention of and Fight against Crime’ Programme. The Agreement enables DLAF to obtain financing necessary for
34 Fight Against Fraud Department – Annual report 2007 organizing seminars, conferences and training internships in the field of prevention and fight against fraud and corruption affecting EU’s financial interests.
On the 21st of November 2007, the Financing Agreement of project ‘Cross Border Cooperation in the Area of the Fight against Fraud’ was signed, based on HERCULE II Programme of European Commission. The seminar taking place within this action, entitled ‘Cross border cooperation and exchange of information in fighting fraud affecting EU’s financial interests’, will be organized by DLAF in Bucharest, between 10th 12th of March 2008. The event will gather specialists from all Member States (Romania, Hungary, Bulgaria) and other neighbour states (Serbia, Moldavia, Ukraine) as well as OLAF experts.
2.4.3 The Training Coordinators’ Network
In 2007, the Training Coordinators’ Network (see Annex B) was extended to 21 members, including representatives of institutions with competences in investigating and managing structural instruments. On the 21st of September 2007, DLAF organized the meeting of the Antifraud Training Coordinators’ Network. The meeting gathered training coordinators from within national institutions with competences in the field and also the external training manager from OLAF. The Meeting of Antifraud Training Coordinators’ The meeting aimed at Network, Bucharest, 21st of September 2007 identifying the professional training needs of specialists involved in the fight against fraud, in view of getting on with the Training Programme for year 2008.
35 Fight Against Fraud Department – Annual report 2007
CHAPTER 3: COOPERATION WITH THE EUROPEAN ANTI FRAUD OFFICE
DLAF has the quality of contact point with the European Anti Fraud Office – OLAF and it is the Coordinating Service of Fight against Fraud (AFCOS) in Romania. Therefore, the department carries out common on the spot investigations in joint teams with OLAF investigators, requests or awards technical assistance to OLAF experts and facilitates the requests for technical assistance addressed to OLAF by the national institutions. At the same time, DLAF cooperates with OLAF regarding the prevention of illegal activities affecting the EU budget. This way, DLAF representatives take part to the meetings of Consultative Committee for the Fight against Fraud – COCOLAF and its sub groups, to the annual meeting of heads of AFCOS and also to the meetings of OLAF Antifraud Communicators’ Network.
3.1 Operational cooperation
In 2007, the good cooperation between DLAF and OLAF materialized by the carrying out of 4 joint on the spot controls regarding the means of obtainment, carrying out and usage of funds from the financial assistance awarded to Romania by EU. The 4 controls envisaged 2 projects financed from PHARE funds, a project financed from ISPA funds and a project financed from a loan from European Investment Bank, their total value amounting to more than 58 million Euro.
In addition to these, OLAF awarded technical assistance for the finalization by DLAF of 8 cases, which envisaged economic operators with the headquarters in other member states, by supplying the necessary information regarding their legal situation, various documents or certain operations in which they were involved.
In the year 2007, the operational cooperation between the two institutions has also been extended by DLAF’s award of technical assistance to OLAF representatives, during the carrying out an investigation in Romania, which concerned the means in which funds afferent to a PHARE TEMPUS project were obtained, carried out and used.
Out of the 103 controls conducted by DLAF in 2007, 6 controls were initiated following notifications sent by OLAF, 5 being finalized. In 3 cases indications of fraud have been ascertained and the control reports have been forwarded to the competent judicial authorities; in the other 2 cases irregularities have been ascertained.
Moreover, DLAF forwarded to OLAF a number of 82 control reports which contain indications of fraud, a 3 times increase as compared to those forwarded in 2006.
