EU and UN abandon inquiry into missing £60m in Kosovo

The Daily Telegraph has learned that there was evidence of theft, graft and widespread breaches of contract tendering rules during EU-financed operations carried by the UN Mission in Kosovo (Unmik) from 1999 to 2008 in connection with the national electricity company and Pristina airport.

EU funds for "economic reconstruction" to help rebuild a war-shattered Kosovo ten years ago were hit by at least 11 scandals involving 12 cases of alleged criminal activity and 27 examples of alleged breaches of rules on the awarding of contracts and nepotism.

Activites of the UN-led Investigation Task Force in Kosovo, which also included representatives of Olaf, the EU's anti-fraud office, were finished in June 2008".

This newspaper has seen internal documents that conclude that "apparently no other follow up action is foreseen".

Accusations of "potential fraud and irregularities" surrounded the "alleged diversion" of funds worth £58.7 million relating to "two major contracts" at Korporata Enerhjitike e Kosoves (KEK).

The Unmik-appointed German chief executive of KEK was found guilty by a German court on the basis of an EU investigation. He is currently serving a sentence of three-and-a-half years in jail.

Evidence of fraud and "irregularities" have also been found in contracts and building projects amounting to at least 4 million euros (£3.6 million) at Pristina Airport.

One case allegedly involved "fraudulent acts and significantly abused tendering processes" for the construction of 2.3 million euro airport terminal.

UN investigators recommended a "criminal investigation" but this was dropped.

Cases involving alleged theft of air cargo fees, alleged bribes in return for airport jobs and claims of "theft and corruption" arising out of the collection of handling and landing fees also appear to have been closed.

Following independence for Kosovo last year, UN officials have concluded that there are now "no means any more to monitor any of those follow-up activities".

Commission officials have "repeatedly raised concerns" with both Unmik and with the Kosovo authorities.

"The Commission continues to raise these concerns with the Kosovo authorities and demand that they clarify the steps they have taken," said a spokesman.

The scandals have thrown into question the £891 million that the EU channels every year to projects in Kosovo via the UN and World Bank.

The European Parliament is threatening to block EU cash for the UN unless there is proper oversight and accounting for the money is spent.

"Parliament must have assurance evidence in order to be able to accept channelling about a thousand million euros on a yearly basis to international organisations," says a confidential letter to the European Commission.

The parliament's budgetary control committee is demanding that the commission halts funding to UN projects which do not hand over accounts to European auditors.

"We urge the commission in future not to finance where there is doubt regarding the existence of such structures and procedures," said the letter.

Chris Heaton-Harris, a Conservative MEP on the parliament's budget control committee, said he was concerned that "British taxpayers' money is effectively being laundered via unaccountable institutions and ending up in the pockets of criminals and fraudsters".

He added: "I am not sure what is more scandalous: the fact that this happened in the first place or the fact that the institutions involved seem quite happy to bury the story".