WRITTEN QUESTION P-2975/03 by Freddy Blak (GUE/NGL) to the Commission. Contracts with CESD.
Date: 2003-10-06
Institutions: European Parliament, Provisional data
Subjects: European Anti-fraud Office, European Commission, North Macedonia, award of contract, census, exchange of information, fraud, services company, services contract

27.3.2004

EN

Official Journal of the European Union

C 78 E/445

Answer given by Mrs Wallström on behalf of the Commission

(18 November 2003)

The Commission is aware of the La Breña II dam project in the province of Cordoba, in the Autonomous
Community of Andalusia, in the South of Spain.

The Commission has opened an infringement procedure in relation to this project in order to ensure that
the Community environmental law is properly applied.

The La Breña II dam project has been the subject of various exchanges of information and meetings
between the Commission and the Spanish authorities. It should be noted that the Commission has received
wide-ranging information in relation to this matter, from the Spanish authorities and different persons,
associations and bodies, who have transmitted their points of view both in favour of and against this
project.

It is important to note that, in the framework of this case, the Spanish authorities have asked the opinion
of the Commission pursuant to Article 6.4 of Council Directive 92/43/EEC of 21 May 1992, on the
conservation of natural habitats and of wild fauna and flora (1). The Commission is currently examining
this request. It is foreseen that the Commission will shortly deliver its opinion in relation to this project.

(1) OJ L 206, 22.7.1992.

(2004/C 78 E/0467)

WRITTEN QUESTION P-2975/03

by Freddy Blak (GUE/NGL) to the Commission

(6 October 2003)

Subject: Contracts with CESD

In December 2001 the Commission (EuropeAid) signed a contract worth EUR 999 780 with the firm
CESD, which was to help with a census in former Yugoslavia. The fact that this contract was entered into
is highly problematic. Firstly, the firm obtained the contract outside the customary tendering procedures.
Secondly, it was entered into in spite of the fact that the firm had already been shown to have swindled
Eurostat out of more than EUR 3 million.

Between 1996 and 2001, CESD entered into contracts worth EUR 31 655 756 with Eurostat, some of
which were awarded outside the customary tendering procedures. Eurostat-CESD contracts not in line with
tendering rules have been criticised by the Court of Auditors in its annual reports (1).

Would the Commission state whether it was unaware of the Court of Auditors’ criticism or whether it
deliberately chose to ignore it?

In a letter (29 September 2003) to Mrs Theato, Commissioner Patten stated that EuropeAid had no
knowledge of irregularities and fraud in connection with CESD before July 2003.

Would the Commission explain how it is possible for EuropeAid not to have known about the problems
surrounding CESD when the Eurostat audit department had established in two reports, in May and July
2001,
fraud and nepotism involving more than EUR 3 million.
The problems were so serious that both reports were forwarded to OLAF in November 2001.

there had been irregularities,

that

Would the Commission explain how it is possible that the Commission’s early-warning database had no
entry on CESD?

Would the Commission say whether it is standard practice for a directorate-general to enter into new
contracts with a firm which has been swindling another directorate-general on a large scale, or whether
rules have been broken?

(1) OJ C 327, 24.11.1994, OJ C 349, 3.12.1999 and OJ C 342, 1.12.2000.

C 78 E/446

Official Journal of the European Union

EN

27.3.2004

Answer given by Mr Patten on behalf of the Commission

(26 November 2003)

In its Annual Report concerning the financial year 1998, the Court criticised the conclusion of contracts
with companies which involved managing special funds; CESD was one of several firms mentioned by the
Court in this context. As explained by Mr Patten in his letter of 29 September 2003 to Mrs Theato, this is
why the project supervision arrangements for the Former Yugoslavia Republic of Macedonia (FYROM)
contract were reinforced. Moreover, the FYROM contract with CESD-Roma was a contract for services,
rather than a grant agreement, allowing for closer scrutiny of expenditure, on the basis of costs actually
incurred.

In its Annual Report concerning the financial year 1999, the Court covered the statistical support given to
the Candidate Countries through the PHARE programme, and questioned the justification for employing
CESD as a technical assistance contractor through a direct agreement for an amount of EUR 15 million.
The Commission explained in its reply that the decision to award the contract by direct agreement aimed
to allow the mobilisation of the essential expertise of the Statistical Institutes of Member States and that,
following further analysis in 1997, it was decided, with effect from 1998, to redesign the nature and scope
of the tasks outsourced and organise tendering in compliance with standard PHARE procedures.

The Commission (EuropeAid) was aware of criticism by the Court of Auditors of potential problems
arising out of the structure of certain contracts with CESD, and took steps to address those criticisms.
However, the Court’s reports did not indicate any problem of fraud or impropriety in relation to CESD.

The decision to award the contract of EUR 999 000 for the electoral census work contract in FYROM by
direct agreement was taken on the basis of the technical advice from Eurostat, and of the need to ensure
the success of the census in FYROM, which was at that time expected to begin in 2001. The urgency of
implementation of the Lake Ochrid agreement was widely recognised at the time, including by the Council
and the Parliament.

EuropeAid, like other services of the Commission, was not aware of the audit reports. Eurostat did not
inform EuropeAid about these reports and the results sent to the European Anti-Fraud Office (OLAF) in
November 2001. The reasons for this situation have already been described to the Parliament’s Budgetary
Control Committee (Cocobu) and explained again by the President of the Commission at the 25 September
2003 Conference of Presidents (CdP) extended to Members of Cocobu. The procedures in place at the time
did not provide for notification to the Commission as a whole of the concerns set out in the reports. It was
only when OLAF had informed the Commission that the necessary conclusions could be drawn (including
use of the Early Warning system) in relation to the problems identified. In this case, the first note of
substance sent by OLAF to the Secretary-General was in May 2003. EuropeAid was made aware of these
reports in July 2003 and the Commission decided in July 2003 to terminate all such contracts with CESD.

The Commission fully accepts that there was a clear lack of communication in this case. In order to
prevent such situations in the future, a draft Memorandum of Understanding concerning a code of conduct
in order to ensure a timely exchange of information between OLAF and the Commission, with respect to
OLAF internal
investigations in the Commission, was approved by the Commission on 23 July 2003.
Pending final adoption of this code, the Secretary General of the Commission and OLAF have decided to
implement the provisions of this code of conduct on an interim basis. Furthermore the Commission took
the decision that Commissioners must be informed by their Director General about the results and
recommendations of audit reports.

The prevention and control mechanisms adopted by this Commission since 2001, which are progressively
coming into force, are designed to avoid such a situation arising in future. The entry into force of the new
Financial Regulation (1) will contribute to set out clearer and stricter rules to avoid such practices recurring
in the future and further measures have already been introduced in July 2003.

On 18 November 2003 President Prodi presented an action plan to Parliament in order to remedy the
shortcomings identified in the Eurostat affair.

(1) Council Regulation (EC, Euratom) No 1605/2002 of 25 June 2002 on the Financial Regulation applicable to the

general budget of the European Communities, OJ L 248, 16.9.2002.