Misappropriation of EU funds and budget fraud: Atlatszo gained partial access to OLAF’s “Öveges-report”
“Misappropriation of EU funds, budget fraud committed by a criminal organisation causing particularly large or particularly significant financial loss” – this is how the European Anti-Fraud Office (OLAF) lists its objections in a report obtained by Átlátszó on the Öveges Program of the Hungarian state. This project – funded by the European Social Fund – aimed to provide new laboratory classrooms and textbooks in 43 Hungarian high schools at the cost of €1 million euros per classroom. A significant part of OLAF’s report sent to us was blanked.
After a decision by the European Court of Justice made another OLAF report about an EU-funded project in Hungary public last year, we asked for OLAF’s report on another EU-funded program, the Öveges-program (described in detail by a study solicited by the Greens/EFA Group in the European Parliament). OLAF had found three types of fraud and several types of irregularities in these tenders, intended for the improvement of school classrooms. The abuses were also confirmed by the Prime Minister’s Office, the National Investigation Office and the National Tax and Customs Administration of Hungary. Despite this, after seven years of investigation, it was only last October that the prosecutor’s office brought charges in the case. The first court hearing took place on 12 April, after the parliamentary elections in Hungary.
In earlier stories we reported in detail on the abuses of the Öveges program to improve science education in secondary schools with textbooks, laboratories, etc. (for example here). In our last story, we reported that, at current exchange rates, Hungary had to pay back almost HUF 3 billion of the nearly HUF 20 billion in total EU funding it received because of irregular applications for the Öveges program and other irregular applications from the European Social Fund.
Although the Hungarian government has kept the exact amount secret for years, Átlátszó managed to find out that Hungary has had to repay €7.8 million (nearly 2.8 billion HUF at today’s exchange rate) in EU funding because of misused money from the Öveges Programme and other irregular European Social Fund applications.
Fraud against the financial interests of the European Union
It is clear from the visible parts of the report obtained by Atlatszo that the “organisation concerned” was the former Klebelsberg Institution Maintenance Centre (KLIK, now the Klebelsberg Centre with different tasks and competences), and that OLAF itself initiated the investigation into suspected fraud and other irregularities. The document estimated the amount of money misappropriated under the “Öveges scam” at the then (2014) exchange rate at more than HUF 1.6 billion. The legal summary of the investigation refers to suspected fraud and “misappropriation of funds” to the detriment of the financial interests of the European Union.
The legal summary also points out that the OLAF investigation found that the Hungarian public procurement rules on conflict of interest were violated in several tenders in the Öveges program. According to the report, fraud or irregularities were found in almost half (47%) of the Öveges programme projects, and OLAF calculates that this concerns 48% of the total project cost.This is why OLAF supported the decision of the European Social Fund’s Directorate-General for Employment, Social Affairs and Inclusion to impose a 10% “flat-rate penalty” on Hungary, as we reported in our last article. Of the EU funding spent on the TÁMOP 3.1.3.-11 programme or the Öveges programme approximately HUF 1.6 billion had to be repaid.
After 7 years of investigation, three suspects were identified
The abuses of the Öveges program were first published by in 2014 by Ákos Hadházy (formerly an LMP party delegated, later independent MP). The abuses were also noticed by the National Investigation Office of the Hungarian Police, which concluded that misappropriation of funds and abuse of office could not have occurred in the Öveges program, but that it was a case of budget fraud committed in conspiracy and on a commercial basis, causing particularly great financial loss. The case was therefore transferred to the National Tax and Customs Administration (NAV), which “sat on it” for many years. Last year, after 7 years of investigation, three suspects were identified.
The Tolna County Prosecutor General’s Office filed an indictment with the Gyula District Court dated 18 October 2021. Three defendants were indicted, two of them for the crime of budget fraud causing particularly large financial loss and one for the crime of budget fraud causing significant financial loss. In addition, all three defendants were charged with the offence of continued use of a forged private document. The Tolna County Prosecutor General’s Office proposed a suspended prison sentence and a fine, as well as a ban from holding executive office in a company.
The criminal trial started on 12 April 2022. The indictment states that “local governments concluded contracts with legal entities led by the defendants to develop teacher’s guides and student workbooks. The contracted companies had already created a database containing the data necessary for the production of the guides and workbooks required by the call for tenders, so that only their editing, reproduction and digitisation was carried out instead of development of separate workbooks. Despite this, the two companies invoiced the work carried out, causing a financial loss to the EU and to the national budget”.
MP Ákos Hadházy, who reported on the trial, criticised the fact that the prosecutor’s office had found those responsible for the embezzlement of only 180 million forints “after 8 years of investigation in the case of the organised theft of 10 billion forints” and that the prosecutor’s office was asking for a suspended prison sentence for “three very small fish” in the obviously much larger case.
Written and translated by Gabriella Horn. The full article in Hungarian is available here.