Sleazed in Slovakia

By bne IntelliNews February 17, 2011

Tom Nicholson in Bratislava -

Heinrich von Hollen won't soon forget his first experience of applying for structural funds in Slovakia. The peppery 74-year-old, a former lieutenant colonel in the German army, still sputters as he describes being asked for a 15% payment that had nothing to do with the official tender process. "I was screaming mad," he tells bne. "I had heard about things like that, but I couldn't believe it happened to us."

It was April 2010, and the managers of von Hollen's local auto-industry firm had been scrambling to meet the deadline for submitting a €3m funding request to the Education Ministry. The bulk of the R&D money was to come from the European Regional Development Fund, and was to finance the prototype for a driverless, electrically powered car.

Lubomir Ochotnicky, director of Hollen Ltd., had arranged a meeting in the company's offices with a private Slovak euro-funds consultant, Michal Gregor. Towards the end of the session, when asked about the likelihood the application would be approved, Ochotnicky claims Gregor dropped a bombshell. "He said it depended on both political and economic aspects. I wasn't sure I knew what he was talking about, so I played dumb and asked him what he meant. He said straight out that we would have to pay 15% [of the amount applied for] in advance," says Ochotnicky.

Ochotnicky's recounting of the meeting is backed up by another Hollen executive, Juraj Vrbik. "We were both making notes, and both of us not only heard him [Gregor] say it, we also wrote it down," Vrbik says.

The men claim that Gregor said he preferred they paid the money directly to unnamed third parties rather than having him act as an intermediary, but he grew cagey when asked who would be receiving the payment. Said Ochotnicky: "I asked him who 'they' were, whether it was people at the Education Ministry, which at the time was controlled by the (former governmental) Slovak National Party, and he said that it was 'a joint thing', meaning no single political party."

Also present at the meeting was Slovak scientist Branislav Sitar, who was reluctant to discuss the alleged demand for payment with bne. During an interview, he eventually admitted to having heard "something like that," but said his attention had been elsewhere at the time.

For his part, Gregor counters that the Hollen team must have misunderstood - that he had in fact been telling them the rate for his services. In a formal written statement, he said: "Euro-funds consultants in Slovakia work exclusively with applicants to ensure that their applications are well prepared. It's up to each applicant what he does with his finished project." However, he didn't didn't address direct questions concerning the content of his statements at the meeting.

The Hollen executives' claims add grist to the mill for the European Commission, which is auditing the Labour Ministry's use of structural funds, the results of which are expected in late February, amid a wider look at how regional aid funds are being distributed in the EU. In 2009, the EU's anti-fraud unit, Olaf, reported 4,931 "irregularities" in these regional funds, accounting for €1.22bn, up 109% in the cost of questionable projects since 2008, with Slovakia, Poland, Estonia and Italy as having the "highest suspected fraud rates."

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