Despite ongoing anti-corruption investigations at national level and calls from the European Parliament not to finance the Passante di Mestre project, the European Investment Bank (EIB) is about to finance the motorway via its Project Bond Initiative.
On February 16th the rating agency Moody assigned a provisional A3 rating to the €830 million senior bonds to be issued by the company Concessioni Autostradali Venete – CAV SpA. As stated by Moody’s Vice President, the involvement of the EIB "significantly reduces the bondholders’ exposure to traffic risk and potential operational underperformance". Our take on this is that the EIB risks facilitating the selling of a debt which might have been generated, among others, by overpriced invoices – amounting to million Euros – including for works that never took place.
In the last years, Counter Balance together with its member Re:Common and the local NGO Opzione Zero have closely monitored the case of CAV, a company controlled by the Veneto region and by Anas whose 100% shareholder is the Italian government. CAV is managing the 74 km motorway near Venice known as Passante di Mestre – a project which was selected by the EIB and the European Commission to benefit from financing under the 'Project Bond Initiative'.
What looked incredible to us is that CAV was at the same time under scrutiny by the Italian authorities as part of the largest anti-corruption investigation in the country. We then decided to alert the EIB, the European Commission and the European Anti-Fraud Office (OLAF) about the project and several subcontracting companies being under investigation by the Italian authorities for alleged fiscal fraud and possible infiltration of the Mafia.
But there was no strong reaction from their side, as OLAF turned down our complaint and the EIB kept on replying that it is in touch with Italian authorities and monitoring closely the situation.
It is actually worth noting that the EIB has already financed the project in 2013 via a €350 million loan channeled to CAV through the Italian public institution Cassa depositi e prestiti. But in March 2011 the project was already subject to a critical report by the Italian Court of Auditors which highlighted the risk of infiltration of organised crime via subcontracting companies carrying out the construction, as well as the lack of public supervision and control leading to an unjustified increase in costs. Indeed, the project, which was initially budgeted at €750 million, faced serious cost overruns. By 2010 costs had already amounted to €1.3 billion, an increase of 80 percent.
In May 2014 the project hit the news with the arrest of 30 people including numerous serious politicians – among them the former governor of the Veneto region, Giancarlo Galan (shareholder of CAV), the former minister Altiero Matteoli, the general Spaziante from the Italian fiscal police (Guardia di Finanza) and the mayor of Venice, Giorgio Orsoni.
Hopefully the European Parliament criticised the involvement of the EIB in the project and called in April 2015 "on the EIB not to finance the ‘Passante di Mestre’ project through the Project Bond Initiative or any other financial instrument, and to ensure that it implements its zero tolerance to fraud policy when considering the use of project bonds".
But now that Moody has announced the issuance of bonds for the project via EIB’s support, few questions emerge:
- How did Moody take into account the fact that the project, and the debt that it generated, is still under investigation and might be tainted with corruption?
- How did Moody take into account the potential risk of money laundering, in particular if liabilities have been monetised for CAV in the future pending the outcome of the investigation and eventual conviction in Venice?
- How does the EIB justify its support to this project in light of its commitment to a “zero tolerance to corruption policy”? For what reasons is it ignoring the call from the European Parliament not to support the project?