Dear X,

On 16 September 1998 you made a complaint to the European Ombudsman, concerning alleged maladministration in the Commission's review of a contract project in which your organisation has been involved.

As your complaint concerned largely the same matters as those lodged in a complaint submitted by a colleague of yours, I decided to deal with the two complaints jointly. The complaint lodged by your colleague was withdrawn on 12 September 2000, in a letter signed by your colleague and yourself. Please note that this withdrawal did not have a material impact on my inquiry or the final decision.

On 15 and 16 December 1998, I forwarded the joined complaints to the President of the European Commission. The Commission sent its joint opinion on 9 April 1999 and I forwarded it to you with an invitation to make observations, which you sent on 10 May 1999. On 11 November 1999, I wrote again to the Commission requesting further information. The Commission sent its second opinion on 21 October 1999 and I forwarded it to you with an invitation to make observations, which you sent on 22 December 1999.

On 5 March and 9 November 1999 and 5 and 11 January 2000, you sent me further information.

On 28 June 2000, you sent me allegations concerning a new contract relating to a project in Romania. In my letter dated 4 July 2000, I informed you that the allegations in your letter of 28 June would not be taken up for inquiry because they did not fall within the present complaint.

I am writing now to let you know the results of the inquiries that have been made.

THE COMPLAINT

In the light of the duration of the inquiry and the circumstances surrounding it, the following account of the background and main events has been deemed appropriate.

In 1992 the Commission and the complainants' organisation concluded a contract. The contract period was 1993 to 1996.

In March 1996, the Commission informed the complainant that the work done by his organisation was inadequate. In April 1996, the Commission informed the complainant, in response to requests by him, that the contract could not be extended beyond the date foreseen in the contract.

In April 1996, the Commission received from the complainant a draft final report on the project, produced in accordance with the contract. The Commission acknowledged receipt of the report, and reminded the complainant that the contract would end at the date foreseen in the contract. Three months later the Commission sent the complainant a response to the draft final report.

On 26 May 1997, the Commission informed the complainant by letter that its anti-fraud unit (then ‘UCLAF’) would conduct an audit on the premises of the complainant's organisation. It appears that the Commission had also informed the complainant about the audit by telephone on 12 May 1997. On 26-28 May 1997, a financial and technical audit was carried out on the complainant’s premises.

On 30 July 1997, the Commission sent the audit report to the complainants for comments. The audit report informed the complainant that on the basis of non-performance of the contract and false or incomplete statements, the Commission intended to recover the entire advanced financial contribution. The complainant sent the Commission his comments on the audit report on 11 September 1997. He received the Commission’s brief response to the report on 11 April 1998.

The problems associated with this contract led the Commission to exclude, in April 1998, the complainants from the negotiations concerning two new projects. It was also decided not to mention the 1993-1996 project in a Commission research programme publication.

On 6 July 1998, UCLAF informed the national public prosecutor for serious fraud, of its suspicions of fraud committed by the complainants in relation to the 1993-1996 contract. It appears that UCLAF held suspicions of serious fraud involving accomplices in other EU Member States. The public prosecutor for serious fraud started an inquiry into the case, which was frequently debated in the national press as well as in the national parliament. The case also gave rise to a more general debate on whether the Member State has implemented adequate anti-fraud measures in respect of Community finances. The complainant’s case was in several newspaper articles referred to as a recent source of strong disagreement between the Commission and the Member State authorities. Statements by Commission officials confirmed that the Commission’s anti-fraud bodies (first UCLAF, later OLAF) were convinced that their suspicions of fraud by the complainant’s organisation were correct. At one point the Commission entered into a direct dialogue with the Member State’s Ministry of Justice, which appears to have implemented new rules as a result. It furthermore became apparent from published articles that some national newspapers had gained access to a confidential report which UCLAF had sent to the public prosecutor for serious fraud.

On 20 December 1999, the national public prosecutor for serious fraud decided that there was no basis for prosecution. It appears that the public prosecutor considered the financial irregularities to primarily amount to bookkeeping errors.

On 5 January 2000, the Commission’s new anti-fraud unit (‘OLAF’) submitted a formal complaint to the director of public prosecutions, requesting him to review the decision of the public prosecutor for serious fraud. The request was made in accordance with established procedures in the Member State’s law. On the following day, OLAF’s complaint was commented on in the national newspapers. At least one newspaper article quoted or referred to statements by OLAF-officials as well as the complainant. An OLAF official confirmed the complaint and stated that OLAF did not consider the public prosecutor’s decision to be well founded.

