PRAGUE (Reuters) - Czech Prime Minister Andrej Babis breached conflict of interest rules over his control of trust funds linked to his Agrofert business empire, according to a European Commission audit, piling pressure on the billionaire ahead of fall elections.
It means all European Union subsidies awarded to the company after February 2017 -- when a local conflict of interest law came into force -- are considered irregular and should be returned, the auditors said in a final report.
"Mr Babis therefore controls the two trust funds and through these trust funds he also controls the Agrofert group," the auditors wrote in the final report published on Friday.
"Based on this assessment, the Commission services consider that the Agrofert group therefore falls under the prohibition...of the Conflict of Interests Act."
Babis, whose minority government has come under fire for its handling of the coronavirus outbreak, rejected any conflict of interest and said the audit was "manipulated" by his political foes and professional whistleblowers.
"I fully complied with Lex Babis, which was meant to only get me out of politics," he wrote in a Twitter post, referring to a law approved by the Czech parliament to limit the accumulation of media, business and political power.
"I transferred the former company to trust funds."
The auditors said the Czech Republic should return EU subsidies Agrofert received after February 2017, which involve around 11 million euros ($13.31 million) related to European Regional Development Fund and European Social Fund grants.
"A 100 percent financial correction should be applied to all related expenditure already declared to the Commission for these operations and the related public contribution from the programmes should also be cancelled," they wrote.
Ivan Bartos, chairman of the opposition Pirates Party -- whose coalition has taken a lead over Babis' ANO party in recent polls -- suggested the audit confirming preliminary reports could have wider implications.
"We will send letters to the Czech authorities to finally recover the money from Agrofert, which was wrongfully drawn," Bartos told news iDNES.cz news.
The EU probe led to mass rallies against Babis in 2019 in what became the country's biggest protests since the end of communist rule 30 years ago.
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(Reporting by Michael Kahn; Editing by Mike Harrison)