Michael Emerson, the European Union's former ambassador to Moscow, has been granted early retirement and a large pension by the European Commission, despite Commission findings that his behaviour in Moscow was "deplorable".
A Commission inquiry into the case has established that Mr Emerson set up business contacts while he was still working as ambassador which were "not in conformity with staff ethics", said a spokesman. He added: "This is deplorable but it does not justify legal proceedings against him."
The Commission clearly hopes that the controversy over the Emerson case, which has been severely embarrassing, will now evaporate. Mr Emerson's attempts to set up a private business in partnership with Russian entrepreneurs, while ambassador to Moscow, has undermined the credibility of EU foreign aid operations and fuelled often-voiced fears about the management of EU's massive foreign-aid budget. The official's well-publicised links with a female Russian translator, who joined him in his business ventures, have also raised questions about how EU officials are vetted for such senior jobs abroad.
The Commission yesterday fuelled the confusion by saying that the inquiry into the case was continuing. A senior Commission fraud investigator is understood to be currently in Moscow tracing Emerson's business links. Belgian police are continuing to investigate the case, and the European Parliament has threatened to block Russian aid funds.
The controversy over the Emerson case erupted two weeks ago, when a retired American airman, Marshall Michel, chose to make public what he knew about Mr Emerson's spare-time activities. Mr Michel's wife, Elena Prokhorova, a Russian translator, had recently left him to live with Mr Emerson. Whatever Mr Michel's motives, the quality of his evidence was not disputed by Mr Emerson or the Commission.
Mr Michel presented a series of letters, written by Mr Emerson and Ms Prokhorova to Russian business contacts, which talked of deals, arrangements for offshore bank accounts, and referred to "our consultancy company".
One of the letters referred to EU plans to launch a new aid programme in Kirgizia, where some of the business ventures were to be based.
As the EU's ambassador to Moscow Mr Emerson was responsible for over- seeing the spending of the EU's Russian aid programme, under which Ecu 1.87bn (pounds 1.5bn) has been spent in the past four years.
Under the EU's staff regulations there are strict rules against officials becoming involved in private business which could be deemed to be a conflict of interest. The dangers of such business contacts in Russia, where organised crime runs rife, have long been a matter of concern to EU fraud watchdogs in the Court of Auditors and in the European Parliament.
Yesterday a spokesman said Mr Emerson had not sought or been given permission for his activities. He added that should the on-going inquiry in the case reveal new cause for suspicion, Mr Emerson could still face disciplinary action, despite having been granted early retirement.