Prodi faces grilling over latest EC fraud scandal

European Commission president Romano Prodi faces a grilling from Euro-MPs tomorrow over the latest fraud scandal to plague the European Commission.

The fact that the meeting will be behind closed doors in Strasbourg, and only open to members of the European Parliament’s Budgetary Control Committee, has hardly helped Mr Prodi’s claim to be running a sleaze-busting, publicly-accountable Euro-bureaucracy.

Four years ago, tales of nepotism, greed and corruption brought down the previous Commission hierarchy, led by President Jacques Santer. Mr Santer is now a backbench Euro-MP observing the discomfort of his successor attempting to pin the new scandal on the old regime.

Only four of the Santer team of Commissioners survived, including Neil Kinnock, who was promoted by Mr Prodi to Vice-President with a mandate to shake up Commission complacency and cut out sleaze and corruption.

But the latest corruption allegations, involving a-little known 760-strong European Commission outpost in Luxembourg called Eurostat, have cast a shadow over Mr Kinnock’s years of reforms.

Now the former UK Labour Party leader, plus Commissioners Pedro Solbes (Monetary Affairs) and Michaele Schreyer (Budgets), is being singled out for attack by Euro-MPs demanding heads on the block.

EU fraud investigators and a Commission Task Force set up by Mr Kinnock have been probing missing funds at Eurostat for months, checking claims that about €938,000 has been siphoned off.

Tonight MEPs will receive the first official inquiry report. Tomorrow Mr Prodi will hold his behind-closed-doors meeting to insist that, whatever the findings, he is fighting sleaze as hard as ever.

The sums involved in the Eurostat allegations are peanuts compared with the department’s €122m-a-year budget, but the scandal has triggered allegations that the Prodi regime’s promises to crack down on fraud are not being carried out.

Mr Kinnock has been forced to defend himself against claims that he took little notice of warnings by a mid-ranking Eurostat official three years ago that large sums of taxpayers’ money were being channelled by Eurostat bosses into unofficial bank accounts, away from the normal EU budgetary control checks.

He says he was waiting for hard evidence before acting, and that senior Eurostat managers now face disciplinary proceedings.

Three months ago Mr Prodi admitted there were “systemic management weaknesses and irregularities” within Eurostat, and since then he and his fellow Commissioners have been battling to counter claims that such corruption stretches far beyond Eurostat.

Earlier this week External Affairs Commissioner Chris Patten pitched in, insisting the dubious Eurostat accounting methods pre-dated the Prodi regime, and that there was no evidence of funds being used “to pay for mistresses’ furs or villas in the south of France“.

The charitable verdict is that Eurostat bosses by-passed normal banking procedures to cut bureaucratic corners and get contracts completed with less than the usual notorious levels of red tape.

The worst option is that officials artificially inflated the value of contracts and diverted the difference into private accounts.

Either way, Mr Prodi hopes the inquiry will confirm that the irregularities date back to 1989 – enabling Prodi to blame the lax accounting culture on Jacques Santer’s tenure.

But some MEPs want heads to roll, knowing that last time it was their vote of no confidence which led to the unprecedented mass resignation of the Santer Commission.