Decision of the European Ombudsman on complaint 1579/2002/IJH against the European Anti-Fraud Office (OLAF) and the Commission

Strasbourg, 23 July 2003

Dear X,

I would first like to inform you that Mr Jacob Söderman, with whom you have previously corresponded concerning your complaint, has retired and that, from 1 April 2003, I am his successor as European Ombudsman.

On 18 August 2002, you made a complaint to the Ombudsman against the European Anti-Fraud Office (OLAF) and the Commission.

On 19 September 2002, the complaint was forwarded to the President of the Commission and to the Director General of OLAF. OLAF sent its opinion on 25 November 2002. The Commission sent its opinion on 18 December 2002. The opinions were forwarded to you with an invitation to make observations, if you so wished, by 28 February 2003. On 31 January 2003, you wrote requesting an extension of the deadline for your observations to 31 March 2003 so that your lawyer could examine the matter thoroughly. On 4 February 2003 your lawyer made the same request. On 10 February 2003, you were informed that the request for an extension of the deadline was accepted. On 26 March 2003 and 16 April, your lawyer made requests for a further extension of the deadline respectively to 15 April 2003 and 9 May 2003. These requests were also accepted. On 2 May 2003, OLAF sent me further information. On 9 May 2003, your lawyer sent me observations on the opinions of the Commission and of OLAF.

I write now to let you know the results of the inquiries that have been made. I am also sending a copy of the present decision to your lawyer.

THE COMPLAINT

The complainant made a previous complaint to the Ombudsman against the Commission on behalf of Y Ltd., in which the main allegation was failure to pay money due under a TACIS contract. During the Ombudsman’s inquiry, the Commission informed the Ombudsman that OLAF had begun an investigation into possible fraud. The Ombudsman’s decision of 30 November 2001 found no maladministration in relation to the complainant’s main allegation against the Commission. However, it did find maladministration in relation to a subsidiary matter: certain remarks in the Commission’s opinion appeared to be discourteous and their insinuations defamatory.

In the present complaint, again made on behalf of Y Ltd., the complainant alleges that OLAF has failed to keep a promise, made during the Ombudsman’s inquiry into an earlier complaint made by the complainant, to complete its investigation into the complainant’s case before the end of the year 2001.

The complainant also alleges that the Commission referred his case to OLAF because he had complained to the Ombudsman and that the Commission is delaying payment just to be vindictive and to victimise a small firm. He claims that Y Ltd. should be paid.

THE INQUIRY

The Ombudsman forwarded the complaint to OLAF and to the Commission for their opinions.

OLAF’s opinion of 25 November 2002

In summary, OLAF’s opinion was as follows:

OLAF never made a promise as to when the investigation would be completed. The letter from the Director General of OLAF to the Ombudsman dated 8 October 2001 stated: “at this moment it is expected that the investigation will be concluded by the end of this year.” This was the best assessment at the time of how long it would take to complete the investigation, barring unforeseen circumstances. It does not state that it is a promise, and indeed, it would be irresponsible to make such a promise, since one can never be sure what obstacles will arise in conducting an investigation.

The Director General must continuously assess OLAF’s investigative priorities, and devote its limited human resources to the most urgent matters. In fact, the Director General was not able to devote resources to this matter until January 2002.

Furthermore, it was the complainant’s own actions that caused delay in completing the investigation. In early January 2002, the responsible OLAF investigators contacted the complainant to arrange an interview. The complainant and his lawyer were not available for a long enough time slot until 15 February 2002. The interview was begun on that date, but could not be completed due to the complexity of the issues. The second part of the interview was scheduled, with the complainant’s agreement, for 13 March 2002. Although the interview was completed on that date, the complainant requested time to review his responses before signing the record of interview. The investigators agreed to this request in good faith.

Two months later, the complainant had still not returned the signed record of interview. On 13 May 2002, an OLAF investigator asked the complainant’s lawyer by e-mail whether his client had signed the record of interview. On 22 May 2002, the lawyer forwarded several proposed modifications to OLAF, asking for its agreement and indicated that a disk containing them had been delivered to OLAF’s offices. However, there is no record of the disk having been delivered.

On 23 May 2002, the OLAF investigator notified the complainant’s lawyer that the modifications were accepted, and stated that OLAF awaited receipt of the signed record of interview. The lawyer acknowledged receipt of this request and stated that he would ask his client immediately to sign the record and return it to him; he would then, in turn, immediately forward it to OLAF. By mid-July 2002, OLAF had still not received the signed interview record. On 15 July 2002, the OLAF investigator sent another e-mail to the complainant’s lawyer requesting this document, but it was not provided. Three months later, on 2 October 2002, the OLAF investigator sent yet another e-mail to the lawyer, but no response was provided.

