Focus chapter: the growing threat of environmental fraud

• Pages: 25-31

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The OLAF report 2019

3. Focus chapter: the growing threat of

environmental fraud

With the EU’s political agenda focused clearly on

environmental issues and the creation of a sust ainable

future, increasing amounts of EU funding are being

invested in environme nt-related policies and projects.

However, as these investments in environmental and

sustainability projects increase, so does the risk of

potential fraud. At the same time, fraudulent and illegal

activity risks seriously undermining Europe’s efforts to

cut emissions and improve air or water quality, as well

as potentially increasing the impact of global w arming

and the danger to people’s health .

Over the past few years, OLAF has investigated an

increasing number of cases of fraud or oth er illegal

activities with an environmental or sustainability

element, underlining that, as sustainability has risen up

the EU agenda, so it has sadly become a new avenue

for fraudsters. From misspending of EU funds intended

for green products to counterfeiting and smuggling of

products with the potential to harm the environment

and health, a selection of these cases can be found

below.

3.1. Volkswagen, EIB and Dieselgate

Perhaps the most well-known case with an

environmental impact in which OLAF has been involved

was the so-called Dieselgate scandal. This centred

around ‘defeat devices’ that the German automobile

manufacturer Volkswagen AG (VW) was found to have

installed in its cars to effectively bypass strict EU rules

on emissions by making the vehicle respond differently

in testing from actual driving conditions. This effectively

meant that VW was undermining EU efforts to improve

air quality by enabling its diesel cars to produce higher

than permitted levels of emissions and deliberately

rigging the engines to allow these emissions to go

undetected .

OLAF got involved after allegations in the press in

October 2015 about the possible misappropriation of

European Investment Bank (EIB) funds by VW in the

development of these defeat devices. A €400 million

loan from the EIB had been awarded to a VW project

called Antrieb RDI, which was designed to support

the car maker’s research on how to reduce emissions.

OLAF’s investigation established that, rather than

spending the EU funding on the vitally important task

of improving vehicle technology to reduce emissions, it

was instead partially spent on designing VW’s EA 189

engine, on which the defeat device was deployed.

One of the primary conditions imposed by the EIB ahead

of granting the loan in 2008 was the sharing of specific

information on the environmental impact and on all

important circumstances or important risks that could

influence the operational results of the project. OLAF’s

investigation established that, at the time the loan was

granted, some of the VW managers and staff involved

in the project were fully aware of the difficulties faced

by the new EA 189 engine in reaching the stringent

emissions standards, and of the deve lopment and use

of the defeat device to overcome the problems by

cheating the tests.

However, this information was never shared with the

EIB, either before the loan was approved or at any

time during which EU money was being used in the

development of the project. Had it been so, the EIB

confirmed, it would never have granted the loan or

would have requested full repayment in advance of the

due date. By failing to share this vital information with

the EIB, VW was found to be in breach of its contractual

obligations towards the bank.

The bank reached a settlement with VW in November

2018, which closely followed OLAF’s recommendations,