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Elizabeth K. Spahn
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Julie DiMauro
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Thomas Fox
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Marc Alain Bohn
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Bill Waite
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Shruti J. Shah
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Russell A. Stamets
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Richard Bistrong
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Eric Carlson
Contributing Editor

More allegations of ‘Prohibited Conduct’ in 2019 from the European Investment Bank

Like the integrity and investigation functions at five other Multilateral Investment Banks (World Bank, EBRD, Inter-American Development Bank, African Development Bank, and Asian Development Bank), the European Investment Bank’s Fraud Investigation team prepares and publishes an annual activity report describing its work to prevent, deter, investigate and remediate fraud and corruption.

At EIB, fraud, corruption, collusion, money-laundering etc., are collectively referred to as Prohibited Conduct (and defined by the EIB’s Anti-Fraud Policy).

The EIB’s Fraud Investigations Activity Report for 2019 provides statistics on the number of reports of Prohibited Conduct received and investigated, as well as providing a number of case studies that demonstrate the range of issues and types of cases which have been investigated by the Fraud Investigations team (also the red flags, findings and lessons learned).

For example, in 2019 the EIB Fraud Investigations team received 228 incoming allegations of Prohibited Conduct, 24 percent higher than in 2018, and completed 80 percent more cases compared to a year earlier.

The Fraud Investigations Division, headed by Bernard O’Donnell, is the only office within the EIB mandated to investigate allegations of Prohibited Conduct involving EIB Group-financed operations and activities, or allegedly involving members of governing bodies or staff.

The many cases described in the 2019 report demonstrate both internal and external investigations, several geographical areas, and different kinds of prohibited conduct. The case studies also show how the Fraud Investigations team operates, as well as how the EIB Group applies zero tolerance to fraud and corruption.

In one 2019 case, allegations of fraud were reported about a company that won three contracts for a total of €20 million ($24 million). The project, co-financed by the EIB, was focused on the thermal rehabilitation of some buildings. The investigation established that the company was indeed a “ghost company,” without any declared employees. The company had its headquarters in a family apartment building and was the subsidiary of an offshore company. Its administrator had no experience in the field. The seven tenders awarded to this company were all below the threshold for publication in the EU official journal and only involved one or two bidders. As a result of the investigation, no disbursements were made and the case was referred to the national authorities. The European Investment Bank is also collecting further elements in order to cancel its financing.

In another 2019 case study, internal sources reported that a bidder allegedly submitted a forged bank letter of guarantee in the context of a project procurement process financed by the EIB. After analyzing the tender documents, the Fraud Investigations team liaised with the relevant bank and obtained confirmation that the bank never issued a letter of guarantee. Submission of a forged document qualifies as fraud under the EIB Anti-Fraud Policy. Ultimately, the bidder was disqualified from the procurement process.

In still another case, an EIB promoter informed the EIB that its former managing director had been convicted for corruption linked to construction and rehabilitation projects not financed by the EIB. The Fraud Investigations team contacted the relevant public prosecutor office and obtained assurances that the former director acted alone without involving other employees. The Fraud Investigations team also verified that the promoter had taken all the necessary measures in order to prevent possible future fraudulent actions of employees. In particular, a compliance function and a double signature for all major decisions were put in place. In the absence of a direct impact on EIB projects, the EIB ensured that the necessary measures were put in place by the promoter to protect EIB funds from possible future occurrences of prohibited conduct. The Fraud Investigations team also referred the case to the competent national authorities.

The many case examples demonstrate both internal and external investigations, several geographical areas, and different kinds of prohibited conduct. The case studies also show how the Fraud Investigations team operates, as well as how the EIB Group applies zero tolerance to fraud and corruption.

According to the World Economic Forum, the annual global cost of corruption is around €3.2 trillion ($3.5 trillion) per year. The EIB is no different from other international and national institutions in terms of such risk and is determined to mitigate these risks to the fullest extent possible.

The EIB’s Fraud Investigations Activity Report for 2019 (in English, French, and German) is prepared annually by the Fraud Investigations team.

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The 2019 Report can be downloaded from the EIB’s website here.

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