'Just bill it to the old whore'

After months of probing damning allegations of fraud in the European Commission, the investigators deliver their verdict today. In an exclusive extract from his book L'Europe des Fraudes, Jean Nicolas, the man who exposed the worst scandal in the history of the EU, traces one man's web of corruption

'I offered to lend him £10,000 to buy an automatic car, a loan secured only on his word. To justify this expense, I arranged a contract for his wife in Software (one of my offshore companies) for three months. I paid this from the company's agreed profit margin with the commission.' This, described in his own words, was Claude Perry's system. It was a network of interlocking favours: a commission official in trouble is helped with a loan that need never be repaid, through a fictitious job for the official's wife in an offshore company whose only job is to work for the commission.

This is also how the man who triggered Europe's worst fraud scandal infiltrated department after department of the commission, building up favours to become its biggest sub-contractor. And this is the system of fraud, operated with the knowledge and connivance of commission officials, that launched the biggest scandal ever to hit the commission and its European ideal.

Now, his house and office are confiscated, his bank accounts blocked and his car is sold for cash. These days he travels by public bus. Still, there is a large villa in Canada, in the name of Perry's former wife, and a network of offshore companies.

The unravelling of Perry's extraordinary story began last July when a German magazine colleague in Brussels called me and said he had heard that an internal commission fraud inquiry into the misuse of some £2 million of its humanitarian budget had been passed to the Luxemburg police. They had started to interview Claude Perry and wanted to question Hubert Onidi, the official in charge of ECHO (European Commission Humanitarian Office).

In his statement to the investigating magistrate, Perry gave a sketchy but tantalising explanation of the scam, insisting that he was not its real beneficiary. Commission officials, he explained, would skim off money earmarked for humanitarian projects by getting sub-contractors such as Perry to pay their relatives or associates for fictitious jobs. The fake jobs were just one of the ways in which Perry had to grease the palms of officials to get his precious contracts. 'I had to give lots of presents to top officials, including paid travel for their nearest and dearest, and tickets to Formula One races and the World Cup.' The system worked like this. 'The commission wants a job done, and has no staff to do it, but they have an operating budget. So from the operating budget, they hire a sub-contractor like me. I submit an application and get a contract. Then the commission chooses the staff, fix the salaries, tell the staff what to do. I am only a shadow boss, paying the salaries and expenses of these people the commission calls 'submarines', because they operate out of sight. And I ask no questions.

There are some 4,000 of these submarine personnel working for the commission. The system is still perfectly oiled and working.' Perry told me he made £350,000 a year from his operations, and that he had well over 200 submarines placed as semi-permanent staff within the commission. His business was conducted through a complex network of companies based in Ireland, Spain and the Channel Islands. Even the anti-fraud unit UCLAF, when it needed a specialist computer expert to automate its fraud-spotting systems, went to Perry to provide one. They put the fox in charge of the chicken-house.

Perry's most explosive claims concerned his relationship with the close friend of controversial French commissioner, Edith Cresson. When I first confronted her staff about these claims, they insisted she did not know Perry. But gradually a very different picture began to emerge.

When Cresson arrived in Brussels in January 1995 to take up her job as commissioner responsible for education, science and youth, she was accompanied by her 'friend of 30 years', Rene Berthelot, a dentist from her home town of Chatellerault.

They were inseparable. The rest of her staff called him 'guru'; he predicted the future for her, saw her becoming the first woman President of France.

When she took an apartment in Brussels, Berthelot moved in too.

Berthelot needed to earn money. In Brussels, he asked the advice of Claude Willeme, a former official of France's DGSE intelligence service, and now deputy head of the commission's security service. Willeme had the answer to Berthelot's problem: Perry.

Perry quickly understood that there might be profit in enrolling the dentist in his team of submarines with fictitious jobs, securing the goodwill of a new commissioner.

Perry and Berthelot first dined together on February 6, 1995, and agreed on a job, a salary, and an apartment which Perry would pay for. On February 24, they went together to the State Savings Bank in Luxemburg to open an account for Berthelot. They lunched together that day, and dined again on March 8, when Perry insisted on meeting Cresson.

