Tens of millions of dollars in public funding for nongovernmental aid organizations is under scrutiny after the arrest of the head of a mine-clearing organization accused of embezzling $12.4 million, Greek authorities say.
Three civil servants could also face charges after an unprecedented audit of the Foreign Ministry's overseas development program.
The program, known as Hellenic Aid, dispensed about $160 million to more than 400 nongovernmental organizations — including Greek Orthodox religious groups and the International Mining Initiative — over a 12-year period ending in 2012. But an audit showed that $40 million could not be accounted for. So far a dozen audited NGOs have returned more than $9 million, investigators say.
"It was a game of kleptocracy," said Nikolaos Matsis, a career diplomat and former deputy director of Hellenic Aid, the only whistle-blower in the case to speak publicly.
"There was no real oversight of NGO funding," he said in an interview. "Instead, the [Hellenic Aid] committee would meet, approve expenses and funding reports — many of them bogus — and then, once the files were signed and sealed, all supporting documents were shredded — immediately."
The heads of the demining group and of Hellenic Aid have denied wrongdoing.
Since the scandal surfaced in February, authorities have broadened the scope of their investigation, bringing under scrutiny more than 3,000 NGOs linked to at least two other ministries plus a grab bag of state corporations. The Finance Ministry announced last month that in the first wave of inspections, 908 of them were being audited on suspicion of misusing funds.
"It is nearly impossible to investigate all of them and verify whether they complete what they were funded to do," said Leandros Rakintzis, Greece's auditor general. "Nine in 10 of these NGOs operate without proper accounting books. It's chaos."
Such public-sector audits were among the commitments Greece made in exchange for more than $330 billion in international bailout loans in recent years.
Claims of corruption at the Foreign Ministry go to the heart of Greece's political elite. Former socialist
Papandreou authorized at least $550,000 in government aid to an NGO founded by his mother, a longtime women's rights activist, Matsis said, citing state ledgers published by local media. There have been no allegations of fraud or money laundering involving that NGO.
The former prime minister and others have denied involvement in wrongdoing; a 13-page audit report makes no criminal allegations but does document gross mismanagement of state funds, a criminal offense for amounts exceeding $275,000, Rakintzis said.
Former Defense Minister Akis Tsochatzopoulos was convicted last year of multiple counts of fraud and money laundering. He was given a 20-year prison sentence for his involvement in a scheme in which several of his relatives and business associates pocketed large sums of money from arms purchases conducted during his 1996-2001 tenure.
George Papaconstantinou, a London-trained economist whom Papandreou elevated to the post of finance minister and who became the face of modernized fiscal policies and corruption crackdowns, was indicted by Parliament last year over the deletion of his relatives' names from a list of suspected tax cheats.
A key figure in the Foreign Ministry scandal is another Papandreou protege, Tanzanian-born Alex Rondos, who acted as the prime minister's chief Balkans advisor and directed Hellenic Aid from 2000 to '04, when NGOs, including the International Mining Initiative, were funded.
The head of the demining organization, journalist Konstantinos Tzevelekos, was arrested and jailed Feb. 18 on suspicion of fraud and money laundering.
Auditors and police investigators said the group, which was founded in 2000 to clear land mines in Bosnia-Herzegovina, Lebanon and Iraq, did not provide valid progress reports on its work. According to a 20,000-page police report, the organization also prevented inspections by Greek Embassy officials in nations where it was working. The group's expenses were only partially checked, even as its funding increased from $336,000 in 2000 to $6.1 million in 2004. It remains unclear how much of the money was used to clear mines.
"What we do know," said a police official with knowledge of the investigation, "is that much of that money was used to purchase prime real estate in Athens and the holiday island of Rhodes."
Though Greece's fragile coalition government has made headway in the effort to cut waste, the country remains notorious for cronyism and corruption.
Last year, Berlin-based Transparency International ranked it the most corrupt nation in the 28-member
Others are skeptical.