On 13 June 2000, the director of public prosecutions decided that he found no reason to overturn the decision of the public prosecutor for serious fraud. The decision of the director of public prosecutions is, according to the Member State’s law, final.

In mid-2000, OLAF officials confirmed to the press that the Commission intended, as previously decided, to recover EC financial contributions from the complainants. This would be done through civil action.

The complainant submitted his complaint to the Ombudsman almost the same time as a colleague of his submitted a very similar complaint. The Ombudsman decided to deal with the two complaints in a joint inquiry. In September 2000, the complaint submitted by the complainant’s colleague was withdrawn. The present inquiry and the final decision were largely unaffected by that withdrawal.

The allegations taken up for inquiry were, in summary, the following:

A) Essential allegations relating to the Commission’s findings of fraudulent and non-contractual behaviour:

(i) The Commission’s conclusions concerning non-compliance and fraud were wrong.

(ii) It was wrong of the Commission not to inform the complainants before reporting the organisation to the national public prosecutor for serious fraud in July 1998.

(ii) The Commission failed to secure the confidentiality of the report which UCLAF had sent to the Member State’s public prosecutor for serious fraud. Its failure to do so was evident from the fact that national newspapers had gained possession of the report.

(iv) It appeared wrong of the Commission’s anti-fraud personnel to give interviews to the national newspapers about their suspicions of fraud on the part of the complainant and his organisation. The complainant appeared to suspect that the Commission intended to create public pressure on the national prosecutors. (This fourth allegation was submitted after the original complaint, but taken up for inquiry and submitted to the Commission for comments.)

B) Other allegations were that:

(v) It was wrong of the Commission not to comment on the final draft report which was submitted end of April 1996. The contract required such comments to be made within two months.

(vi) The Commission's audit on 26 to 28 May 1997 was announced to be only a financial control. It was therefore wrong of the Commission to also conduct a technical audit.

(vii) The officials who conducted the audit in May 1997 acted offensively, e.g. making accusations directly against the complainants' employees.

(viii) The Commission did not reply within a reasonable period of time to the complainants' letter of 11 September 1997.

(ix) The Commission’s decision in April 1998 to exclude the complainant’s organisation from the negotiation of new projects should have been made earlier. The fact that it did not do so caused the complainants to spend time and energy on negotiating the new projects.

(x) The Commission's decision not to include the disputed project in the Commission’s research publication was unjustified.

THE INQUIRY

The Commission’s opinion(s)

In addition to its first opinion on the complaint, the Commission was later requested to submit further comments and information. This was primarily in response to the fourth allegation referred to above, which was raised subsequent to the complainant’s original complaint.

As a preliminary point, the Commission drew the Ombudsman’s attention to the fact that the national public prosecutor was investigating the question of fraud by the complainant’s organisation. The Commission suggested that this might constitute a situation "sub judice" (i.e. a case not yet judicially decided) which the Ombudsman might like to consider as an aspect that could affect the admissibility of the complaint.

The Commission’s substantive replies to the Ombudsman’s requests for opinions and information can be summarised as follows (in the order of the allegations, set out above):

(i) The Commission maintained that the contract had not been complied with, describing in some detail the technical matters concerned. It also maintained that the audit in May 1997 had shown that false or incomplete statements had been made. It regarded the latter to constitute an adequate basis for referring the matter to the national prosecutors.

(ii) In complying with its duty to refer cases of potential fraud to national judicial authorities, the Commission did not have an obligation to inform the complainant beforehand.

(iii) As regards the leaking of UCLAF’s report to the national press, the Commission stated that it had carefully been watching the rules of confidentiality and could therefore not be held responsible. Furthermore, at the time of the leak, the report (or copies of it) was in the possession of the permanent representation of the Member State in question in Brussels, the Member State’s prosecutor and the complainant himself.

(iv) The statements made by its anti-fraud personnel to national newspapers had not been such as to endanger the complainant’s rights of defence. Furthermore, the anti-fraud personnel had not informed the public actively, but had been contacted by journalists and responded to their questions in due course.

