The European Anti-Fraud Office (OLAF) put an end to an intricate fraud scheme through which more than € 1.4 million euro-worth of European Union funds, meant for emergency response hovercraft prototypes, had been misappropriated. Operation Paper Castle stretched over several EU Member States, and relied on OLAF's close cooperation with Guardia di Finanza, in Italy.
OLAF uncovered the complicated fraud scheme as part of its investigation into alleged irregularities in a Research and Innovation project granted to a European consortium. The Italian-led consortium, with partners in France, Romania and the United Kingdom (UK), was tasked with creating two hovercraft prototypes to be used as emergency nautical vehicles able to reach remote areas in case of environmental accidents.
During on-the-spot checks performed in Italy by OLAF and Guardia di Finanza, at the premises of the lead partner, OLAF investigators only discovered various disassembled components of the hovercrafts. It became evident that, in order to obtain the EU funds, the Italian partners falsely attested to the existence of the required structural and economic conditions to carry out the project.
Investigative activities carried out by OLAF in the UK revealed that the British partner only existed on paper. The company was in fact created and owned by the same Italian couple who acted as the consortium's leader. To simulate the actual development of the project and to divert funds, fictitious costs had also been recorded. In practice, once the EU funds were obtained, the Italian grantees used accounting artifices to syphon off money, forging documents denoting false expenses.
A thorough analysis of more than 12 000 financial transactions and payments made in the project showed that part of the EU funds received by the Italian and UK partners had been used to extinguish a mortgage on a castle facing foreclosure - today subject to seizure. OLAF ascertained that the castle officially belonged to a different British company, originally established by the same Italian couple, but now owned by a US company, from Delaware. Further enquiries uncovered that the Italian couple also created and owned the above mentioned US company.
OLAF concluded its investigation in November 2017 with two judicial recommendations - to the Public Prosecutor's Office of Genoa and to the City of London Police in the UK – and a financial recommendation to the Directorate-General for Research and Innovation of the European Commission. Guardia di Finanza is investigating the persons concerned for embezzlement and fraud against the EU, false accounting, fraudulent bankruptcy and fraudulent statements.
Operation Paper Castle is a testament to the pertinent results of the close and constant cooperation between OLAF, Guardia di Finanza and the police forces of Member States. The transnational nature of the investigation meant OLAF played a decisive role, from stem to stern, being able to map out and put an end to the complex fraudulent activity which stretched across several Member States.