Finally, on 24 October 2002, OLAF received the signed interview, together with several further minor modifications, more than two months after the complainant filed his complaint with the Ombudsman.

OLAF is currently organising one further interview with the Task Manager, who is resident in Moscow. Once this interview has been completed, it is anticipated that the final case report will be completed soon thereafter and OLAF’s investigation brought to a conclusion.

OLAF's letter of 2 May 2003

On 2 May 2003, OLAF sent a further letter informing the Ombudsman that its investigation has been concluded.

The Commission’s opinion

In summary, the Commission’s opinion was as follows:

The complainant’s accusations of retaliation and vindictiveness are unfounded. The Commission’s departments have merely complied with the applicable rules.

The conditions for service contracts financed from TACIS funds expressly provide that the departments may check that contractors have duly discharged the obligations they have undertaken and may suspend payment. In the present case, the Commission availed itself of its rights under the contract, in accordance with the principles of good management of Community funds.

As regards referral of the matter to OLAF, Commission Decision 1999/396(1) requires the Commission’s services to provide OLAF with information and to cooperate with it. In accordance with its duties under this Decision, the responsible Commission service decided, in the light of the results of the audit of TACIS project 96-0564, to refer the matter to OLAF. Following this referral and in the light of further information from the External Affairs Directorate-General indicating that there were serious grounds for suspecting that irregularities, or indeed fraud, had occurred in the execution of the project, OLAF decided on 24 July 2000 to open an investigation on the basis of Article 3 of Regulation 1073/1999(2).

As regards the complainant’s claim, the Commission maintains its decisions to refuse and suspend payment pending the results of OLAF’s investigation, which is intended to identify any irregularities harmful to the financial interests of the European Communities.

The complainant's observations

The complainant's lawyer sent observations on the opinions of OLAF and the Commission. The observations contain, in summary, the following points:

The complainant accepts that OLAF’s estimate of when the investigation would be concluded does not constitute a promise. However, on the basis of good administration, when an institution gives such an estimate it creates for the interested person a legitimate expectation that his case will at least be looked at within the given time frame. In fact, the Commission first made contact with the complainant in January 2002, at a time when supposedly the analysis of his case would be complete.

After the interview on 13 March 2002, the complainant’s lawyer reviewed the answers and proposed minor modifications. In the next few days, the corresponding floppy disc was handed to the reception of the OLAF office and, in good faith, no receipt was asked for or received. The floppy disc was lost in the OLAF offices.

The complainant has no interest in delaying this affair and both he and his lawyer were convinced that the OLAF services were working on the dossier. On 22 May 2002, following a new request from OLAF, the complainant’s lawyer sent to OLAF electronically the same information as was contained in the lost floppy disc, asking for a confirmation of the modifications. OLAF accepted them on the very next day. Under these circumstances, there was no need to wait for the complainant’s signed paper and no obstacle to organising an interview with the Task Manager: even the Court of Justice accepts electronic transfers of correspondence.

Almost three years after it began and five years after the end of the project, the investigation is still not completed. The complainant’s file is therefore not being handled with the diligence that one should expect from a European Institution that must respect the principle of good administration. The continued investigation is causing financial loss to the complainant.

OLAF has informed the complainant that the delay was due to staff shortages. This admission by OLAF constitutes an explicit recognition of maladministration, as on a regular basis the case law of the European Courts has judged that a large Community organisation, such as the Commission, cannot justify bad or inadequate administration on the basis of internal problems.

Furthermore, the Commission did not show the will to cooperate with OLAF, as demonstrated by its failure to invite the Task Manager to assist in the procedure by attending an interview. This proves that the Commission is not particularly preoccupied in solving what it considers to be a potential case of fraud.

The complainant requests the Ombudsman to close the inquiry by finding that:

- by exceeding a normal delay in handling the complainant’s file, the Commission and OLAF committed maladministration.

- by omitting to organise a confrontation between the Task Manager and the complainant, OLAF failed to respect the rights of the defence.

THE DECISION

1 The scope of the Ombudsman’s inquiry

1.1 In observations on the opinions sent by OLAF and the Commission, the complainant’s lawyer makes new allegations. In substance, these are that:

• The complainant’s file has not been handled with due diligence over the period of nearly three years of investigation;
• OLAF failed to respect the rights of the defence by omitting to organise a confrontation between the Task Manager and the complainant.