36 Fight Against Fraud Department – Annual report 2007
2005 6 8 2006 4 82 10 13 2007
27 3 7 4 28
OLAF DLAF Joint controls Control Reports notifications Technical sent by DLAF assistance requests Diagram 22: The results of operational cooperation with OLAF: 2005 2007
„Leonardo da Vinci” Case
The case constitutes an example of defrauding funds from Leonardo da Vinci programme by accessing/deducting these funds for activities which should have been carried out in another member state. The projects The control envisaged eight projects, in total amount of 268.800 Euro, whose objective was the training in Germany of 120 young persons in various professional domains, between 2001 2004. The funds were accessed by 7 NGOs/Commercial companies, controlled by persons among whom there were kinship as well as business relationships. The control activity As the implementation of project implied a partnership with other entities from Germany, with a view to verify the reality of activities’ carrying out, DLAF requested operational support from European Antifraud Office. The investigations took place simultaneously both in Romania and in Germany. Following the investigations, OLAF representatives found out the following: • the foreign partners were fictitious; • part of the probationers could not travel to Germany as they did not receive entrance visa from the Consulate of Federal Republic of Germany; • in the only project in which the travel to Germany was identified, this was made for tourist purposes. DLAF investigation team, following the verifications made in Romania, identified the following: • false documents were presented for the obtainment of the financing, respectively: three documents of foreign partnership, afferent to the projects, 16 individual training stage contracts; • false documents were presented to the Final Report, respectively: copies of probationers’ passports, fiscal invoices (together with the afferent receipts), 40 diplomas or attendance certificates, policies of medical insurance, individual training stage reports. A joint DLAF OLAF investigation team proceeded to interviewing the main person involved. Moreover, DLAF team audited over 20 probationers and funds beneficiaries. All false documents submitted at the Contracting Authority were
37 Fight Against Fraud Department – Annual report 2007 retained. Follow up There were issued Notes of Debits for the recovery of the amounts wrongly spent. The control reports drawn up, together with the afferent documentation and the statements taken, have been forwarded to Prosecutor’s Office attached to Law Court of Sector 4 Bucharest, for competent solving.
Diagram 23: „Leonardo da Vinci” Case
3.2 Participation to COCOLAF meetings and its sub groups
The European Commission created in 1994 the Consultative Committee for the Fight against Fraud – COCOLAF. The Committee meets on Commission’s call and has an advisory role on all issues regarding the prevention and fighting fraud affecting EU financial interests, as well as in terms of the cooperation in this field between Member States and the European Commission. COCOLAF is made up of experts from within qualified institutions of Member States and has 3 sub working groups: • Group art. 280; • Group Irregularities and Mutual Assistance – agricultural products; • Group Risk Analysis regarding irregularities and fraud.
Beginning with January, the 1st 2007, once Romania joined the European Union, DLAF took part as full right member to all the meetings of the Consultative Committee for the Fight against Fraud – COCOLAF and its sub groups: • 2 May 2007, Brussels, Belgium – meeting of Group art.280; • 3 May 2007, Brussels, Belgium – meeting of the Group Risk Analysis regarding irregularities and fraud;
38 Fight Against Fraud Department – Annual report 2007
• 23 May 2007, Brussels, Belgium – meeting of the Group Irregularities and Mutual Assistance – agricultural products; • 24 May 2007, Brussels, Belgium – COCOLAF meeting. Discussions were held on project regarding the Report on art. 280 implementation for 2006; • 13 July 2007, Brussels, Belgium – meeting of Group art. 280; • 20 September 2007, Brussels, Belgium – first COCOLAF meeting on judicial matters. Agenda of the meeting focused on practical matters regarding the cooperation between judicial authorities of Member States and OLAF, in the field of PIF; • 29 October 2007, Brussels, Belgium – COCOLAF meeting; • 15 November 2007, Brussels, Belgium – meeting of the Group Irregularities and Mutual Assistance – agricultural products.
3.3 Annual Meeting of Heads of AFCOS
A delegation of DLAF, led by its head, participated to the Annual Meeting of the Heads of AFCOS (Anti Fraud Coordination Service), held in Ljubljana, Slovenia, between 11 12 October 2007. Heads of antifraud services meet annually in order to assess the degree and establish the priorities in the fight against fraud affecting EU financial interests. This year, agenda of the meeting aimed at international cooperation in fight From left to right: Ovidiu Dobleaga (DLAF), Patrick Larkin (OLAF), Luc Schaerlaekens (OLAF). against fraud affecting EU financial The Annual Meeting of Heads of AFCOS, interests. On this occasion, the head Ljubljana, 11 12 October 2007 of DLAF held a presentation regarding Antifraud Training Coordinators’ Network, created and coordinated by DLAF.
