International shell companies involved in defrauding €4.4 million from an EU subsidy scheme.

The European Public Prosecutor’s Office (EPPO) has charged four individuals in Czechia with defrauding the European Regional Development Fund (ERDF) of over €4.4 million.

The case reveals another complex fraud involving inflated procurement and international shell companies.

What happened?
🔹 Fraudsters used a chain of companies, including those in the United States, to artificially inflate the price of industrial machinery.
🔹 Authorities say the scheme misled regulators to extract EU subsidies under false pretences.
🔹 During the investigation, searches were conducted across multiple locations, resulting in asset seizures worth €2.6 million (houses, cars, and cash).
🔹 The case relied heavily on cooperation with EPPO offices in Belgium, Cyprus, and Slovakia.

Why this matters :
➡️ Procurement fraud remains high-risk, especially when supply chains span multiple jurisdictions.
➡️ Shell companies and inflated invoices are classic laundering and subsidy fraud tools.
➡️ Cross-border red flags often get missed unless teams are trained to connect the dots.

The full story

• Four individuals were charged, and assets worth approximately €2.6 million (CZK 65 million) were frozen in an investigation into a €4.4 million (CZK 110 million) EU subsidy fraud scheme.  
• This happened at the request of the European Public Prosecutor’s Office (EPPO) in Ostrava (Czechia), in close cooperation with the Police’s National Organised Crime Agency (Národní centrála proti organizovanému zločinu, NCOZ). 
• The suspects allegedly manipulated public procurement procedures to fraudulently obtain EU subsidies from the European Regional Development Fund (ERDF) to purchase industrial machinery.
• The investigation uncovered that the price of machinery was artificially inflated multiple times through a chain of companies, including entities based in the United States.
• Furthermore, evidence shows that the managing authority that distributed the funds was misled about the true nature of the transaction, as the recipient of the EU funds was purchasing the machinery from themselves.
• On 28 and 29 March 2025, the police carried out nine searches in houses and other premises. Seized assets include cars, homes, and cash, amounting to €2.6 million (CZK 65 million).
• The investigation has also benefited from cross-border cooperation with EPPO offices in Belgium, Cyprus and Slovakia, which provided crucial evidence.
• If convicted, the suspects face prison sentences ranging from five to ten years.

What we can learn:
🔍 Scrutinise supply chain partners and funding sources in EU-funded projects
📚 Use case studies like this to inform EDD frameworks and procurement reviews
🤝 Cross-border collaboration isn't optional—it's essential

📖 Read the full case here:
🔗 EPPO official update: https://www.eppo.europa.eu/en/media/news/czechia-eu44-million-subsidy-fraud-investigation-leads-to-charges-and-asset-seizures