January 4, 2018 / 2:47 PM / 3 months ago

UPDATE 1-Czech ministry proposes to scrap EU subsidy for PM's former firm

* Finance Ministry proposes scrapping EU subsidy for PM’s former firm

* EU’s anti-fraud watchdog OLAF detects “irregularities” -FinMin

* Finance Ministry does not provide any details on OLAF findings (Adds OLAF finding “irregularities” in project financing, para 7)

PRAGUE, Jan 4 (Reuters) - The Czech Finance Ministry said it proposes to give up a European Union subsidy for a project at the centre of a police investigation that has hurt the minority government’s chances of winning a parliamentary confidence vote.

The two million euro subsidy was awarded in 2008 to a farm and conference centre now owned by Agrofert, the biggest Czech private employer created by then businessman Andrej Babis and owned by him until he moved it to a trust fund last year.

The project called Stork Nest is at the centre of allegations that Babis, appointed prime minister after his party won an election in October last year, manipulated ownership of the project to win funding he was not entitled to.

The scandal is the chief reason why other political parties have refused to join Babis’s ANO party in a coalition and why a minority cabinet led by Babis is expected to lose a parliamentary confidence vote planned for next week.

Babis denies any wrongdoing and says the case is a fabrication by opponents fearing his anti-corruption drive.

The case has been investigated by Czech police, who have charged Babis and others with fraud in the case, and by the EU’s anti-fraud body OLAF.

The ministry released three paragraphs of the OLAF report, which said that the EU watchdog found “irregularities” in the Stork Nest project and proposed to exclude the subsidy from EU funding. It did not provide any details and said the full 48-page report could not be released due to pending investigations.

In a separate statement on Thursday, the ministry said its recommendation to regional authorities in charge of managing EU subsidies followed a letter from the European Commission which recommended taking back requests to fund a number of projects under criminal investigation or investigation by OLAF.

“The European Commission...proposed to take out expenditure that is subject to administrative or criminal proceedings or proceedings by OLAF from European funding,” the ministry said.

“The ministry therefore today turned to (regional administrators) and the Environment Ministry with a proposal to accept the European Commission letter.”

Babis and his spokespersons were not immediately available for comment.

Stork Nest, a conference centre and a farm outside Prague, had undisclosed owners when it requested the subsidy. The funding, made under the EU’s programme for poorer EU regions, was meant for small business and Babis’s Agrofert would not qualify. It was however owned by Agrofert entities earlier and is now owned by Agrofert again.

Babis has been charged with subsidy fraud in the case but won parliamentary immunity in the election. The lower house is expected to vote on lifting his immunity in the coming weeks.

It is up to regional Czech authorities to decide on the European Commission and the Finance Ministry recommendation. Officials there were not immediately available for comment. (Reporting by Robert Muller and Jan Lopatka, Editing by William Maclean)

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