September 7, 2008
A top EU official passed on sensitive information potentially worth millions to a company, Insight reports
Insight: Jonathan Calvert, Claire Newell and Nicola Smith
The elegant Comme Chez Soi is one of the great Brussels restaurants where businessmen on expense accounts mix with Eurocrats beneath its famous art nouveau glass ceilings.
On a warm Wednesday evening in March, one of the diners turning up to sample the two Michelin star menu was Fritz-Harald Wenig, a director in the European commission’s trade department.
He had accepted an e-mail invitation to dine with two British lobbyists whom he had never met before. But it was one of his favourite restaurants and he was in good spirits.
When the lobbyists explained that they wanted help for a Chinese client, he quipped, “We decide so after a second dinner here”, before quickly adding: “No, I’m joking.”
Mandelson official in cash for secrets row
What Wenig did not know was that he was talking to two undercover reporters from The Sunday Times who were posing as lobbyists to investigate allegations of Brussels sleaze.
The newspaper had been given allegations that some senior officials were getting too close to commercial interests and were offering favours in return for gifts or hospitality.
Within weeks Wenig was prepared to listen to suggestions of backhand payments and a proposal to take up a lucrative role with the fake lobbyists’ Chinese client.
It was no longer a joke. He passed on details about two Chinese companies which could not be obtained outside the commission and could have been commercially valuable – had he not been dealing with reporters.
Last week he also told the fake lobbyists about a crucial decision on footwear tariffs in advance of an expected decision on the subject this week by Peter Mandelson, the trade commissioner.
On Friday a spokesman for Mandelson said that Wenig’s actions will be the subject of a “comprehensive and thorough” investigation.
For more than 10 years Wenig, a German national who trained as a lawyer, had been one of the most powerful men in the commission.
“He could make or break a company and take decisions which cost companies millions of euros,” said one Brussels trade source.
As director of the trade defence department, he was responsible for the “anti-dumping” investigations which decide whether to levy tariffs on manufacturers from outside the European Union.
The commission often imposes tariffs on imports where it suspects that manufacturers outside the EU are using subsidies from their government to flood the European market and put the home producers out of business.
However, there has been long-standing criticism about the secrecy surrounding the commission’s antidumping investigations, which gives the officials considerable powers of discretion.
Syed Kamall, a Conservative MEP on the parliament’s trade committee, said: “Some companies have even alleged that ties between commission officials and lobbyists or enterprises benefiting from the commission’s decisions represent a dangerous conflict of interest.”
The Sunday Times was given specific information which prompted our undercover investigation earlier this year.
Posing as the directors of a lobbying company based in London, two reporters approached Wenig shortly before he was moved sideways to become the commission’s director of market access.
At Comme Chez Soi the reporters told Wenig they were acting on behalf of Zhou Li Ping, a fictional Hong Kong businessman who runs a firm called Tsinghi Ltd (the name is an anagram of Insight and the company does not exist).
They explained that Ping’s business exporting leather footwear from China to Europe had been damaged by “punitive” European tariffs.
The tariffs had adversely affected all the Chinese businesses except one. This company had been examined by the commission’s trade defence team and was found to have accounting procedures which showed that it was receiving no government subsidies.
The commission therefore granted this company “market economy treatment” (MET), which meant that it paid a lower duty than its competitors.
The reporters explained to Wenig that Ping was seeking a similar status for his Chinese supplier. They wanted to make sure that his Chinese factory would be inspected by commission investigators if, as seemed likely, there was a review of the footwear tariff in October.
Wenig said he could not directly influence the process, especially as he was due to change jobs, and laughed when the undercover reporters asked if he might keep his eye out for an MET request from Ping’s Chinese company.
He agreed to meet Ping but added: “It has to be in places like this one [the restaurant], offices I don’t.”
A Chinese community worker was drafted in to pose as Ping for the next dinner at La Truffe Noire, a Brussels restaurant which specialises in expensive truffle dishes.
Before the meeting, the undercover reporters sent Wenig an e-mail saying that Ping had two main issues to discuss. The first was the footwear case and second was a new request on candles.
At the time, an antidumping investigation had recently begun and commission inspectors were about to go to China to scrutinise candle companies. In the process one or two Chinese candle suppliers might be given MET status.
Wenig was told that Ping was negotiating a ¤100m candle contract which he could secure if he were able to tie in candle suppliers who had reduced duties because they had been given MET status.
To make the deal with the Chinese suppliers he needed to be the first to know who had been given MET status.
Both issues were discussed at La Truffe Noire. There was also talk about the possibility that Wenig might take up a job working for Ping in Brussels — a subject the undercover reporters had raised at the first dinner. He was offered ¤600,000 for a one-year contract, as this would be a fraction of what Ping would earn by using suppliers who paid substantially less duties than their competitors.
The undercover reporters made it clear that Wenig was most useful to them while he was still working for the commission, although he suggested that any job should start after his retirement.
When they suggested that they might make a down payment to him of ¤100,000, the conversation was as follows.
Wenig: “No, this should be, of course I have to think about it, this should be something to which for the time being I don’t have access. Because if I do this now . . . then this is during my present duties which I can’t do. If I do this, this is against all rules and I would be liable to all kinds of . . .”
Reporter: “How can we do this in such a way that you didn’t have to?”
Wenig: “This would be, but I am now thinking, this should be that you put all this money somewhere with a kind of frozen joint access . . . and that this is only accessible after my retirement.”