3.4 OLAF Antifraud Communicators’ Network – OAFCN
Created in 2001, OAFCN represents part of OLAF external communication strategy. OAFCN Network acts as a support for the European citizens and informs the public regarding the field of fight against fraud. OAFCN is made up of members of OLAF communication service, press officers, PR officers and communicators of all antifraud services from Member States. Members of the Network meet once a year within the Annual Meeting and also take part to other of its regular meetings.
During 3 4 May 2007, in Brussels, Belgium, took place the meeting of OAFCN Network, event which also gathered DLAF representatives. The purpose of the meeting was organizing the ‘Open Doors’ event of the European institutions and establishing the organizational details regarding the Annual Meeting of the OAFCN Network, which for the first time, took place in 2 OLAF partner states: Austria and Slovakia.
39 Fight Against Fraud Department – Annual report 2007
During 23 26 September 2007, one DLAF representative took part at the Annual Meeting of OLAF Antifraud Communicators’ Network OAFCN. The seminar took place in Vienna and Bratislava and was entitled ‘Fight against fraud in the spotlight’. There have been presented and discussed media projects in the field of fight against fraud, difficulties met and practical solutions.
40 Fight Against Fraud Department – Annual report 2007
CHAPTER 4: COMMUNICATION AND PUBLIC RELATIONS ACTIVITIES
In 2007 DLAF continued its policy based on transparency in its relationship with mass media and focused its efforts on disseminating the prevention message. At the request of the department, all management authorities have introduced in the guides/booklets aimed for the public information about DLAF’s activity and the risks to which the beneficiaries are exposed by non observing the legislation in the field.
4.1 Study visit of a delegation from Croatia
Between 10th and 12th of September 2007, at DLAF headquarters, following the recommendation of the EU, a delegation from Croatian Ministry of Finance has carried out a study visit in the field of protection the EU financial interests in Romania, in view of setting up a similar structure, which demonstrates the appreciation at European level of the results gathered by the Study visit of Croatian delegation, 10 - 12 Septembrie 2007 antifraud system created by DLAF. DLAF, as national coordinator for fight against fraud, hosted the main activities carried out within this event and facilitated the dialogue between representatives of Croatian delegation and Romanian authorities. The purpose of the meeting was to get acquainted with the antifraud system implemented by the Romanian authorities and coordinated by DLAF, regarding fraud and irregularities prevention in the use of EU funds, and also in the field of cooperation with OLAF.
4.2 DLAF activity in mass media
4.2.1 The national mass media
During the year 2007, the Romanian press published approximately 50 articles and 20 press releases about the activity, investigations and results of the Department. DLAF activity was also promoted in specialized programmes on television stations, both central and local, the message focusing on the importance of the appropriate spending of European money, as well as on the contribution of EU funds to the local DLAF activity in national media development.
41 Fight Against Fraud Department – Annual report 2007
In April 2007 DLAF’s website became operational at the address www.antifrauda.gov.ro. The website represents an important source of information regarding the way in which the EU’s financial interests are protected. The site comprises information on the Romanian antifraud system, on the antifraud legislation in force, both national and European, and on DLAF’s activity, as the contact institution with OLAF and as institution responsible for carrying out Romania’s obligations in accordance with the provisions foreseen by art 280 from EU Treaty. Any allegation regarding possible fraud with European funds could be forwarded to the Department either by filling in an online form, accessible on the site, or by e mail, at the address [email protected].
