Hungarian authorities turn a blind eye to fraudulent EU funding applications

June 6, 2017

Photo: OLAF

Less than half of the fraud suspicion cases forwarded to Hungarian authorities by the European Anti Fraud Office (OLAF) between 2013 and 2015 reached the prosecution phase, reports Hungarian authorities responsible for investigating fraud found some sort of error in only 0.9 percent of the various EU grant applications, while OLAF revealed that it had a strong suspicion of misconduct in 3.5 percent of the funding cases, compared to the EU average of 0.4 percent in the same period.

In 2015, only Slovakia had a higher rate of suspicious applications, and the 2015 report did not yet include the findings of the inquiry into the massive corruption surrounding the construction of the M4 metro line in Budapest.

According to the Attorney General’s Office, out of the 30 Hungarian cases between 2013 and 2015 reported by OLAF in which there was a suspicion of misconduct:

  • 19 are still being investigated
  • six investigations were cancelled
  • four were prosecuted
  • one got to sentencing

In the sole case where there was a sentencing, the perpetrators managed to acquire EU funds worth HUF 50 million (USD 183,000) with false information in their application. The chief accused was sentenced to one-year imprisonment suspended for two years, while their accomplice was fined HUF 300,000 (USD 1,100).

A company purchasing overpriced forestry equipment which caused HUF 178 million in damages to Hungary and the EU, 84 employees of the Agricultural and Rural Development Bureau who were accused of HUF 120 million in fraud, a Pest county-based entrepreneur who applied for grants worth HUF 52 million for a military training exercise area which they were not even entitled to use, and a man who applied for HUF 112 million to improve a hydrotherapy treadmill for dogs are among the perpetrators of the prosecuted cases.

One reason for the high rate of suspicious applications in Hungary is the 50 percent down payment (which is usually around 20-30 percent in the rest of Europe) provided for applicants by the Hungarian state. The European Commission fiercely opposed the high rate of down payment, arguing it facilitates corruption.

Another reason is the Hungarian government’s intention to allot EU funds as quickly as possible without monitoring the legal background of the applications.

What makes matters worse is that OLAF is entitled to make a recommendation in cases only where there is enough evidence to back up fraud charges and cannot facilitate the prosecution of these cases, while Hungarian authorities seem to turn a blind eye to suspicious applications.