Prodi ally implicated in multi-million fraud case

A LEAKED report compiled by Brussels fraud investigators embroiled one of the most senior members of Romano Prodi's incoming European Commission in fresh controversy yesterday only two days before a crucial parliamentary questioning session.

Pascal Lamy, arguably the most contentious member of Mr Prodi's line- up, faces questions over the handling of a multi-million-pound fraud that took place when he was the top aide to the former Commission president, Jacques Delors.

The revelations came to light as the centre-right, which dominates the parliament, said that even if the incoming Commission is approved in two weeks' time, it may be only on probation pending a second vote in December or January.

Hans-Gert Pottering, leader of the biggest parliamentary group, called on Mr Prodi to make commissioners more accountable to the European Parliament and to pledge that they will quit if a majority of MEPs withdraws backing from any individual. Mr Pottering said his group would see over several months whether Commissioners are up to the job adding: "We will insist on a second vote."

But the right is already atttacking Mr Lamy because of his role in the "ancien regime", the focus of severe criticism by a committee of independent experts. The emergence of an unpublished report by the European fraud investigators gives MEPs a new weapon.

The report describes the handling by Mr Delors' office of the Flechard affair, involving shipments of butter from Ireland to Russia that were diverted to Poland, as "completely illogical" . It also notes that the lenient handling of the French company at the centre of the scandal was preceded by "political interventions" and points out that minutes of a crucial meeting held in Mr Delors' office have gone missing.

Mr Lamy is not mentioned by name in the document, but it says the key decisions were taken in Mr Delors' office. Critics argue that the case is symptomatic of wider abuses under the old regime. Some MEPs are threatening to refer the matter to the Court of Auditors, raising the prospect of yet another investigation.

Giles Chichester, a Tory MEP and the co-ordinator of the relevant committee for the centre-right bloc, said: "A number of people intend to grill him on this. We have Mr Lamy in our sights."

The report, completed in March, details the lead-up to a decision to lower the fine imposed on the Flechard company. Potential fines of 261 euros (pounds 171) per 100 kilograms were reduced to 44.5 euros per 100kg.

The document describes a direct plea by the company to Mr Delors in September 1993 and a meeting in his cabinet on 7 January 1994. It notes: "No minutes of this meeting seem to be available. It looks as if the 44.5 ecu/100kg has been accepted by the participants of this meeting." It adds: "This amount being calculated on the basis of a `French proposal' is completely illogical." The document notes that the settlement was ostensibly made in the interests of "equity" but concludes: "It is astonishing that such motives are put forward in a case that, as has been pointed out already in 1992 by the Irish, `looked like a fraud from the very beginning'."

Mr Lamy has defended the decision over the affair, arguing that a higher fine would have been unfair and would have ruined the company.