New fraud inquiry into missing EU money

The European Commission admitted yesterday that a scandal involving €900,000 (£630,000) of EU money showed that its systems had "not functioned properly", and said a new inquiry had been launched into separate fraud claims.

Pedro Solbes, European commissioner for economic and monetary union, described the investigation into missing money at Eurostat, the EU's Luxembourg-based statistical office, as "very disturbing".

He said a further investigation had been launched into another body, CESD-Communitaire, an organisation set up to help statistical services in developing countries. No information was given about the money at stake in that inquiry.

The admissions came at a hearing in which members of the European Parliament questioned three European commissioners about their handling of the case. The main allegations centre on claims that funds from the sale of Eurostat information to the private sector were channelled into an unofficial bank account that was not subject to scrutiny.

In May the director general of Eurostat, Yves Franchet and a senior colleague, Daniel Byk, were moved from their posts at their own request. However the EU's internal fraudbusting unit, Olaf, had been investigating Eurostat for more three years - apparently without informing European commissioners, who have political responsibility, of the scope of their inquiries.

Mr Solbes said he was "deeply concerned by the fact that I had to find out through the press that these two officials had been put under suspicion, and not through Olaf as should normally have been the case."

Yesterday the spokesman for the European Commission president, Romano Prodi, dismissed newspaper claims that Mr Prodi had been informed in advance of the irregularities.