BBC News, 21/2/2008

The EU's anti-fraud office is to look at an internal report amid claims that it has uncovered embezzlement by MEPs.

The confidential audit is reported to have found that MEPs had not accounted properly for the £100m a year allocated to staff costs.

British Lib Dem MEP Chris Davies, who has seen the report, said he was shocked by the scale of alleged fraud.

But European Parliament officials said it did not deal with individual Euro MPs or reveal cases of fraud.

Possible inquiry

Franz Bruner, director general of Olaf, the EU's internal anti-fraud squad, said he had demanded to see the audit report by the end of this week.

An Olaf spokesman said the report would take up to two months to analyse and a decision would then be made on whether an inquiry should take place.

Mr Davies is one of a group of MEPs on the European Parliament's Budget Control Committee who were allowed to look at the report under surveillance and without taking notes or copies.

In one case an unnamed MEP reportedly took money but employed no-one, and another had just one member of staff.

"This report is dynamite," said Mr Davies.

Embezzlement and fraud

He told the BBC that the document had to be placed in the public domain and legal proceedings should follow.

"Let's be quite honest. I think the allegations within this report from our own auditors should lead to the imprisonment of a number of MEPs. I think it's embezzlement and fraud on a massive, massive scale."

British Labour MEP Gary Titley said it was clear the system had been abused.

"The reality was, before 2006 and this report is about pre-2006, the rules were far too lax. They have been improved," he said.

Every MEP is eligible for about £130,000 a year to pay for staff.

The audit is reported to spotlight payments to non-existent staff, transfers to political parties, a failure to legally register companies, and the non-payment of social security costs.

A spokesman for the parliament's president declined to comment on a report which he said was as yet unpublished.

The details are due to be discussed by the budget control committee on Tuesday.