politico– There’s even bigger trouble ahead for billionaire Czech Prime Minister Andrej Babiš after Brussels found his business ties represent a conflict of interest, according to the transparency watchdog that first raised the complaint.
A document seen by POLITICO shows the European Commission has officially confirmed an audit last year that found Babiš still controls an agricultural conglomerate he founded, Agrofert, despite putting his assets into trusts. This means millions of euros in EU grants that Babiš had awarded Agrofert in his role as a public official breached domestic and EU conflict of interest legislation.
But there’s a second audit still in the works where the stakes are even higher for Agrofert and Babiš, according to Transparency International, whose petition two years ago prompted the Commission probes.
While the first audit dealt with so-called EU structural funds, which are meant to support things like business development and innovation, the second audit deals with a much bigger pot of subsidies for Agrofert: from the EU’s mammoth €48 million per year Common Agricultural Policy.
“For me, this is the bull’s eye that they [the Commission] should aim at because the direct subsidies are in the heart of Agrofert,” said Milan Eibl, chief analyst for the Czech branch of Transparency International.
“In terms of money, the second audit is bigger for Agrofert than this one … If they stop receiving direct subsidies, it’s when Babiš is hurt the most and he has to start [to] act on it.”
Eibl said the Commission’s finding in the first audit that Babiš violated conflict of interest rules will be crucial for the second report, which is expected to be finalized next year. The result of both could also prompt other EU leaders to decide the Czech PM shouldn’t be allowed to participate in any of the ongoing budget-related discussions, he added.
“If you had asked me this question a year ago [about whether this could be possible], I would say ‘hell no.’ When you’re asking me now, I’d say that the chances are higher,” Eibl said.
Babiš has repeatedly denied wrongdoing and maintains he complies with the 2017 Czech conflict of interest legislation that forced him to put his Agrofert shares into trusts. He told national media last week after reports of the audit review: “I do not control or manage Agrofert.”
But Transparency International disagrees — as does the Commission, according to the first audit.
The Commission concluded its first audit last December, but reaffirmed those findings in the follow-up document seen by POLITICO last week and dated October 22.
The first audit reviewed the allocation of EU structural funds under the European Social Fund and the European Regional Development Fund, which according to one Commission official amounted to €6.3 million. It found that some of this funding was awarded to Agrofert after the Czech conflict of interest legislation took effect in 2017.
It also found a high number of irregularities in how Czech authorities determined whether certain Agrofert projects were eligible for such EU grants. For example, Czech authorities awarded about €3.8 million to Penam, a bakery business, for what it claimed was an “innovative” new toast production line — but the Commission found this shouldn’t have qualified for funds for innovation after all since the same line was already in use at another Agrofert bakery.
The volume of such irregularities was so high that the Commission said it would need to review each project one-by-one to determine if they had met the criteria, a process which is still ongoing.
The follow-up document lists a set of recommendations for Czech authorities to follow and gives them three months to respond from the time they receive the report translated into Czech, which is set to be sent in the coming weeks.
A Commission spokesperson said Czech authorities have not declared any expenditure to the Commission to seek reimbursement for any of the operations covered by the audit, and will now no longer be able to seek reimbursement from the EU budget for such payments.
“The EU budget is protected,” the spokesperson said.
This means that even though some projects have already been subsidized by the Czech government, the EU will not reimburse this spending.
The Czech industry ministry is already examining whether some of Agrofert’s subsidiaries should return the grants to the Czech budget, Czech daily Deník N reported. According to Czech media, Deputy Prime Minister Karel Havlíček (from Babiš’s ANO party) said the government was acting in full compliance with Czech law, but acknowledged that subsidies paid in the Penam bakery case could be paid back to the state budget if they were ultimately found to be unjustified.
The Czech Ministry of Regional Development, responsible for allocating EU funds, did not respond to a request for a comment.
Regardless of what Brussels decides to do, Eibl said Babiš’s government and company aren’t likely to give up without a fight and could even try to bring its case to the Court of Justice.
“[Czech] ministries said that if there’s a problem, there’d be no issue to sue the European Commission because they don’t agree with the audit report,” he said. “It’d take another two, three years, God knows how long.”