In regard to allegations (v) to (x), the Commission submitted that:

(v) Under normal circumstances, the draft final report would have to be expressly replied to within a period of two months, and a failure to do so would constitute an acceptance of the report. However, in this case the Commission only acknowledged receipt of the report without further comments within the period of two months since it had already indicated to the complainants that the work was not done in compliance with the terminated contract.

(vi) Article 5.1 of the general conditions of the contract gave the Commission the right to carry out both a technical and financial audit during or after the completion of the project. The organisation was informed by phone and by letter that an audit review and control would be carried out both by the financial auditor and the responsible scientific officer. The complainants did not object to this during the audit.

(vii) The officials who carried out the audit had not acted inappropriately.

(viii) The Commission had not initially considered it necessary to reply to the letter of 11 September 1997, given that the Commission did not find that the organisation's answer to the report contained any new elements.

(ix) Two new projects had been accepted during the scientific evaluation phase. However, during the subsequent financial and administrative evaluation, and further given the non-performance of the contractual obligations in the present contract, the Commission advised other contractual parties to either exclude or postpone contracting with the complainants' organisation.

(x) The research-publication was aimed at presenting the results of projects funded by X-program, which have been successfully completed. Given that the complainants' project did not meet these criteria, there was no reason for that project to appear in the publication.

The complainants' observations

In their observations on the Commission’s opinions, the complainants maintained their allegations.

THE DECISION

1 The allegation of wrongful conclusions concerning breach of contract and fraud

1.1 In regard to the allegations that the Commission wrongly concluded that the complainant’s organisation had not complied with the contract, the Ombudsman points out that while maladministration may be found when the fulfilment of obligations arising from contracts concluded by the institutions or bodies of the Communities is concerned, the Ombudsman considers that the scope of the review that he can carry out in such cases is necessarily limited. In particular, the Ombudsman is of the view that he should not seek to determine whether there has been a breach of contract by either party, if the matter is in dispute. This question could be dealt with effectively only by a court of competent jurisdiction, which would have the possibility to hear the arguments of the parties concerning the relevant national law and to evaluate conflicting evidence on any disputed issues of fact.

1.2 The Ombudsman therefore takes the view that in cases concerning contractual disputes it is justified to limit his inquiry to examining whether the Community institution or body has provided him with a coherent and reasonable account of the legal basis for its actions and why it believes that its view of the contractual position is justified. If that is the case, the Ombudsman will conclude that his inquiry has not revealed an instance of maladministration. This conclusion will not affect the right of the parties to have their contractual dispute examined and authoritatively settled by a court of competent jurisdiction.

1.3 The Commission has stated that the project had not been carried out in accordance with the contract, referring to specific provisions of the contract. The Commission considers that this was confirmed at the on-site audit review in May 1997.

1.4 Without prejudice to the question of whether breach of contract has occurred by either party, the Ombudsman finds that the Commission has provided a sufficiently coherent account as to why it considers its actions to be justified. Therefore, the Ombudsman finds that there is no instance of maladministration as regards this aspect of the case.

1.5 As regards the allegation that the Commission wrongfully concluded that the complainant and his organisation had acted fraudulently, that matter has been thoroughly investigated by two levels of specialised national instances, i.e. the national public prosecutor for serious fraud and the national director of public prosecutions. Both prosecutors decided that there was no basis for initiating prosecution against the complainant or his organisation.

1.6 The fact that the Commission’s suspicions of fraud were wrong in substance does not of itself imply that there was maladministration in the Commission’s acting. The question to be asked is whether the Commission had acted with due diligence in reaching its conclusion that a reference to the national prosecutors was relevant.

1.7 The Ombudsman concludes that the Commission acted with a reasonable degree of due diligence in deciding that it was relevant to refer the matter to the national prosecutors for further investigation and final assessment of the matter. There has therefore been no maladministration as regards this aspect of the case.

2 The allegation concerning the Commission's reporting to the national prosecutor

2.1 The complainant considers that the Commission should have informed his organisation before reporting it to the national public prosecutor for serious economic fraud. The Commission stated that is has no obligation to inform individuals before making such reporting.

2.2 It appears that the Commission is under no specific duty to inform individuals whom it reports to a national authority for fraud-investigation. The Ombudsman therefore finds that the Commission, by reporting its suspicion of fraud to the national federal police without informing the complainants, did not violate any rule or principle binding upon it. There is therefore no maladministration as regards this aspect of the complaint.

