Pressure was growing last night on the European Parliament to publish a secret report into the misuse of MEPs’ expenses, which whistleblowers claim shows widespread abuse of taxpayers’ money.

There was disbelief among the few MEPs who have been allowed to see the internal audit after officials at the Parliament said that they had not called in EU anti-fraud investigators because they did not think that it showed fraud.

The Times understands that the audit of 167 MEPs’ staff expenses found seven who had set up companies to pay staff who did not seem to exist and others employing unqualified family members or paying the whole allowance of €15,496 (£11,710) a month to one person. In addition more than 20 appeared to have paid excessive Christmas bonuses, which the auditor felt were hard to justify.

The report, which does not name MEPs, was drawn up by an internal auditor and can be viewed only by members on the budget control committee providing they go to a secure room, agree not to make notes and take a vow of silence.

It was dismissed as “just rumours” by Herbert Bösch, the Austrian MEP, who chairs the committee, and played down by the Parliament’s media director, Jaume Duch Guillot, who said in a statement: “It did not look into individual MEPs’ transactions and did not reveal cases of fraud.”

He announced that a longstanding proposal to simplify payments to MEPs’ staff would now be brought forward to start after the next elections in June 2009. This would unify the process instead of relying on the 27 legal and social security systems of the member states.

The excessive secrecy surrounding the audit backfired when its existence was revealed by Chris Davies, a Liberal Democrat MEP, who stood by his claims that it showed criminal levels of fraud. “I think if names were attached to some of the cases of malpractice highlighted, then prison should follow,” he said. “Maybe when some MEPs are named, exposed for defrauding the Parliament and the public and are sent to prison a more acceptable approach will be adopted.”

He added that he suspected some MEPs of setting up arm’s-length companies to launder public money and called for an inquiry by Olaf, the anti-fraud office. “It is for Olaf to decide whether it believes evidence that the Parliament’s procedures are so lax and open to abuse that public money can be used in such outrageous ways. It could decide to take action against individuals or against Parliament as a whole because they could have worked within the rules to do what many people would regard as misappropriating the money.”

Another MEP who has read the document said: “There is certainly a strong suspicion of fraud.”

A spokesman for the Parliament said that it had not received a request by last night from Olaf to release the document from its safe in Strasbourg. Sources at the anti-fraud body said that the request had been made and would be received today.

The budget control committee is due to discuss the audit report on Tuesday. Chris Heaton-Harris, a Conservative member of the committee, called for the report to be published immediately. “Over the years the European Parliament has neutralised its budget control committee so it is not as strong as the Public Accounts Committee in Westminster. It looks as though we are being secretive when we should have changed the rules years ago.”

Jens-Peter Bonde, an independent Danish MEP on the budget control committee, said that the Parliament had to take tougher action to stamp out fraud and not just introduce a new system next year. “If members take money back that is meant for their assistants, then it is fraud and there should be a legal follow-up. If you pay your relatives as assistants, then that may be waste and abuse but it is not fraud,” he said.

Paul van Buitenen, the Dutch Liberal MEP, whose revelations of financial mismanagement helped to force the mass resignation of the Santer Commission in 1999, said that the internal auditor was right to call for a simplified system.

“A lot of people have known about these problems,” he said. “What is new is that we now have an internal report that has done an excellent job and put everything on paper. I support 100 per cent the auditor’s proposal for one statute for all assistants. We can no longer have this jungle of assistants’ contracts with 27 different national legislations.”

Colourful and controversial

Chris Davies is one of the more colourful MEPs in Brussels with a reputation for energetic campaigning and eccentricity

The 53-year-old Liberal Democrat for the North West of England is known for calling for cannabis to be legalised — and for losing his party's Brussels leadership over what he called “ten seconds of madness”

A Cambridge graduate, he was Lib Dem MP for Littleborough and Saddleworth from 1995-97 and elected to the European Parliament in 1999

Such was his commitment to the cannabis cause that he was fined £100 after being arrested in possession at a protest in Stockport in 2002

He quit as leader of the Lib Dem group in 2006 after a row over a blog accusing Israel of pursuing “racist policies of apartheid” while posing as a victim

Accused by a correspondent of mistakenly believing that the plight of the Palestinians could be equated to Holocaust victims, Mr Davies responded: “Sounds like racism to me. I hope you enjoy wallowing in your own filth.” He later apologised.

Source: Times archive

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