Doc. 10414

22 January 2005

Council of Europe Development Bank (CEB)

Written question No 461 to the Committee of Ministers

Reply from the Committee of Ministers

adopted at the 912th meeting of the Ministers’ Deputies (19 January 2005)

I. Written Question No. 461 by Mr Henry (Doc. 10390)

Mr Henry wishes to point out to the Committee of Ministers that in early 1994 the Council of Europe Development Bank (CEB), then known as the "Council of Europe Social Development Fund", decided to take legal action against its former Governor (who had resigned on 15 November 1993), accused of being behind a huge financial scandal involving, inter alia, the misappropriation of the Bank's staff pension fund.  Following a recommendation by the Committee of Ministers in favour of suspending the former Governor and the staff involved in the alleged scandal, the CEB instituted further legal proceedings against the former Governor, in which he was accused of using illegal accounting practices in order to falsify the Bank's financial statements for 1992 and 1993.

The Paris Tribunal de grande instance delivered its judgments in the two sets of proceedings against the former Governor on 4 July 2000; those judgments were upheld by the Paris Court of Appeal on
4 May 2001.

The Paris Tribunal de grande instance found the former Governor not guilty not only of use of forged documents and fraudulent breach of trust regarding his management of the CEB, but also of the offence of having falsified accounting entries in the CEB's financial records for 1992 and 1993.

Mr Henry accordingly asks the Committee of Ministers to inform him of its reaction to the judgments delivered by the Paris Tribunal de grande instance and of any action taken following those judgments. In particular, he would like to know whether the Committee of Ministers has ordered further inquiries concerning liability for the unlawful acts perpetrated within the CEB, especially regarding the presentation of the 1992 and 1993 financial statements.

II. Reply by the Committee of Ministers

The Committee of Ministers would inform the Right Honourable Member of Parliament of the following:

1. The Governing Board and Administrative Council of the Council of Europe Development Bank unanimously decided to apply to the French courts, on the recommendation of the Committee of Ministers, in connection with matters that had no bearing on the issue of the Bank’s staff pension fund or the 1992 and 1993 accounts. It was at the instigation of the French investigating judge that the court case was extended to other matters, some of which could have affected the accounts for 1992 and 1993.

2. On 4 May 2001 the Paris Appeal Court, in a final decision, gave the former Governor, Mr Vanden Branden, and the former Treasurer, Mr Roose, both of Belgian nationality, six-month suspended sentences, fined them 300,000 FF each and ordered them jointly to pay damages of 3,000,000 FF to the Bank for fraudulous transactions carried out in Belgium for their own benefit, to the detriment of the Bank.

3. The French criminal courts dismissed the other charges, including that concerning financial transactions that might have caused the accounts for 1992 and 199 to be falsified, on the grounds that, although they might qualify as managerial errors, they were not criminal offences. Moreover, the 1992 and 1993 accounts had been reviewed in 1994 at the express request of the external auditors employed at the time, corrected and unanimously approved by the Administrative Council and Governing Board after all the checks provided for in the Articles of Agreement and with the endorsement of the Auditing Board.

4. Further to the Paris Appeal Court judgment of 4 May 2001, the Administrative Council, with the consent of the Governing Board, decided to question the external auditors, who differed from the 1994 auditors, and took the view that there was no need to review the accuracy of the accounts for 1992 and 1993 unless the external auditors considered it necessary to do so.

5. On 13 September 2001 the Administrative Council examined the external auditors’ conclusions, according to which it was neither appropriate nor possible to amend the accounts for 1992 and 1993 retrospectively.

6. The Bank’s collegial organs have thus taken a perfectly clear stand on the matter. The Committee of Ministers would point out that this information has already been brought to the attention of the authorities of all the Bank’s member states whose representatives sit on the Governing Board, the Bank’s supreme organ, and on the Administrative Council.