EU cheese scheme mired in scam

The European Union scheme which enabled the Government to controversially spend more than €800,000 on cheese for disadvantaged people last year is at the centre of a multi-million euro scam.

The revelation came from European Court of Auditors, which analyses the accounts of EU institutions.

It is understood that a Italian company had swapped milk and cheese destined for disadvantaged people for a large quantity of German butter which, under the rules, should have been sold in another country.

While EU export control documents for the intervention butter were cleared, the vast bulk of it was returned to the German market, netting millions more than had if it been sold abroad.

The Irish Dairy Board, which won the tender to supply the cheese for Ireland, said all of the produce distributed here came from domestic suppliers, rather than foreign sources.

In its report for 2010, the court also found that an accounting error led to Britain receiving €189m more than it should have from the European Commission - in what is known as the UK rebate.

The commission said that what it termed "remedial action" was under way to correct the matter.

The court would not be drawn on the controversy over Ireland's new nominee, Kevin Cardiff.

Outgoing Irish member Eoin O'Shea said: "The court has no role in the appointment of its members. It's an issue for Member States and the European Parliament."

Mr O'Shea said he wished Mr Cardiff well with his Parliamentary hearing on 23 November, saying he already had the opportunity to meet him and he was "a very credible appointment to the Court of Auditors".

The auditors report found that, in 2010, Ireland remained a net beneficiary from the EU in the amount of €676m. While the State contributed €1.394bn, it received €2.070bn.

It also identified a €5.7bn hole in the commission's accounts between 2009 and 2010, in which money given by Brussels to states to support urban development and small enterprises was judged to be an expense, even though the money had not been spent.

The President of the Court, Vitor Caldeira, told the European Parliament this morning there were "material levels of error" in the commission's accounts, particular in the fields of agriculture and the cohesion funds.

Auditors had found that over a third of the €35.5bn allocated by the EU for regional funding was affected by errors, either unintentional or possibly fraud.

The Audit and Anti-Fraud Commissioner, Algirdas Semeta, maintained 95% of payments were free from errors.