Commissioner urged to resign as EU fraud scandal spreads

Pressure mounted on a European commissioner yesterday to take responsibility and resign over a multimillion-pound EU fraud scandal.

In a row with echoes of the drama of 1999, when the previous European Commission quit en masse, the authorities have found bogus contracts, unofficial bank accounts and an accounting system that operated outside official records.

Yesterday the European Commission promised to sever commercial ties between four companies and Eurostat, the EU statistical office on which the investigation is centred.

A further 400 contracts signed by Eurostat are to be scrutinised by the Commission's internal audit service, and a letter was sent to senior staff asking for assurances that no other "phantom" bank accounts exist. Eurostat, based in Luxembourg, produces statistics for the European Commission but has also sold information to the private sector, and set up other contracts to gather data. Revenue from sales of statistics, worth €920,000 (£650,000) and channelled through an unofficial account, has apparently vanished, and a total of up to €5m could be missing.

Yves Franchet, the former head of Eurostat, had senior posts in two of the companies now under investigation. Although the European Commission says this was to help scrutinise these firms' activities, and that M. Franchet did not benefit personally, the latest developments draw the Commission further into the scandal.

MEPs are asking why the Commission took so long to act, given that it knew about M. Franchet's ties with these companies. The MEPs are also saying that the European commissioner responsible for Eurostat, Pedro Solbes, should have been aware of what was going on.

Chris Heaton-Harris, a Conservative member of the European Parliament's budgetary control committee, said: "We have been asking about the links between these companies and the Commission. Mr Solbes should certainly have known about these links. What will it take for him to admit his incompetence and go?"

In 1999, as political pressure grew, the former commission president Jacques Santer was unable to force the resignation of Edith Cresson, the commissioner who faced most criticism because she employed her dentist as a scientific adviser.

This time, too, Commission officials fear MEPs want to force a resignation, with Mr Solbes in the firing line. Romano Prodi, the president, has been summoned to appear before MEPs in September to discuss the crisis. Mr Prodi is in a strong position to demand the resignation of Mr Solbes because all the commissioners promised when they were appointed to quit if asked by the president.

The latest discoveries appear to have made a mockery of promises of internal reform and of a pledge, given at the appointment of the new Commission, of "zero tolerance" of fraud and irregularities.