EPPO

This morning in Sicily, the Carabinieri (Italy’s military police) of Palermo placed three suspects under house arrest as part of an investigation by the Palermo office of the European Public Prosecutor’s Office (EPPO). The three suspects – two public officials and one private accountant – were arrested for unlawful inducement to give or promise money.

The investigation, carried out between October and December 2021 by the EPPO Investigative Section of the Palermo Carabinieri Provincial HQ, made it possible to acquire strong elements against two high-ranking public officials working for the Palermo social housing offices, with the complicity of a private accountant.

It is alleged that the two public officials proposed, to the contractor of a renovation project – a social housing complex worth €1.5 million and located in the so-called ‘ZEN neighbourhood’ of Palermo – to carry out part of the renovation on paper only, and to split the resulting money between the two officials and the contractor. Moreover, they are suspected of having asked the contractor to hire the private accountant to oversee the transactions.

In doing so, the public officials would have abused their powers and would have potentially embezzled part of the sums of money allocated to the construction works.

The renovation project was part of the ‘RUIS Palermo’ project (urban regeneration and security project of the City of Palermo), which is financed by the European Union’s Cohesion Fund.

Searches of the Palermo social housing offices are still ongoing.

Today's operation is the first joint action between the EPPO Investigative Section of the Carabinieri Palermo Provincial HQ and the European Public Prosecutor's Office.

On 8 July, €2 million were seized in a European Public Prosecutor’s Office (EPPO) investigation into fraud concerning EU agricultural funds in Sardinia (Italy). The Nuoro Group of the Guardia di Finanza (Gruppo Nuoro della Guardia di Finanza) carried out the preventive seizure order in Nuoro (Sardinia) and in some neighbouring villages.

Between 2018 and 2021, 15 Sardinian agricultural companies applied for, and obtained, contributions from the European Agricultural Fund for Rural Development (EAFRD). Funding was provided to support the installation of dry-stone in wire mesh closures.

It is alleged, however, that the companies involved did not actually carry out the works by using companies specialised in the sector, but instead assigned the contracts to each other. Hence, the different companies became both clients and suppliers of the works and issued invoices and payments of invoices for works that were never carried out. With this scheme, it is believed that the suspects fraudulently obtained contributions of over € 2 million.

The investigation revealed that almost all of the projects for which funding was granted were carried out by the same engineer designer and director of works, who are thought to have created the repeated modus operandi for each individual grant.

Twenty-two individuals, including high-level public officials, are suspected of fraud regarding agricultural funds in Sicily. At the request of the European Public Prosecutor’s Office (EPPO), officers of the Italian Financial Police (Guardia di Finanza) of Palermo carried out a judicial warrant this morning, 28 June 2022: 12 suspects were placed under house arrest, and 10 are obliged to appear before the judicial police. Money and assets worth approximately €2.5 million were preventively seized.

The investigation focuses on the application procedures for EU and domestic public funding for agriculture, granted in the framework of the Rural Development Programme [Programma di Sviluppo Rurale – PSR] 2007/2013 and 2014/2020, and managed by the Provincial Inspectorate of Agriculture [Ispettorato Provinciale dell’Agricoltura – IPA].

There are serious suspicions of the existence of a criminal enterprise involving high-level public officials and industry professionals, capable of steering decisions in order to allow private companies operating in the surroundings of Palermo to receive public funds.

Several high-level IPA officials are alleged to have favoured private planning companies (agronomists and engineers) by:

Unlawfully disclosing the findings of irregularities during the assessment phase of the financing applications and, in some cases, personally replacing documentation previously submitted, thus granting the application a favourable position in the final ranking;

Fraudulently slowing down control procedures in order to avoid penalties, the forfeiture, or revocation of the subsidies already granted.

Additionally, suspicions of corruption between private citizens and high-level public officials arose:

Officials designated to verify the compliance of each application allegedly omitted to detect errors in the documentation presented by one private planning firm. In return, they received professional services for a close family member.

During another verification process, after detecting irregularities in the documents, they apparently helped to replace the documents and received, in return, a position of employment in favour of a family member.

At the moment, the charges pressed against the suspects are: criminal conspiracy; grand larceny within adjudication of public funding; corruption; abuse of office; forgery; the destruction and concealment of documents; and the disclosure of office secrets. The judicial order has been issued based on material elements acquired during the preliminary investigations. While awaiting a definitive judgment, the presumption of innocence must be applied. 

The Financial Intelligence Unit (FIU) of Italy and the European Public Prosecutor’s Office have signed a Memorandum of Understanding (MoU) with the aim of facilitating their cooperation related to suspicious financial transactions.

The document lays down the principles on how both parties will exchange information and provide analytical support, on the suspension of suspicious transactions, on data protection and mutual training initiatives. The MoU was signed by Claudio Clemente, director of FIU Italy, and Danilo Ceccarelli, Deputy European Chief Prosecutor and European Prosecutor for Italy.

This is the first agreement entered by the EPPO with the Financial Intelligence Unit of a Member State.

1 year of EPPO operations: larger and faster EU fraud investigations

The first year of operations of the European Public Prosecutor’s Office (EPPO) shows that it is working well: 4006 crime reports registered and analysed, 929 investigations opened and €259 million (more than four times the EPPO’s annual budget) of freezing orders granted. Nevertheless, challenges remain, the most important one being the low level of detection of EU fraud.

As soon as the first EPPO case was registered at 7:00 exactly one year ago, the ‘EPPO zone’ was created. A zone where the EPPO is the primary entity responsible for fighting EU fraud by means of criminal law. Our 35 offices in 22 countries implement the same prosecutorial policy: to focus on cases involving serious organised crime, with the same main objective: to help the EU Member States recover the damages.

In the course of fulfilling its potential, the EPPO would like the participating EU Member States to set up dedicated specialised units to support our investigations. To that end, the European Chief Prosecutor has proposed the creation of an elite corps of highly qualified financial fraud investigators, who would be able to work transnationally within the EPPO.

The numbers

Of the 4006 crime reports processed, 1921 originated from national authorities, 1841 from private parties, 231 from EU institutions, bodies, organisations and agencies, and 13 were registered ex officio by the European Delegated Prosecutors.

The EPPO difference

Once the EPPO gets a viable crime report, it brings about a tangible improvement. The immediate access to all the information in the cases registered in the participating Member States allows us to establish connections and find assets that could not otherwise be identified. The scope of the investigations is often enlarged to several countries, and no one is currently better placed to investigate all the possible ramifications of a cross-border case.

The EPPO is also a spectacular accelerator. The first convictions and confiscations have already taken place, which is unseen for these types of complex financial investigations.

Increase the level of detection of EU fraud

Be it in the EU Member States, or the different EU institutions, organisations, bodies and agencies, the level of detection of EU fraud is uneven and, too often, low. If there is no detection, there can be no investigation, no prosecution, no judgment and no recovery of damages.

Organised criminal groups are able to inflict tremendous damages with VAT fraud alone, probably between €30 and €60 billion per year. This is money that either should have been paid into the budgets of the Member States, or was simply stolen from them. Too often, we are confronted with a rather limited understanding of the implications, for any economy and society, of the existence of criminal organisations able to inflict such damages solely with VAT fraud. Especially in the current economic context, it is surprising that we still have to emphasise that combatting these organised crime groups with the utmost determination is necessary.