3 The allegation that the Commission failed to secure confidentiality

3.1 The complainant claims that the Commission failed to secure the confidentiality of the report which UCLAF had sent to the national public prosecutor for serious fraud. The Commission has denied this allegation and stated that no leak was proven.

3.2 It appears an established fact that newspapers did gain possession of the report. It also appears that when this happened, the Commission, the public prosecutor, the permanent representation of the Member State in Brussels and the complainant were in possession of the report.

3.3 Principles of good administration require that citizens must be able to trust that the Commission respects the confidentiality of sensitive information about them and thus takes all measures to ensure this confidentiality. In this case, the Ombudsman concludes that the Commission has not presented him with evidence, which clearly suggests that the leaking of the report was due to wrongful acting by the Commission. Thus, no maladministration has been established in regard to the third allegation.

4 The allegation of inappropriate statements to national newspapers

4.1 The complainant has alleged that it was wrong of the Commission’s anti-fraud personnel to give interviews to the national newspapers about their suspicions of fraud on the part of the complainant and his organisation. The Commission has responded that the statements made by its anti-fraud personnel to national newspapers were not such as to endanger the complainant’s rights of defence. It also stressed that the anti-fraud personnel had not informed the public actively, but had been contacted by journalists and responded to their questions in due course.

4.2 It appears from the evidence provided to the Ombudsman that members of the Commission’s anti-fraud personnel repeatedly made statements to the national press about their conviction that the complainant and his organisation had acted fraudulently. The complainant’s organisation was mentioned as a recent source of the Commission’s general dissatisfaction with the fraud-combating approach of national authorities in regard to Community finances. It appears that the Commission’s anti-fraud personnel insinuated to the national press that the public prosecutors of the Member State in question will often refrain from prosecuting even when it is evident that the individual in question is guilty of fraud.

4.3 The fundamental question raised here is whether the acting of the Commission’s anti-fraud officials infringed the principle that any person shall be presumed innocent until proved guilty, a principle that may be infringed not only by a judge or court but also by other public authorities(1).

4.4 The Court of Human Rights has established that while public authorities may inform the public about criminal investigations, the principle of presumption of innocence requires that they do so with all the discretion and circumspection necessary if the presumption of innocence is to be respected(2).

4.5 In the present case, the Ombudsman considers that the Commission’s anti-fraud personnel failed to respect this requirement. The Commission personnel should have limited itself to only informing the press about the basic procedural steps that were taken in the matter. This restraint was particularly important in the light of the fact that the matter had been referred to the national prosecution authorities for final examination. Maladministration has accordingly been established in regard to this aspect of the complaint, and the Ombudsman therefore makes a critical remark below.

5 The allegation concerning lack of comment on the final draft report

5.1 The complainant has alleged that it was wrong of the Commission not to comment on the final draft report which was submitted end of April 1996. The Commission has stated that it did not consider the comments necessary, given that it had already indicated to the complainants that the work was not done in compliance with the contract, which was terminated.

5.2 It appears a reasonable view that the Commission’s duty was dependent on compliance with, and existence of, the contract. The Ombudsman therefore refers to his finding on the complainant’s first allegation, and concludes that there has been no maladministration by the Commission.

6 The inadequate announcement of the audit

6.1 The complainant has put forward that it was wrong of the Commission to conduct a technical audit of the project, given that the Commission had announced it to be only a financial audit. The Commission has stated that it had a contractual right to carry out both a technical and a financial audit during or after the completion of the project, and that the complainant had in any case been informed by phone and by letter that an audit review and control would be carried out by both the financial auditor and the responsible scientific officer. Furthermore, the complainant did not object to this during the audit.

6.2 The Ombudsman’s inquiries confirm the complainant’s factual view that the letter in question only referred to a financial review. However, given the Commission’s contractual right to carry out a technical audit the Ombudsman considers that no maladministration has been established.

7 The accusation of inappropriate behaviour by the Commission officials

7.1 The complainant has alleged that the officials who conducted the audit in May 1997 acted offensively, e.g. making accusations directly against the complainant’s employees. The Commission has rejected the allegations.