4.2.2 DLAF at the Open Doors Day for the European Institutions
In order to mark the 50th anniversary since the Treaty of Rome was signed, the Open Doors Day of the European Institutions was organized on the 5th of May 2007 in Brussels. Visitors had the opportunity to better understand the way Community institutions function. European Anti Fraud Office – OLAF was among the institutions taking part at the event. The stand was organized together with partner institutions from within Member States and pointed out the cooperation DLAF representatives presented informative between OLAF and the national materials regarding results in the antifraud structures. Informative materials and fight and also responding to visitors’ the technology used in investigations questions. were presented. There even took place a demonstrative operation of fighting cigarette traffic. Moreover, present at OLAF stand, DLAF representatives informed the European officials and the numerous visitors about the Romanian antifraud system and the real results obtained until now.
4.3 International Conferences and Public Debates
In 2007 DLAF representatives took part in international conferences, organized by the Academy of European Law, Trier ERA:
• “Combating Corruption and Fraud in the EU: New Approaches to Compliance and Law Enforcement”. The event took place in Trier, within 1 – 2 February 2007. The conference was also attended by the General Director of OLAF, Mr Franz – Hermann Brüner, as well as by representatives of European Commission, Serious Fraud Office from UK, EBRD, Ministry of Home Affairs from
42 Fight Against Fraud Department – Annual report 2007
Austria, Ministry of Justice from Italy and by European prosecutors and magistrates. On this occasion, the Head of DLAF delivered the presentation “The Romanian Antifraud System: An Integrated Approach to Fraud”, and highlighted the key points of the national antifraud system developed by DLAF. • “Procedural Guarantees in Criminal Proceedings”, held in Berlin, Germany, between 20 – 22 February 2007. Franco Frattini, Vice President of the European Commission, Responsible for Justice, Freedom and Security, high officials within Ministries of Justice from Member States, European Commission representatives and numerous European prosecutors and magistrates attended the event. • “Tax Fraud in the European Union: European Strategy and National Measures”, organized between 10 – 11 May 2007, in Madrid, Spain. The debates were concentrated on issues of the moment in the field of fiscal fraud. Despite the efforts of the EU institutions and Member States, progress in the construction of the internal market has had the side effect of creating more opportunities for tax evasion and fraud at the European and international level. The subject was presented in depth and from an essentially practical perspective with national and EU experts, analyzing the comparative approach and national experience in the field. Mr Donato Raponi, Head of Unit, Administrative Cooperation and Fight Against Fiscal Fraud, Directorate General Taxation and Customs Union (TAXUD), participated, among other national experts. • “Protection of EU and Swiss Financial Interests: Challenges for Law Enforcement and the Financial Industry”, held in Basel, Switzerland, between 10 – 11 December 2007. The subject of the conference was the cooperation between the European Commission and Switzerland in the field of the fight against fraud, based on the protocol the parties have concluded on 26 October 2004. Mr Paulo Casaca, member of the European Parliament, Committee on Budgetary Control of the EP delivered the keynote speech. Presentations were also delivered by experts from Switzerland and Member States and by Mr. Lothar Kuhl, Head of Unit D.2., OLAF.
4.4 DLAF activity reflected in the evaluation of the European institutions
In July 2007 were published The Commission Report towards European Parliament and Council of Europe regarding protection of the EU financial interests – Fight against Fraud and the Activity Report of European Anti Fraud Office – OLAF, for 20061. Both reports point out the steady attitude of Romanian authorities involving in the fight against fraud affecting EU financial interests and they confirm the efficiency of DLAF activity for year 2005 up to the present, both on investigating the EU funds and on cooperating with European institutions. On this occasion, the European Commission Vice President, Mr. Siim Kallas, in charge with administrative, audit and antifraud affairs stated: ‘We are very pleased with the pro active transparent approach of Romania in fight against fraud and corruption affecting EU funds. A large number of reported irregularities does not necessarily mean that a member state has greater
1 The reports can be found on OLAF website http://ec.europa.eu/anti_fraud/reports/index_en.html
43 Fight Against Fraud Department – Annual report 2007 fraudulent activities than another. This could rather represent the result of a higher and efficient level of investigations carried out.’ In Romania’s case, the Commission Report notices the transparency, promptitude and efficiency in reporting irregularities (the largest number of investigation cases, observing the terms of reporting) and the quality of reports transmitted to Brussels.
