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The Slovak mafia funded from European subsidies: Still no oversight mechanisms in sight

Fotka od David Peterson z Pixabay

Slovakia is currently investigating the biggest corruption scandal in its modern history.

When I wrote the first article about the scandal in July, I didn’t know things would go back to the way they were in November. Whose fault is it? Why did it happen in Slovakia? And what has to happen to prevent any similar schemes in the future? Just to give you an idea: over 100 businesses were involved in the case and current data shows that the bribes exceeded 11 million EUR.

A quick review for the start: The whole case originated with the Slovak Agricultural Paying Agency, an institution responsible for redistributing hundreds of millions of euros granted to Slovakia as part of agricultural and rural development support. The corruption scheme existed for fourteen years and was based on a simple principle: People with ties to Slovak oligarchs and the Direction party and the Slovak National Party founded intermediary agencies for procuring subsidies. Their contacts at the ministry granted them access to internal rules and assessment criteria. The applications they made were much more successful than the applications of any other entities who tried to win EU and state support without their “assistance”. The officials charged a pretty penny for their mediation services. Persons of interest in the investigation included civil servant, lawyers with ties to politicians, and oligarchs.

The Dobytkár case is also connected to the 2018 murder of journalist Ján Kuciak. Before his death, Kuciak wrote about massive fraud in agricultural direct payments. One of the people arrested in relation to the case was Norbert Bödör whose security agency probably provided surveillance on journalists for Marián Kočner.

What has happened since July?

In the last few months, significant progress has been made in several fields, but none of it has resembled true systemic change, which is what Slovakia sorely needs when it comes to subsidy distribution.

The Slovak Agricultural Paying Agency has undergone several rapid staff changes this year, which shows its lack of stability and problems with the reform of the agency. In April 2020, the Agency’s director Juraj Kožuch was removed from office. He had been leading the agency since 2016 and today he is facing corruption charges. After his removal from office, he remained with the agency as (this is not a joke) the director of the direct payments department, but he did not stay there for long. Only a few days later he was detained by an elite police unit. He was replaced by Beatrix Galandová, but she was removed only weeks later, in mid-May, to be succeeded by Tibor Guniš. The newest director’s goal was to turn the agency into “a partner, rather than a menace, for Slovak farmers”. Yet in the beginning of September, he expressed his desire to resign for personal reasons and he has only been remaining in office until a suitable replacement can be found. It has been said that Guniš’s resignation was due to the low popularity of Minister of Agriculture Ján Mičovský (Ordinary People Party) as the public suspects him of planting “his” people in key institutional positions. Right after taking up his duties, Guniš ordered an in-depth internal audit, but its results are not public (!).

The Dobytkár case includes two kinds of EU agricultural subsidies: Firstly, direct payments, part of the Common Agricultural Policy, which are allocated to farmers based on the size of the area farmed. Secondly, subsidies from investment and structural funds, which farmers can apply for with various projects.

At the October session of the Committee on Budgetary Control, I found out that while the European Commission did suspend the payment of subsidies in the first half of 2020, this was only true for rural development subsidies. Direct payments to farmers have not been suspended, even though no control mechanisms for preventing further fraud have been introduced. European funds can still be channelled into the hands of the mafia. The Slovak Pirates has even called on the European Commission to take over the subsidy distribution management in Slovakia. If you want to know more about the way the shared management system works (or not), see this article. Nevertheless, in the long run, we need to create oversight mechanisms that will prevent any fraudulent use of European funds. If these are set up right, it will make sense for local authorities to be in charge of subsidy allocation, as they should be the ones who know best what their region needs.

The European Commission’s inactivity is alarming. Subsidy distribution problems in Slovakia have become known in 2016. Yet instead of clearly intervening, the Commission basically passed the case to the European Anti-Fraud Office OLAF, which has nine open investigations related to Slovak subsidy fraud, but in the long four years, it has not issues any systemic recommendations to Slovak courts or authorities. The Slovak authorities are currently working on a forensic audit of their own. On top of that, the Paying Agency has been on probation since the middle of October: a trial period of sorts, in which the agency has to undergo specific changes in its operations, its scope of activity is limited, and it is under strict supervision of the Ministry of Agriculture.

A forensic audit is an audit of financial, trade, accounting, and similar documents. It is a method employed in investigations of corruption or accounting fraud charges.

There is another way

Subsidy allocation in Slovakia faces fairly specific challenges. One of the biggest problems is land grabbing. About 20% of all land is owned by the state, with 80% farmers farming land that they only rent, not own. Contracts are often unclear and small farmers have to face threats and neglect by the state. Quite often it is enough if somebody disputes a farmer’s right to farm their land and that farmer’s payments will be suspended. Land disputes are lengthy and small farmers can lose their livelihoods in the meantime. In 2015-2019, the Slovak Supreme Audit Office discovered that farmers applying for European agricultural subsidies did not have to prove their relation to the land for which they are planning to get funding.

The European Public Prosecutor’s Office, which will become fully functional by the end of 2020, should change this. It will have the power to prosecute, arrest suspects, and freeze accounts, which will lead to more successful prosecution of financial crime and easier recovery of lost funds. It will mainly act in cases where local authorities are suspected of neglect. Such as this one: there has been talk of problems in the Slovak Agricultural Paying Agency for years, but the Slovak judiciary and police failed to act, all the way up to Kuciak’s death.

At the EU’s and Slovakia’s initiative, two action plans for better subsidy management in Slovakia were commissioned. But sadly, these plans are not public, and the public does not even know their timetable. We cannot afford to wait several more years to resolve this problem.

Member States should also be obliged to publish a list of final beneficiaries of subsidies. At the moment, there is no transparency in where the funds go after being distributed by national authorities, such as the Slovak Agricultural Paying Agency.

The last thing we have to realize is that the EU’s support for farmers is not the problem. It’s just that this support has to be directed at those who really need it: small farmers, who can use it to be more competitive. We need to swiftly introduce mechanisms that will protect the EU citizens’ money and rebuild their confidence that national authorities have their interests in mind.


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