KOSOVO: EU Cornered by UN Jurisdiction – Part 2

By Stefano Valentino Reprint | | Print |

BRUSSELS, Sep 6 2011 - European investigators had a hard time dealing with cases of misuse of European Union funds in Kosovo due to the complex bureaucracy that regulated the relationship between the EU and the United Nations administration, which was the only official international decision-making authority in the former Serbian province.

This investigation found out that the vague legal architecture jointly set up by the EU and the United Nations Mission in Kosovo (UNMIK) resulted in a lack of accountability as to how donor money was spent.

Based on their framework funding agreement, the EU was supposed to provide money, while the U.N. was supposed to manage it. But the borderline between their respective responsibilities was fuzzy.

For example, officials of the Kosovo Trust Agency were paid by the EU, but had an employment contract with what was called UNMIK Pillar IV, namely the Department of Reconstruction and Economic Development.

But “Pillar IV was just the name of a policy operation within UNMIK mandate and not a legal entity, so as a matter of fact it didn’t have any formal employee,” said an UNMIK official.

Since Pillar IV officials couldn’t be considered EU employees, the European Anti-Fraud Office didn’t have competence to investigate and sanction them for mismanagement of public tenders.

Pillar IV officials couldn’t even be considered as contracted by the U.N. Yet they could benefit from judicial immunity and diplomatic protection, like the rest of the staff working under the UNMIK mandate.

The ultimate goal, implicitly shared by the EU and the U.N., was to give the Kosovo Trust Agency’s staff full power to take economic decisions while at the same time depriving their undefined status of any formal link to either the EU or the U.N. As a result, neither of the two international institutions could be held accountable for wrongdoing by the officials, and eventually, for the waste of public money that contributed to the failed reconstruction of Kosovo.

When this reporter asked who was responsible for the Kosovo Trust Agency, Lawrence Meredith, current Head of the Kosovo Unit at the European Commission, responded: “Talk to UNMIK, Pillar IV was under their responsibility since it was created within the UNMIK mandate.”

The same question was addressed to Olivier Salgado, current Head of the Division of Public Information in UNMIK, who answered: “Talk to the European Commission, Pillar IV was under their responsibility since they were paying salaries.”

The largest donor grants managed by UNMIK’s Pillar IV were intended to rescue the Kosovo Electric Corporation and Pristina International Airport.

Both public enterprises became the main focus of the Investigation Task Force, a joint team set up by the U.N. Office of Internal Oversight Services, the Financial Investigation Unit (consisting of agents of the Italian Guardia di Finanza) and the European Anti-Fraud Office (OLAF).

Between 2003 and the end of its mandate in 2008, the Investigation Task Force coordinated 50 investigations into UNMIK-managed money flows, most of which came to nothing.

“The Investigation Task Force did not have sufficient personnel and technical know-how to gather the evidence that had allowed for indictments or court convictions,” commented a high-ranking adviser at UNMIK.

“It was difficult to get hold of international officials and interrogate them due to their short-term contracts,” a senior OLAF official said. “Some of them had already left Kosovo and we couldn’t open cross-border investigations based on the Investigation Task Force mandate.”

The European investigators had their hands tied.

In 2005 the European Court of Justice ruled out the possibility for EU-paid Kosovo Trust Agency officials to have the status of EU employees, thus formally excluding them from OLAF’s jurisdiction to enforce sanctions against suspected individuals.

Also, the Investigation Task Force members were obliged to report exclusively to the Head of UNMIK (dependent on the U.N. Secretary General), the only authority entitled to lift diplomatic immunity, remove undisciplined personnel, authorise requests for recovery of funds or defer cases to competent judicial bodies.

OLAF was only successful when it could operate outside the Investigation Task Force, namely in cases where the European Reconstruction Agency directly organised tenders and awarded project contracts rather than transferring budget contributions to UNMIK or leaving to Kosovo Trust Agency managers the choice of sub-contractors.

European Agency for Reconstruction sub-contracted companies are required by EU regulations to keep financial records for five years to enable investigators to carry out audits. OLAF did not have the same power when the management of public enterprises spent mixed funding from different donors without complying with European procurement rules.

All four investigations independently conducted by OLAF between 2005 and 2008 brought reimbursements and disciplinary measures, including the dismissal of European Agency for Reconstruction staff.

One of the probes, initially launched by the Investigation Task Force, also led to legal action: former manager of the Kosovo electric company Joe Trutschler, appointed by UNMIK, was convicted in his country, Germany, in 2003 for stealing 4.5 million euro of the 20 million euro allocated in 2001 by the European Agency for Reconstruction to subsidise urgent electricity imports.

But Trutschler would appear to be just the tip of the iceberg. “He went to jail only because we convinced the German press to make noise,” said Augustin Palokaj, the EU correspondent of Koha Ditore, the largest Kosovo-Albanian newspaper.

The bulk of the financial scandals have not been uncovered. “I can confirm that mismanagement of tenders and procurement fraud occurred frequently within the Kosovo Electric Corporation,” said Derk van der Wijk, former Head of Internal Audit at Kosovo Trust Agency.

The Investigation Task Force’s investigations files are classified U.N. documents and even OLAF is bound to confidentiality.

“We have repeatedly asked UNMIK for Investigation Task Force related information, but were refused,” said Ruud van Enk, an expert on Kosovo issues at the European Commission in Brussels.

In the report on its visit to Kosovo in 2008, the European Parliament’s delegation blamed “U.N. unwillingness to cooperate on questions of transparency and financial control with EU representatives.”

According to the Investigation Task Force’s final report issued in 2008, of which IPS saw a confidential copy, the task force “investigated a total number of 13 cases regarding allegations of fraud and irregularities in the development and management of the Kosovo Electric Corporation contained in the Deloitte and Touche Forensic Review” and “a total number of 37 cases related to Pristina International Airport based on allegations of fraud and irregularities contained in an audit by the firm De Chazal Du Mée.”

Eventually, the Investigation Task Force shortlisted 11 cases containing evidence of criminal conduct and involving over 60 million euro. All of them were submitted to the head of UNMIK for further referral to the Department of Justice of the U.N. mission.

“We expected that the prosecutors would request the Investigation Task Force to pursue the investigations rather than dismissing the cases,” said Roberto Magni, Guardia di Finanza’s agent and former head of the Financial Investigation Unit that collected hundreds of archived files until its staff was resized within the EULEX framework.

Former OLAF investigators in Kosovo backed up Magni’s view. Further investigations on the existing files would have certainly helped in gathering more factual evidence, they added.

Will EULEX do the job that was discontinued by UNMIK judges?

“Based on my recent visit to Kosovo, I can affirm that EULEX organisation has serious short-comings, it seemed to me that the judges cannot keep pace with their own work,” an OLAF agent said.

* This story is published under an agreement between IPS and Freereporter and was developed with support from the European Fund for Investigative Journalism.