Mr. Franz Hermann Brüner – General Director of OLAF, appreciated on the occasion of OLAF report publication: ‘Our cooperation with Fight against Fraud Department is excellent. Our Romanian colleagues are very efficient. The number of fraud cases detected in Romania may be high but we take that as an important proof that fight against fraud affecting EU funds is seriously treated and important efforts are being made in order to detect all Franz-Hermann Brüner, General Directorul of OLAF irregularities’.
Subsequently, present at the European forum in Alpbach (Austria), in August 2007, General Director of OLAF confirmed once again the good results achieved by Department: ‘Each time OLAF presents its annual activity report, journalists ask me about the large number of cases opened by the antifraud service in Romania. This does not mean that Romania registers a greater fraud with EU funds than other Member States, but that Romania has a very active antifraud service. You cannot discover fraud unless you open an investigation. When other states report no cases of fraud, this only means that the authorities take no measures for that. I congratulate the Romanian colleagues for their activity in the past few years and for a good cooperation with OLAF.’
44 Fight Against Fraud Department – Annual report 2007
ANNEX A: Cases investigated by DLAF and sent to trial
Following OLAF’s notification, Fight Against Fraud Department (DLAF) carried out a control regarding the way in which, between 2003 2004, Local Council of Cordun commune used the amount of 3.458.133 lei, financed under SAPARD programme, for the execution of several communal roads. Following the verifications, there resulted the fact that the representatives of the construction company, namely SC AISPA STARS 95 SA Foc ani, used false documents to win the tender organized by the Local Council of commune Cordun; for this purpose there were also falsified the certificates issued by the fiscal authorities regarding the inexistence of debts to the budget as well as a letter of solvency from a commercial bank. The deeds committed by the employees of SC AISPA STARS 95 SA Foc ani, P.C. and P.G. were also favoured by the fact fact the general director, P. Co., deficiently fulfilled his attributions of coordinator and supervisor of the company. DNA was notified with regard to the case and by the indictment dated 24.07.2006 disposed sending to trial the three defendants for committing several offences against the financial interests of European Communities. By the criminal judgment dated 26.11.2007, Law Court of Sector 1 Bucharest disposed the conviction of the three defendants to prison punishments of 4 – 10 years.
DLAF carried out a control regarding the means of obtainment and usage of community funds by SC Best XZ SRL Bucharest, SC SBAN Company SRL Pite ti and SC SUNSET TRADE SRL Bucharest for the execution of three projects in total amount of 328.095 euro. The objectives of the Projects were establishing an electronic centre for training, counseling and placing the unemployed and graduates, facilitating the access to the internet, assuring several services of electronic information and supplying several software packages. DLAF verifications revealed the fact that the three mentioned companies had the same shareholder/administrator, namely N.A. DLAF ascertained the fact that he used and presented to the implementing and contracting authorities inexact and false documents with regard to the usage of funds; moreover, he changed the destination of funds, which he used for his own benefit, disposing payments or cash withdrawals related in no way to the object of PHARE contracts and presenting, as justification, false statements of account to the authorities. With a view to simulating the tenders, all supply contracts were awarded to commercial companies managed or controlled by N.A. For the purpose of justifying the existence of own financial resources which should have been allocated to the carrying out of PHARE projects, together with non reimbursable funds, N.A. presented to the monitoring authorities false collection orders, out of which it came out that he and two other persons would have ‘credited’ the company with 1,3 billion lei. DLAF notified DNA, which confirmed the aspects ascertained by the investigation team and disposed sending to trial the defendant N.A. for committing offences which brought to the budget of the European communities a prejudice of 3.824.595.684 ROL and 36.472,5 Euro and the afferent interest rates. The file is currently pending at Law Court of Sector 1 Bucharest. DLAF verified the means in which, between 1st of February 2003 – 31st of March 2004, Technical Military Academy carried out two projects for the development of human resources in the field of army reorganization, in total amount of 446.658 euro financed from PHARE funds.
