European Union Starts New Graft Inquiry Into Tobacco Regulator

Source from:  The New York Times  10/10/2013

European Union investigators said on Thursday they had started a new investigation into the former senior official responsible for tobacco regulation, the latest turn in a high-profile case of alleged corruption.

The case focuses on John Dalli, a politician from Malta, who resigned last October from the European Commission as the official in charge of health and consumer protection after a preliminary inquiry into a Maltese businessman's solicitation of a nearly $80 million kickback from the tobacco industry. Mr. Dalli has denied wrongdoing.

The affair was the biggest scandal to hit the commission since 1999, when the entire European Commission led by Jacques Santer, a former prime minister of Luxembourg, was forced to resign over allegations of fraud and mismanagement against some of his commissioners.

When allegations against Mr. Dalli last autumn reached José Manuel Barroso, the commission's president, he forced Mr. Dalli to resign. Yet the commission did not find evidence to support action against Mr. Dalli. Maltese authorities started their own investigation, but said in June that they had found no evidence of wrongdoing.

Mr. Dalli has said he knew Mr. Zammit from his earlier career in Maltese politics but he has denied that they were close or ever business partners. Mr. Dalli has also sued the commission at the European Court of Justice, the highest court in the Union, for neglecting proper procedure and for violating his rights of defense. That case is continuing.

The new investigation by the European Anti-Fraud Office, more commonly known by its French acronym OLAF, focuses on two or more trips Mr. Dalli took to the Caribbean last year that were first reported in July by the International Herald Tribune and The New York Times. Mr. Dalli was still in his post as health and consumer protection commissioner when he made those trips.

In a statement Thursday, OLAF said it was "currently looking into new elements that have emerged in the context of media reports" in relation to Mr. Dalli. The office added that it did not comment on the nature or purpose of investigations, and it declined to offer more details.

Although OLAF does not conduct criminal investigations, its findings can result in severe sanctions for E.U. staff, including fines and dismissals. OLAF also can pass its findings on to national authorities that have prosecutorial powers that can lead to criminal sanctions. The media office for the Maltese police declined to comment by telephone on Thursday evening. The office had no immediate response to questions sent by email.

Mr. Dalli, reached by telephone on Thursday, declined to comment on the investigation, saying he had not been informed about it. Mr. Dalli said he did not yet have any update about the progress of his legal action at the European court.

But Barry Connor, who rented a villa he owns in the Bahamas to Mr. Dalli's daughter in the summer of 2012, where Mr. Dalli stayed, said that he and his wife were interviewed for two days by officials at the anti-fraud office in Brussels this month.

"We went through everything that we had," Mr. Connor said this week in a telephone interview, referring to the information he and his wife shared with investigators about Mr. Dalli and the other guests at the villa. The investigators "now know who was in the house and what was being said and what they were talking about," said Mr. Connor.

"They are going into a lot of depth," Mr. Connor said of the investigators.

Mr. Connor recalled in a previous interview that Mr. Dalli said that he was planning to transfer large amounts of money for an unspecified venture and that Mr. Dalli had discussed that matter with him.

Mr. Dalli said in a telephone interview in June that he had made the Caribbean trips to help coordinate the transfer of tens of millions of dollars to a charitable project to help people in Africa.

Mr. Dalli said in June that the project was very personal and confidential, and would not discuss its details. But he insisted that it involved nothing unseemly. He said that he personally had no accounts in the Bahamas, that he was not being paid and that the money was not for him, but rather would be put into a trust for the charity.

On Thursday, Mr. Dalli said he was not currently involved in the charitable project.

The E.U. treaty states that commissioners can only hold one job; under a separate code of conduct they may contribute to charitable organizations, but may not manage them.

Mr. Dalli still could claim a pension from the European Commission that amounts to more than 4 percent of his former annual salary of about €250,000, or $337,000, for each full two years he was in office.

On Thursday, Mark Gray, a spokesman for the commission, declined to comment on Mr. Dalli's pension entitlement to protect Mr. Dalli's rights of privacy and because of the ongoing case at the European court.

The case first came to the authorities' attention in May 2012 when Swedish Match, a company that makes a form of smokeless tobacco known as snus, reported to the commission that a Maltese entrepreneur, Silvio Zammit, had asked the company for as much as €60 million in return for using his contacts with Mr. Dalli.

In its report, Swedish Match included a recording of one of the requests for money made by Mr. Zammit to a lobbyist for the tobacco industry.

The aim, officials suspected, was to influence a legislative proposal on tobacco products — and in particular to seek an end to the ban on snus sales that covers all countries in the bloc except Sweden. Snus are small packets held in the mouth instead of chewing tobacco or powdered tobacco.

Mr. Dalli has previously said he knew Mr. Zammit from his earlier career in Maltese politics but denied that they were close or ever business partners. He said Mr. Zammit worked as a political canvasser.

Mr. Dalli has also said the accusations made against him in Brussels were part of what he described as an elaborate effort to entrap him, led by the smokeless tobacco industry. He suggested the aim was to bring down the bloc's top health official and manipulate legislation.

Mr. Dalli said on Thursday that he also had brought a defamation case in the Belgian court against Swedish Match but gave no further details.

Malta Today, a news daily in Malta, reported on its Web site in December that Mr. Dalli had filed a complaint for defamation against Swedish Match in the Court of First Instance in Belgium for distributing false information about him. Enditem