Description: A risk capital fund was set up in a region of one MS with ERDF support. The fund was to provide risk capital to technology-oriented innovative SMEs located in the specific region in their early stages. Market-oriented innovation or support of research and development were mandatory criteria for the EU support within the Fund, which also excluded companies in difficulties.
The risk capital fund was implemented by a beneficiary who had to identify investment opportunities within the terms and conditions of the investment strategy on the basis of which it was selected. In order to comply with state aid rules, the regional authorities had to select the management of the fund through an open and non-discriminatory tender procedure with the aim of securing efficient, commercial management for the fund, while reflecting market practices.
The stakeholders who were investigated included the manager of the risk capital fund, his friends and business partners, and one other investment manager. The investigation did not only concern one single project but the participations of a risk capital fund in the whole region of the MS.
Case study category: Irregular investments/financial fraud
ESI Fund(s) concerned: European Regional Development Fund (ERDF)
Type of irregularity detected.
- Breach of funding rules
- Conflict of interest
- Failings in tender procedures
Insufficient supervision by the competent authorities
Reporting mechanism: Following its investigation, OLAF issued a financial recommendation to the EC/DG REGIO to recover €162.3 million and addressed a judicial recommendation to the national judicial authorities in relation to the fraudulent activities. The case was ultimately dismissed. The recovery procedure for the ERDF funds already paid out (€162.3 million) is still on-going.
IMS reporting: No