45 Fight Against Fraud Department – Annual report 2007
From the verifications it came out that the technical implementation was coordinated by col. C.N., professor within Technical Military Academy Bucharest, while the financial implementation was coordinated by lt. col. eng. ec. G.M.M., chief accountant within the mentioned institution. The two used and presented false, inexact and incomplete documents and statements (justificatory documents and payrolls non conform to the reality, individual labour contracts illegally drawn up, unreal documents with regard to assuring the own contribution), resulting into the wrong obtainment of funds from the general budget of European Communities. Moreover, G.M.M. changed the destination of the amount of 134.155 lei, deriving from the credits not used until the end of 2002, for the co financing of the two contracts, without observing the legal provisions (the initiation of the project was made without the approval of the authorized body from within Ministry of National Defense and without assuring the beneficiary’s own contribution for the entire period of implementation). With a view to punishing the guilty persons, as well as to recovering the prejudice of more than 200.000 euro, DLAF notified DNA. By the indictment dated 03.12.2007, Section for Combating corruption offences committed by military personnel, within DNA, disposed sending the two officers to trial, for committing offences against the financial interests of European Communities and the offence of funds embezzlement.
DLAF verified the means in which the Association ‘ACTIV CLUB BUCHAREST’ implemented, between June 2003 until June 2005, a number of 6 (six) projects, in total amount of 112.315 euro, aimed for the stimulation and education of communication skills of the youth from the placement centres, for the purpose of their integration in the society after leaving the centres. For this purpose, the Association benefited from financing, by Youth Community Programme, from National Agency for Supporting the Initiative of Youth (ANSIT) and received the total amount of 85.146 euro. Following DLAF verifications resulted that, in fact, the Association did not carry out any of the Projects financed, while all the documents (contracts, invoices, payment documents, lists of attendants etc.) presented for the justification of the advance received and for the obtainment of the remaining payment are fictitious; the amounts of money received from ANSIT were used by the Association’s president, N.G.G., for personal purposes. For the criminal punishment of the persons guilty for prejudicing the budget of the European Communities, as well as for recovering the prejudice thus produced, in the amount of 49.584 euro, DLAF notified National Anticorruption Directorate. By the indictment dated 17.12.2007, DNA disposed sending to trial the defendant N.G.G., president of the Association Activ Club Bucharest, for committing the offences of changing, without observing the legal provisions, the destination of funds obtained from the general budget of European Communities, of using or presenting false, inexact or incomplete documents or statements, which resulted into wrongly obtaining funds from the same budget and also the offence of false in documents under private signature.
46 Fight Against Fraud Department – Annual report 2007
DLAF carried out a control regarding the means of obtainment, carrying out and usage of PHARE funds afferent to the project ‘Construction materials – safety and quality. Production of tiles and concrete’, whose beneficiary was SC VEST BANAT 2001 SRL Caransebe , Cara Severin county. The project, in total amount of 164.000 euro, aimed at developing the company by transfer of new technologies, arranging a new construction hall, carrying out studies/researches and creating 11 work places. From the verifications carried out resulted that the administrator of SC Vest Banat 2001 SRL Caransebe , N.P., simulated the tenders for equipments procurement, buying the equipments from the companies where he acted as associate, shareholder or administrator. In order to mislead the Contracting Authority with regard to the real origin of the equipments, N.P. used the companies of other ‘business partners’ as ‘tenderers’. For this purpose, documents were falsified related to the procurement of the equipments, their wear/value and to the execution of works for fitting out the production hall. Thus, N.P. collected community funds without making any supplementary effort, except that of transferring the goods, only in the documents, between the companies managed by himself. DLAF ascertained that the intermediary and final reports which certified the carrying out of the project’s activities were false. DLAF notified DNA which, by the indictment dated 07.12.2007, disposed sending to trial the defendants N.P. and other 5 accomplices of his for committing several offences against the financial interests of European Communities, which produced a prejudice of 96.586 euro.