7.2 The general principle of good administration that public officials should behave in a correct manner serves not only to avoid offence of individuals, but can also be important to avoid misunderstandings. To enable supervisory bodies to determine if this principle has been followed, the Commission should normally ensure that on-site audits are concluded with a record that contains an adequate account of what happened during the audit. The absence of such record may create a presumption in favour of the complainant’s own account of what was said during the audit. The Ombudsman concludes that the Commission’s failure to ensure that an audit-record was produced constitutes an instance of maladministration, and therefore makes a critical remark below.

8 The allegation of failure to reply within a reasonable time

8.1 The complainant has alleged that the Commission did not reply within a reasonable period of time to the complainant’s letter of 11 September 1997. The Commission has replied that it had not initially considered it necessary to reply to the letter, given that the Commission did not find that the organisation's answer to the report contained any new elements.

8.2 The letter dated 11 September 1997 was a request from the complainant for an extension of the deadline for submitting comments on the audit report. On 11 September 1997, the complainant submitted his comments on the audit report, and thus the letter of 11 September 1997 lost its relevance. On 21 April 1998, the Commission acknowledged receipt of the complainant’s comments on the report.

8.3 Principles of good administration require that the Commission reply to letters from citizens within a reasonable time. In this case, the Commission did not reply to the letter in question, because it considered that the contents of it did not require an answer. Having examined the letter of 11 September 1997, this view does not appear unreasonable. The Ombudsman also notes that at a later stage, the Commission did acknowledge receipt of the letter of 11 September 1997. Given these circumstances, the Ombudsman finds that the Commission has complied with the above requirement. There is therefore no maladministration in regard to this aspect of the complaint.

9 The Commission’s decision to exclude the complainant from new projects

9.1 The complainant has claimed that the Commission’s decision in April 1998 to exclude the complainant’s organisation from the negotiation of new projects should have been made earlier. The Commission has rejected the allegation of delay.

9.2 It shall first be observed that an existing contractual dispute between a contractor and the Commission does not oblige the latter to refrain from starting new negotiations with the contractor. The administration must, however, be attentive to not unreasonably delay a decision to exclude a potential contractor when the relevant facts are known and have been evaluated. In the present case, the Commission entered into new contract negotiations in spring 1998. The decision to exclude the complainant’s organisation from the new contracts was also taken in spring 1998. On this basis the Ombudsman finds that the Commission acted without undue delay. Therefore, there is no maladministration in this aspect of the complainant.

10 The decision not to mention the project in the research publication

10.1 The complainant has alleged that the Commission's decision not to include the disputed project in the Commission’s research publication was unjustified. The Commission has replied that the research publication was aimed at presenting the results of projects funded by X-program which have been successfully completed. Given that the complainant’s project did not meet these criteria, there was no reason for that project to appear in the publication.

10.2 In the present case, the Commission had wide discretionary powers to decide what should be the policy line for the publication. It does not appear that the Commission has in this case failed to act within the limits of its legal authority in exercising those powers. There has therefore been no maladministration in regard to the tenth allegation.

11 Conclusion

On the basis of the Ombudsman's inquiries into this complaint, it is necessary to make the following critical remarks:

The Court of Human Rights has established that while public authorities may inform the public about criminal investigations, the principle of presumption of innocence requires that they do so with all the discretion and circumspection necessary if the presumption of innocence is to be respected.

In the present case, the Ombudsman considers that the Commission’s anti-fraud personnel failed to respect this requirement. The Commission personnel should have limited itself to only inform the press about the basic procedural steps that were taken in the matter. This restraint was particularly important in the light of the fact that the matter had been referred to the national prosecution authorities for final examination. Maladministration has accordingly been established in regard to this aspect of the complaint.

The general principle of good administration that public officials should behave in a correct manner serves not only to avoid offence of individuals, but can also be important to avoid misunderstandings. To enable supervisory bodies to determine if this principle has been followed, the Commission should normally ensure that on-site audits are concluded with a record that contains an adequate account of what happened during the audit. The absence of such record may create a presumption in favour of the complainant’s own account of what was said during the audit. The Ombudsman concludes that the Commission’s failure to ensure that an audit-record was produced constitutes an instance of maladministration.

Given that these aspects of the case concern procedures relating to specific events in the past, it is not appropriate to pursue a friendly settlement of the matter. The Ombudsman therefore closes the case.

The President of the European Commission will also be informed of this decision.

Yours sincerely,

 

Jacob SÖDERMAN

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(1) Allenet de Ribemont v. France, Case 3/1994/450/529, para 36.

(2) Ibid, para 38.