The question of payment was never decided and Wenig agreed to think about the offer. He ended the meal saying: “So I think this was a very interesting evening. I am coming back to you in this next week.”
Indeed, he did come back a few days later with news that would have have been known only from within the commission. “On candles, the situation is the following,” he said.
“The people are going next week for investigations . . . I think we’re covering in our sample I think about 40% to 50% of the imports.”
Wenig said that he would not do anything “illegal” but made it clear that he would leak information on the progress of the footwear and candle investigations.
Wenig: “We have to wait but I will keep you informed when I know anything.”
Reporter: “You see because this is not information we could get from the outside.”
Wenig: “Yes I know. I see . . .”
Reporter: “It’s information you could only get from the inside.”
Wenig: “Yes.”
Reporter: “Now we discussed that we would pay you.”
Wenig: “No, no, no. Don’t mention it. This we see when you have results.”
He was true to his word. In August, Wenig e-mailed one of the undercover reporters to say that he wanted them to telephone him. “Now I have some news about this market economy status,” he began.
“Do you have a pencil to write them down?”
He gave the names and addresses of two Chinese candle companies for whom, he said, there has been a “relatively clear indication” that they will be given MET status.
The companies were Ningbo Kwung Wisdom Art and Design and Ningbo Kwung Interior and Gifts. Both are based in the town of Gulin in the Yingshou district of China but they are separate entities. Their similar names come from a company that split in two more than a decade ago.
When The Sunday Times spoke to the companies last week, they confirmed that they had applied for MET status but said they did not expect to be given the decision for weeks or even months.
Wenig had apparently given the undercover reporters information that not even the companies knew.
On Thursday night the reporters had a final dinner with Wenig at Villa Lorraine, another of Brussels’s great restaurants. As a truffle the size of an apple was being grated onto scallops, the conversation turned to the two candle firms.
Wenig said he was 99% sure that the companies would be given MET and acknowledged that they would be unaware of the decision. He was told that Ping was negotiating supply contracts with the companies without telling them they were likely to get MET.
If Wenig thought this was sharp practice, he did not say so. Instead, he suggested that Ping put a clause into the contract in case the company’s duties turned out to be higher than expected.
The undercover reporters explained that Ping had been so pleased that he was looking for inside information on other companies that might get MET status in other industries threatened with European tariffs.
Wenig agreed to notify the reporters about which Chinese aluminium foil producers would be given MET status as part of a commission tariff investigation which is taking place this autumn.
The other key issue for discussion was the tariff on Chinese leather footwear. For weeks it has been speculated in Brussels that the commission will call for an expiry review when the current tariff period ends next month.
Little has been said publicly about this move, which would effectively extend the tariff period for a year or more. Mandelson will tell his fellow commissioners about his decision this week.
However, Wenig was happy to disclose the outcome to his dinner companions, the two undercover reporters, whose client had a commercial interest in the decision. He confirmed that Mandelson would recommend the review. “We don’t expect the proposal will be rejected,” he said.
Warming to the subject, he explained that Mandelson had, in the past, made so many errors in promoting free trade that he had no choice now but to introduce protectionist measures.
He said: “His wish is to remove barriers for trade, but unilaterally. Only to remove barriers at any cost. And in the real world this is, of course, not possible . . . He showed his sometimes radical, extreme positions so that member states that did not share his views were really scared and this you can’t do.”
He also poked fun at Mandelson: “He has a vision — without to be nasty — to be always on the front of the Financial Times. This is a problem with a visionaire. Ha? Someone who has vision, they don’t listen.”
The reporters reminded Wenig that Ping wanted to seek MET status for his footwear company. Later, he volunteered: “Now, when the shoe case is open, tell me a little bit about what you have in mind, which company this would be, what they should do.”
In the several conversations between Wenig and the undercover reporters he did not agree on a payment or a job. When the issue was raised again at the dinner on Thursday, he said: “We talk when you have results.”
Reporter: “Should we meet again or . . . ?”
Wenig: “We should stay in contact.”
Reporter: “Do you think you will be able to find out more information about this?”
Wenig: “Yes. I’m still responsible for industry therefore I know what is going on in this area.”
This weekend, trade bodies in Brussels expressed their concern about Wenig’s disclosures, especially the leaking of the names of the companies expected to get MET status.
Alisdair Gray, director of the British Retail Consortium in Brussels, said: “This is like insider trading. It gives a commercial advantage to anyone who chooses to act on it.
“I could phone up those factories and sign an exclusive deal to only source to me and bring in products way cheaper than my competitors.”
Wenig’s actions appear to be in breach of article 17 of the commission’s staff regulations which say that officials must “refrain from any unauthorised disclosure of information received in the line of duty, unless that information has already been made public or is accessible to the public”.
On Friday Wenig said that he had done nothing wrong. When he was read the substance of the story, he replied: “This is outrageous. I got some information about expiry reviews on shoes and this is now with member states . . . but all the others \ is pure fantasy.”
Wenig denied that he had passed on commercially sensitive information arguing that a company with MET could still face high duties and it was not a secret as “lots of people” have access to it. “It was semi-public in so far as it was sent out . . . to member states and lawyers of companies,” he said. He added that he had not been interested in working for Ping’s company. “It is absolutely ridiculous that I should work for a company like this,” he said.