So at 3.30pm on March 23, Cresson first met Perry, with Berthelot, when he called at her apartment. Three days later, the three of them dined together at the restaurant l'Amigo. On April 11, Cresson had them to dinner, along with Willeme and Perry's assistant and mistress, Catherina Klaver. The toast that evening was the new partnership of Perry and Berthelot.

Cresson then sent Perry to see a member of her private office, Jack Metthey, about arranging consultancies with some Finnish and Swedish scientists.

Mrs Cresson was sufficiently moved to write out for Perry a list of names of officials in the commission whom he might approach for contracts. He has the note still, and I have a copy. I also have Perry's sworn statement, which reads: 'I, Claude Perry, state under oath that after several meetings and meals with Mrs Cresson and Mr Berthelot, the issue was raised, with the assent of Mrs Cresson, of finding a fictitious job for Mr Berthelot . . .

and if required I will so testify in court.' Cresson denies this.

'Dr Berthelot agreed a private contract with Mr Perry, and I fail to see how that concerns me,' Cresson told Le Monde last year. Although Mr Berthelot denies that he was corrupt, he told Liberation of his deal to provide consultancy services to Perry: 'I was a fool to have accepted.' On April 25, on Cresson's recommendation, Perry went to see Dr Hansen, director of the commission's department for science and research - and came away with nothing. No contract, despite the salary of ?4,259 a month (£2,975) he was paying Berthelot, not to mention the monthly ?2,000 (£1,400) for Berthelot's apartment.

Perry was beginning to feel cheated. This was a lot to pay, when winning no contracts from the departments run by the High Priestess. But he persevered.

Perry started to get some crumbs from his deal. Berthelot began faxing documents to him, including Cresson's plans for a big reorganisation of her empire. There were other meetings and a dinner between Cresson and Perry, the sixth and last on July 20 of the same year.

But by then, Cresson's own department was taking care of Berthelot. His new contract with her science department, as an adviser on Aids research began on September 1, 1995, and was renewed to the end of February 1997.

Perry, meanwhile, was running into trouble. He was a poor administrator and, by 1993, 60 contracts with the commission were incomplete, bills were unpaid and invoices not sent. Some honest souls inside the commission were becoming suspicious.

When I went to see Perry, on August 10 last year, it was in his sumptuous office overlooking the old town of Luxemburg. But his system was collapsing.

For 25 years he had been a faithful servant, and even more faithful co-conspirator and an indispensable tool for the commission. He served it, lived well on it, but he was not one of them. In the summer of 1998, they blocked his funds and stopped his contracts and tossed him out like an old sock.

This was why he spoke to me. I got there just in time, before the clean-up brigade who were going to make all the documents disappear, and well before the arm of justice of Luxemburg began its own inquiry. And it was also in that office that I came to know Hubert Onidi, who was corrupted for the pounds 5,000 a month which Perry paid to Onidi's wife for a completely fictitious job. The commission's own fraud squad dismissed Onidi's protestations that he had done nothing wrong and asked Luxemburg police to file charges, which are pending.

These two realised swiftly that attack was the best form of defence; they knew which dossiers and files could best divert the scandal from them into the next commission department. And they thought the Fourth Estate of the press could become their best weapon, not knowing how it could turn against them.

That was how I came to learn of the multitude of frauds, the little tricks and networks of favours and monetary diversions. That was how I came to learn of Cresson.

But the fact remains that neither she nor her commission team signed any contracts with Perry. Had she not sought to portray herself as more pure than she really was, had she not sought to deny and cover up the services done for Berthelot and other friends and political allies, she might never had landed in such a mess.

But by denying the early claims I made in the Belgian press about her dentist and his connection to the Perry group, and then stonewalling enquiries from the French press, she unleashed the media hunt against her empire. She did this just at the moment when the commission's own financial control and anti-fraud services were staring to probe other aspects of her commission stewardship, notably in the Leonardo youth training programme.

Today, when the 'Committee of the Wise' delivers its verdict, she could pay the price.