Following the notification received from ANPCDEFP, DLAF conducted verifications regarding the way in which SC Horse Sport Centrum SRL, SC Academia Ecvestră Mogo oaia SRL and National Agency for Encouraging Race Horse Breeding obtained and used funds from Community Programme Leonardo da Vinci. The entities benefiting from community funds were held and managed by the same person, respectively D.I. The projects, in total amount of 90.800 euro, envisaged the training of several employees in France, in units specialized the field of race horse breeding, for the purpose of assimilating European norms and methodologies in the activity of equestrian competition organization, of integration of Romanian rural equestrian tourism in the European tourism system and implementation of European system for animal identification. From DLAF verifications resulted the fact that the project was not carried out in reality, the respective persons did not travel to France and the money allocated for this purpose was used by D.I. for his own benefit. For the justification of using these funds D.I. presented more than 100 false documents (contracts and labour books, qualification diplomas, payrolls, IDs, passports, airplane tickets, insurance policies, bank account statements, contracts with foreign partners, balance sheets). Part of the false documents used were drawn up by his wife D.E. (general director of SC Academia Ecvestră Mogo oaia SRL). DLAF notified DNA in relation to the aspects found, while by the indictment dated 26.10.2006 the prosecutor’s office disposed sending the two to trial for prejudicing the EU budget with the amount of 51.088 euro, by committing offences against the EU’s financial interests and of the offences of false in documents under private signature and false in statements.
47 Fight Against Fraud Department – Annual report 2007
ANNEX B: DLAF’s coordination system
CNADNR MMFES MMDD MIRA
CFR APIA
Irregularity OPCP ACP Reporting Network MT MDLPL
MEF APDRP ANPCEFP AA
DNA CFR APIA ANPA MMFES
INM ONPCSB
ANV CNADNR Anti Fraud Training Coordinators Network IGPR OPCP
GF APDRP
MEF ANPCEFP
AA ANAF MT MDLPL MIRA MMDD
PICCJ CFR
CNADNR IGPR DLAF Anti Fraud Communicators APIA Network GF APDRP
MEF ANPCEFP
MT MDLPL
48 Fight Against Fraud Department – Annual report 2007
ANNEX C: Training activities 2007
No. Period Theme Location Partners Crt
TRAINING COURSES 29 31 European 1. Protection of Euro Ia i January Commission TAIEX OLAF 2. 5 9 March Financial Crime Investigations (1) Sibiu City of London Police TAIEX 19 23 OLAF 3. Financial Crime Investigations (2) Sibiu March City of London Police Exploitation of the VAT system: TAIEX 4. 16 18 April Frauds and weaknesses (1) Ia i OLAF
Exploitation of the VAT system: TAIEX 5. 18 20 April Ia i Frauds and weaknesses (2) OLAF Cross border Cooperation in ERA 6. 23 24 April Ia i Fighting Trans national Criminality Judicial Cooperation in Criminal ERA Cluj 7. 4 5 June Matters: Introduction to EU Law Napoca and Practice TAIEX 8. 25 26 June Irregularities Reporting (1) Bucure ti OLAF TAIEX 9. 1 5 October CAP Fraud (1) Timi oara OLAF TAIEX 10. 8 9 October Irregularities Reporting (2) Bucure ti OLAF 15 17 Risk Analysis in Own Resources (1) TAIEX 11. Ia i October OLAF 17 19 TAIEX 12. Risk Analysis in Own Resources (2) Ia i October OLAF 19 23 TAIEX 13. CAP Fraud (2) Bucure ti November OLAF TRAINING INTERNSHIP 5 9 Exchange of experience in the field Southend, HMRC 1. February of training UK TAIEX
49 Fight Against Fraud Department – Annual report 2007
ANNEX D: DLAF’s organisation chart
Head of DLAF
General Directorate Policies and Operations
Directorate A Directorate B Directorate C
Legislation, Control Intelligence Policies, Training
50