Olive oil caper points up Europe's problem with barnyard con artists

Somewhere between the sun-drenched olive groves and the treasury cashier's office, Italy's output of its treasured olive oil fictitiously swelled by some 350,000 tons last year.

The olive oil fraud - which if undetected could have cost the European Common Market and taxpayers as much as $230 million - is just one among many cases of multimillion dollar fraud against the European agricultural program. EC investigations show that some wily farmers and traders tried to bilk the costly, controversial agricultural program with embarassing regularity.

Elaborate machinery for price supports, export subsidies, and purchases of excess farm production amount to about 65 percent of the EC's $22 billion budget. Critics charge that the agricultural program is wasteful and results in costly dumping of surplus commodities in the world market, which in turn causes friction with competitors such as the United States, Australia, and many third world countries.

EC authorities say that press and political reports have exaggerated the losses involved. But some critics say the cheating unearthed so far represents only an above-the-surface leaf on a vast hidden root system that illegally touches virtually every type of agricultural commodity.

These critics say that as long as the agricultural program generates billions of dollars worth of payments and the monitoring process remains limited, barnyard con artists seem destined to reap a bountiful harvest.

There are some unconfirmed reports that the olive oil plotters were so sophisticated that they moved artificial olive trees around some of the olive orchards to deceive inspectors who were monitoring cultivation from helicopters. Perpetrators of this scam falsified records to lay claim to EC subsidies on about 350,000 tons of olive oil that they did not have. The plan reportedly involved some individual growers and perhaps even some cooperatives and mills. Payments of subsidies have been delayed pending an investigation by European and Italian authorities.

The uncovering of the scheme in Italy has also aroused suspicion about the claims for olive oil output in Greece, the EC's other major producer of olive oil. Greek olive oil production reportedly increased to 338,000 tons in 1981, just before the country joined the EC and became eligible for subsidies; in 1980 , only 239,000 tons were produced.

But capers involving just about every type of agricultural commodity in the EC farm program have been uncovered - and in a number of different countries. EC authorities say the losses resulting from such frauds are relatively small. One civil servant on top of the problem once estimated the loss from fraud at about about the amount undetected.

In 1979 Great Britain alone discovered some 25 offenses involving about $500, 000. In one year, four men were sentenced to nine-year prison terms in France for making up phony grain shipments worth $120 million. A $32 million meat-smuggling operation in Italy was disclosed at about the same time.

One of the popular gimmicks is fake customs certificates. With forged documents, perpetrators may lay claim to export subsidies on nonexistent shipments, or they may put in more than once for payments on the same cargo or obtain reductions in customs duties normally paid upon entry into a country.

Several years ago a Belgian grain barge reportedly was apprehended after floating around European canals collecting subsidies from several countries by changing the description of its goods.

Other popular scams include collecting slaughter premiums several times for the same animal; smuggling in beef from outside the EC and calling it veal because customs duties on veal are lower than on beef; and palming off spoiled, low-quality, or even nonexistent commodities as food aid to developing countries.

Trafficking and smuggling also take on many guises. Tomato paste, grains, butter, butter oil, milk, skim milk powder, other dairy products, and meats have been involved at one time or another. Hidden compartments in trucks and ships have been discovered by officials over the years.

But with billions in the EC farm fund to entice schemers, the small band of officials in Brussels assigned to protect against such fraud has to rely on the help of national authorities to chase after the latest culprits.