Recovery proceeding initiated against Disco Magic Ltd. – the deadline for repayment has expired 8 January 2008
The competent intermediate body has initiated a recovery proceeding against Disco Magic Ltd. caught in the act of committing fraud. Should the measures taken by Mag Plc prove ineffective, the National Development Agency (NDA) will initiate legal proceedings against the company that used EU funding in an irregular manner. 29 December was the deadline date for the repayment of the rate of assistance.
The Kiskunhalas-based company was approved 24 million 735 thousand HUF non-reimbursable-type EU assistance via tendering two years ago for strengthening the competitiveness of the company and the acquisition of new light and sound technical equipment. The National Development Agency launched an inquiry in October last year, on the one hand due to the series of news items that appeared in the media, and on the other hand because Disco Magic Ltd. failed to submit a report on operations and activities. During the course of the on-the-spot check, it became evident that although the company did submit an itemised accounting statement accompanied by invoices to NDA, the company purchased equipment that was substantially poorer quality and much cheaper in relation to the item claimed in the statement. This is why the National Development Agency instructed Disco Magic Ltd. to pay back the entire rate of assistance granted.
Since, beyond the irregularities, the inquiry also exposed signs pointing in the direction of fraud, the National Development Agency filed charges against the company to the Hungarian Customs and Finance Guard.
From January through to October 2007, the National Development Agency reported 46 cases exceeding the value of 10 thousand Euros to the Hungarian Office of the European Anti-Fraud Office (OLAF) in which cases irregularity was examined. As regards the irregularities committed, in some cases beneficiaries began to implement their respective project prior to submitting applications, whilst in other cases they failed to implement their projects. Inefficient and unprofessional financial registration was a typical error, similarly to how the beneficiaries failed to follow what was defined within the scope of the assistance contract. Applicants that were approved funding violated the provisions of the Public Procurement Act, submitted incorrect accounting statements or tried to claim ineligible expenditures. Acts of fraud giving rise to criminal proceedings were committed in a few cases. In some cases, the companies implementing the projects were under joint ownership, in which case the proprietor circulated invoices among the same sphere of companies. However, in one particular case, the beneficiary would have wanted to use the EU funding for repeatedly paying for an investment that has already been completed.
Through the measures that have already been taken in the Disco Magic Ltd. case, and are anticipated to be taken, if required, the National Development Agency wishes to explicitly demonstrate that the Agency will be as prudent and circumspect as possible, as well as rigorous and strict when committing the funds granted by the European Union and during the course of granting the funding approved via tendering. At the same time, the Agency expects applicants to respect the law and acknowledge the rules of the tendering system when submitting applications.