1.2 The Ombudsman notes that the first new allegation, although linked to the original allegation against OLAF, is broader in scope. The second new allegation appears to raise issues that are outside the scope of the original complaint. The Ombudsman considers that it would not be justified to delay a decision on the original complaint in order to inquire into these new allegations.

1.3 The complainant could make a new complaint to the Ombudsman concerning either or both of the new allegations, if he considers it useful to do so.

2 The allegation concerning failure to complete an OLAF investigation

2.1 The complainant alleges that OLAF failed to keep a promise, made during the Ombudsman’s inquiry into a previous complaint concerning a TACIS contract, that OLAF would complete its investigation into the complainant’s case before the end of 2001.

2.2 OLAF argues that it never made a promise as to when the investigation would be completed, but gave its best assessment in October 2001 of how long the investigation would take, barring unforeseen circumstances. The Director General of OLAF was unable to devote resources to the matter until January 2002. Thereafter, the complainant’s own actions caused delay in completing the investigation.

2.3 The Ombudsman considers that OLAF did not make a promise to complete its investigation before the end of 2001. The Ombudsman points out, however, that it is good administration to respect the reasonable expectations created by the behaviour of an institution or body(3). The Ombudsman takes the view that, by stating in October 2001 that it expected its investigation would be concluded by the end of 2001, OLAF created a reasonable expectation that it would at least contact the complainant before that date to explain any change in the timetable foreseen. By its own admission, OLAF did not devote resources to the matter until January 2002. The Ombudsman considers that OLAF thereby failed to respect the reasonable expectations of the complainant. This was an instance of maladministration and the Ombudsman will make a critical remark below.

3 The allegation of retaliation and vindictiveness

3.1 The complainant alleges that the Commission referred his case to OLAF because he had complained to the Ombudsman and that the Commission is delaying payment under the TACIS contract just to be vindictive and to victimise a small firm. He claims that Y Ltd. should be paid. The Ombudsman therefore understands the complainant to allege that the Commission has misused its powers.

3.2 The Commission denies the allegations and argues that it has merely complied with the applicable rules. The relevant contract provides for the possibility of checks on contractors and suspension of payment. The responsible Commission service decided, in the light of the results of an audit, to refer the matter to OLAF. OLAF decided on 24 July 2000 to open an investigation. The Commission maintains its decisions to refuse and suspend payment pending the results of OLAF’s investigation.

3.3 The Ombudsman points out that, according to established case-law, an act of a Community institution is vitiated by misuse of powers only if it was adopted with the exclusive or main purpose of achieving an end other than that stated. Furthermore, a finding of misuse of powers may be made only on the basis of objective, relevant and consistent evidence. The Ombudsman finds that his inquiry in the present case has not revealed evidence of misuse of powers by the Commission.

3.4 Taking the above finding into account, the Ombudsman does not consider that the Commission’s stance as regards the complainant’s claim to be paid violates any principle of good administration. The Ombudsman points out that the complainant has the possibility to begin legal proceedings to enforce his contractual rights against the Commission.

3.5 In view of the above, the Ombudsman finds no maladministration by the Commission.

4 Conclusions
As regards OLAF:

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

It is good administration to respect the reasonable expectations created by the behaviour of an institution or body(4). The Ombudsman takes the view that, by stating in October 2001 that it expected its investigation would be concluded by the end of 2001, OLAF created a reasonable expectation that it would at least contact the complainant before that date to explain any change in the timetable foreseen. By its own admission, OLAF did not devote resources to the matter until January 2002. The Ombudsman considers that OLAF thereby failed to respect the reasonable expectations of the complainant.

Given that OLAF has now finally concluded its investigation, it is unnecessary to pursue a friendly settlement of the matter.

As regards the Commission:

The Ombudsman finds no maladministration by the Commission.

The Ombudsman therefore closes the case.

The President of the Commission and the Director General of the European Anti-Fraud Office (OLAF) will also be informed of this decision.

Yours sincerely,

 

P. Nikiforos DIAMANDOUROS

---

(1) Commission Decision 1999/396/EC of 2 June 1999 concerning the terms and conditions for internal investigations in relation to the prevention of fraud, corruption and any illegal activity detrimental to the Communities’ interests, 1999 OJ L 149/57.

(2) Regulation (EC) No 1073/1999 of the European Parliament and of the Council of 25 May 1999 concerning investigations conducted by the European Anti-Fraud Office (OLAF), 1999 OJ L 136/1.

(3) See Article 10 of the Code of Good Administrative Behaviour, approved by the European Parliament on 6 September 2001.

(4) See Article 10 of the Code of Good Administrative Behaviour, approved by the European Parliament on 6 September 2001.